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					              STRATEGY
FOR THE TEXTILE AND CLOTHING INDUSTRY
                IN SYRIA


            Fernando G. ALBERTI
         UNIDO International Consultant




                    June 2010
Table of contents


    List of acronyms                                                          5
    Executive summary                                                         7

    1. Foreword                                                              10
       1.1. Pre-conditions                                                   10
       1.2. Perspectives                                                     10
       1.3. Background                                                       10
       1.4. Approaches                                                       11
       1.5. Phases                                                           11
    2. Methodology                                                           12
       2.1. Pre-understanding                                                12
       2.2. Use of archival data                                             12
       2.3. Collection of primary data                                       12
       2.4 Panel discussion                                                  12
    3. The world outlook                                                     13
       3.1. The global economic and financial crisis                         13
       3.2. The global scenario for textile and clothing industry            14
       3.3. The Syrian industry in the new global setting                    16
    4. The industrial sector in Syria                                        17
       4.1. Overview                                                         17
            4.1.3. The protectionist background                              17
            4.1.4. The current situation                                     17
       4.2. The Syrian industrial context                                    18
            4.2.1. A brief outlook of the evolution of the Syrian industry   18
            4.2.2. The main characteristics of the Syrian industry           18
       4.3. The entrepreneurial climate                                      19
       4.4. The Syrian competitive industrial performance                    20
       4.5. A SWOT analysis of the Syrian industrial context                 21
            4.5.3. Strengths                                                 21
            4.5.4. Weaknesses                                                21
            4.5.5. Opportunities                                             22
            4.5.6. Threats                                                   22
    5. The Syrian textile and clothing industry                              22
       5.1. Industry overview                                                22
            5.1.1. Industry size                                             22
            5.1.2. Industry structure                                        23
            5.1.3. Internationalization of the industry                      23
            5.1.4. Industry segments                                         23
       5.2. Performances of the textile/clothing industry                    24
            5.2.1. Industry growth                                           24
            5.2.2. Industry investments                                      24
            5.2.3. Industry production                                       24
            5.2.4. Industry consumption                                      24
            5.2.5 Industry export trade                                      25
            5.2.6 Industry import trade                                      25
       5.3. Main challenges                                                  26
       5.4. A SWOT analysis of the Syrian textile and clothing industry      28
            5.4.1. Strengths                                                 28

      IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)        3
        5.4.2. Weaknesses                                                  29
        5.4.3. Opportunities                                               29
        5.4.4. Threats                                                     30
6. The ‘way forward’: a strategy for the Syrian textile and clothing
   industry                                                                30
   6.1. Vision, mission and objectives                                     31
        6.1.1. Vision                                                      31
        6.1.2. Mission                                                     32
   6.2. Strategic governance: towards an Industry Strategic Board          34
        6.2.1. The need for a new governance body                          34
        6.2.2. Organization and composition                                34
        6.2.3. Expected roles                                              35
        6.2.4. Expected activities                                         35
        6.2.5. Critical remarks                                            36
   6.3. Strategic directions                                               37
   6.4. Macro-level strategies                                             37
        6.4.1. Trade liberalization in the textile/clothing market         38
        6.4.2. Upgrading textile/clothing-specific infrastructures         41
        6.4.3. A new industrial mindset for the textile/clothing
               industry                                                    42
        6.4.4. Marketing the entire textile/clothing industry              46
        6.4.5. Innovation and research for the textile/clothing industry   52
        6.4.6. Textile/clothing-specific intelligence system               56
        6.4.7. Textile/clothing-specific financial system                  58
   6.5. Meso-level strategies                                              60
        6.5.1. Clusters and industrial zones for the textile/clothing
               industry                                                    61
        6.5.2. Training for the textile/clothing industry                  65
        6.5.3. Services and consulting for the textile/clothing industry   70
        6.5.4. Textile/clothing-specific business associations             75
   6.6. Micro-level strategies                                             81
        6.6.1. Restructuring the textile/clothing private and state-
               owned firms                                                 81
        6.6.2. Prioritizing the geographical textile/clothing markets to
               be targeted                                                 85
        6.6.3. Focusing on key strategic textile/clothing products         88
        6.6.4. Upgrading management practices of textile/clothing
               firms                                                       93
7. Conclusions                                                             97
   7.1. Intended purposes                                                  97
   7.2. Strategy architecture and time-plan                                98
   7.3. Public-private commitment                                          99

Data sources                                                               100
Appendix 1. Global textile industries’ profiles                            101
Appendix 2. Strategy implementation matrix                                 111




  IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)           4
List of acronyms

AFTI                    Arab Federation of Textile Industries
ATC                     Agreement on Textile and Clothing
CBS                     Central Bureau of Statistics
CENTEXBEL               Belgian Textile Research Center
CENTROCOT               Cotton Textile and Clothing Center
CETTEX                  Technological Textile Center
CMO                     Cotton Marketing Organization
CTDC                    Clothing and Textile Development Center
DITI                    Damascus Institute for Textile Industries
DSE                     Damascus Stock Exchange
EDF                     Exports Development Fund
EDPC                    Exports Developing and Promotion Commission
EPB                     Export Promotion Bureau
EU                      European Union
FDI                     Foreign Direct Investment
FYP                     Five-Years Plan
GAFTA                   Greater Arab Free Trade Area
GCC                     Cooperation Council for the Arab States of the Gulf
GdoC                    General Directorate of Customs
GDP                     Gross Domestic Product
GOE                     General Organization for Exhibitions
GOTI                    General Organization for the Textile Industry
HCSR                    Higher Commission for Scientific Research
HIBA                    Higher Institute for Business Administration
HRDC                    Human Resources Development Center
I’MUP Syria             Industrial Modernization and Upgrading Syria
ICT                     Information and Communication Technology
IFTH                    Institut Francais de l’Habillement et du Textile
IMF                     International Monetary Fund
IPO                     Initial Public Offer
ISB                     Industry Strategic Board
ITRC                    Industrial Testing and Research Center
JCI-Syria               Junior Chamber International – Syria
MFA                     Multi Fiber Arrangement
MoA                     Ministry of Agriculture
MoET                    Ministry of Economy and Trade
MoEd                    Ministry of Education
MoE                     Ministry of Environment
MoF                     Ministry of Finance
MoHE                    Ministry of Higher Education
MoI                     Ministry of Industry
MoIR                    Ministry of Irrigation
MoLA                    Ministry of Local Administration
MoLS                    Ministry of Labor And Social Affairs
MoT                     Ministry of Transportation
MoTel                   Ministry of Telecommunications
NCDPE                   National Commission for Developing and Promoting Exports
NCTO                    National Council of Textile Organizations
NDP                     Net Domestic Product

      IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)             5
OSS                   One-Stop Shop
R&D                   Research & Development
RMB                   Renminbi , Yuan , the Chinese currency
SAFD                  Syrian Association of Fashion Designers
SASMO                 Syrian Arab Standards and Metrology Organization
SEBC                  Syrian Enterprise Business Center
SEU                   Syrian Exporters Union
SIA                   Syrian Investment Agency
SME                   Small and Medium Enterprise
SPC                   State Planning Commission
STGEA                 Syrian Textile and Garment Exporters Association
SYEA                  Syrian Young Entrepreneurs Associations
SYP                   Syrian Pound
TEMPUS                Trans-European Mobility Program for University Studies
TNC                   Trans-National Corporation
UAE                   United Arab Emirates
UMU                   Unit for Modernization and Upgrading
UN                    United Nations
UN-ESCWA              United Nations – Economic and Social Commission for Western Asia
UNCTAD                United Nations Conference on Trade and Development
UNDP                  United Nations Development Programme
UNIDO                 United Nations Industrial Development Organization
US                    United States
USDA                  United States Department of Agriculture
VAT                   Value Added Tax
VTC                   Vocational Training Complex
WEF                   World Economic Forum
WTO                   World Trade Organization




    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                     6
                                        EXECUTIVE SUMMARY



Aim                      The Industrial Modernization and Upgrading Program (I’MUP Syria), in
                         cooperation with the Ministry of Industry (MoI) in Syria and financed by
                         the Italian government, supervised and implemented by United Nations
                         Industrial Development Organization (UNIDO), aims at providing technical
                         assistance to the Ministry in order to develop and enhance the
                         competitiveness and the productivity of Syria’s industrial sector, with
                         special emphasis on the textile/clothing industry.

Acknowledgements         The present study has been conducted within the framework of the
                         mentioned cooperation, under the supervision of Mr. Fouad Al Lahham,
                         National Technical Coordinator; Mr. Gerardo Patacconi, Chief of the
                         Productivity, Quality, Enterprise Upgrading Unit - Trade Capacity Building
                         Branch of UNIDO; and Mr. David Yuen-Hoi Lee, Industrial Development
                         Officer of the Textiles and Leather Unit - Agri-Business Development
                         Branch of UNIDO. Valuable support and suggestions have been received
                         from Mrs. Anita Travaini, Senior Advisor of UNIDO; Mr. Sameer Rouman,
                         National Expert of UNIDO; Mr. Daniele Mazzanti, former CTA of UMU in
                         Damascus; and from the entire UMU staff. This document was validated on
                         the 25th of October 2009 during its official presentation. The comments
                         received (including the comments of MOI) have been discussed within
                         UNIDO and UMU and the resulting revisions have been implemented in
                         this final version.

Method                   The pre-understanding of the Syrian textile and clothing industry was built
                         on data collected from the field as well as from previous studies and
                         reports. Additionally, data was also gathered from in-depth semi-structured
                         open-ended interviews with national and international industry experts, this
                         data was delivered by the industry (managers/former-managers and
                         entrepreneurs), the local institutions and the United Nations (UN) network
                         of experts and consultants. Finally, a panel of local industry experts and
                         stakeholders commented on a preliminary draft of the document, serving as
                         a sounding board for this study.

Global textile           This study begins with the consideration that globally, the textile/clothing
                         industry is hostile, mature and faces many challenges that are enhanced by
                         the current global financial and economic crisis. Given that Syria operates
                         within this competitive framework and faces several challenges that the
                         industry poses, the objectives of the industrial strategy in Syria should be to
                         raise the competitiveness of existing industrial activities, enhance the
                         technological and marketing capabilities of firms, increase the industry
                         growth rates, create new job opportunities, improve competencies, benefit
                         from international spillovers, and specialize in the dynamic segments of
                         global value chains.

Syrian textile           The Syrian textile and clothing industry is a promising strategic sector in the
                         Syrian economy, which is anchored in ancient traditions and relies on a
                         valuable cotton industry. Nevertheless, the Syrian textile and clothing

       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               7
                        industry suffers from a legacy of inefficiency, it has been affected by
                        protectionist policies and it is ultimately unfit to compete in the current
                        global context. Syria does have the full textile production chain, which gives
                        it a great advantage. However, this industry cannot yet compete in the
                        international market. The essence of the desired competitiveness lies in
                        innovation and knowledge, as well as in technological, organizational and
                        networking related issues.

Main argument           The Syrian textile/clothing situation demands immediate strategic
                        interventions. These interventions may leverage the unexpressed potential
                        that the Syrian textile/clothing industry has in terms of comparative
                        advantages, which can be transformed in competitive edges. Syria has to
                        invest now in the implementation of dramatic reforms that will enable the
                        country to enter the global competition as a player and not as a sideline
                        observer. This document also suggests that since the global textile and
                        clothing market is suffering from the current financial crisis, it will be
                        difficult for Syria to penetrate the international markets now, unless it
                        follows aggressive product/quality ratios that only China and other South-
                        Asian countries can afford. Thus what is feasible now is to invest in the near
                        future and be prepared for when the global markets restart. Syria has already
                        missed another window of opportunity similar to the present one,
                        immediately after the end of the Multi-Fiber Arrangement. Failure to catch
                        this new occasion in a proper way may imply the exclusion of Syria from
                        the world’s textile and clothing scene for a long time. Now is the time for
                        Syria to pro-actively seek the future competitiveness of its industry. Not
                        complying with the needed strategic interventions would hamper not only
                        the sustainability of the Syrian textile and clothing industry, but would also
                        affect the entire Syrian economic system.

Strategies suggested In this document, strategies are organized in three distinct levels of
                     intervention that should be closely interconnected when applied.

                        Macro-level strategies. The highest level of strategic intervention needed in
                        order to upgrade and modernize the Syrian textile and clothing industry is
                        the macro-level. On this level, strategies are formulated to set the proper
                        conditions for the overall business environment. These strategies refer to:

                        -   trade liberalization in the textile/clothing market;
                        -   upgrading of textile/clothing-specific infrastructures;
                        -   new industrial mindset for the textile/clothing industry;
                        -   marketing of the entire textile/clothing industry;
                        -   innovation and research for the textile/clothing industry;
                        -   textile/clothing-specific intelligence system;
                        -   textile/clothing-specific financial system.

                        Meso-level strategies. The intermediate level of intervention, the meso-level
                        refers to the stage where the strategies employed complement and strengthen
                        all the industry’s service, support institutions and agencies that are too weak,
                        or non-existent in the Syrian textile and clothing industry, but are
                        fundamental carrying out effective upgrading strategies. These strategies
                        refer to:

      IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                8
                         -   clusters and industrial zones for the textile/clothing industry;
                         -   training for the textile/clothing industry;
                         -   services and consulting for the textile/clothing industry;
                         -   textile/clothing-specific business associations.

                         Micro-level strategies. Finally, this document also includes strategies
                         designed for the micro-level, i.e. the level of industry operators. It creates a
                         distinction between the strategies needed for upgrading of private firms and
                         those specifically needed for state-owned firms. These strategies refer to:

                         -   restructuring textile/clothing private and state-owned firms;
                         -   prioritizing geographical textile/clothing markets to target;
                         -   focusing on key strategic textile/clothing products;
                         -   Upgrading management practices and strategies of textile/clothing firms.

Industry governance In order to comply with such major strategic interventions, there is a need to
                    establish a national textile and clothing industry board, i.e. a meta-
                    management institution designed to govern the entire textile/clothing
                    industry. This Industry Strategic Board should deal with all the different
                    production cycles and with other related services in both the public and
                    private sectors (that is, from cotton farming to design and support services)
                    in the form of a public-private partnership. It should be an arena where all
                    key industry stakeholders are represented and a number of specialized
                    experts support them. The Industry Strategic Board should be the starting
                    point of any effective strategic intervention in the Syrian textile/clothing
                    industry.

Document structure The document is organized as follows.

                         First, the document carries out an in-depth and accurate strategic assessment
                         of the industrial situation within the macro economic framework. Also, in
                         order to specify weaknesses and identify bottlenecks,it compares the
                         performance of the Syrian industrial sector with the performance of other
                         countries.

                         Second, it focuses on the characteristics of the Syrian textile/clothing
                         industry, its structure, main strengths and weaknesses, performance and
                         future challenges.

                         Third, it offers an articulated strategic framework by proposing a
                         vision/mission for the industry, highlighting the main strategic objectives
                         and detailing all the strategic interventions believed to be crucial for the
                         upgrading and modernization of the Syrian textile/clothing industry.

                         Even if this document is not meant to be a comprehensive ‘blueprint for
                         action’ it concludes by suggesting both a time-frame for intervention and a
                         strategy implementation matrix. These in turn can inspire the State Planning
                         Commission to elaborate on the11th Five-Years Plan.




       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                9
1. Foreword

This document is meant provides technical support to help the Ministry of Industry (MoI), which is
the main player in Syria’s industrial development, to elaborate industrial policies aimed at
developing the Syrian textile and clothing sector’s competitiveness.

   1.1. Pre-conditions

   Formulating an industrial strategy is a very demanding task, given the complexity of the
   phenomena, it must be taken into account the extension to which the stakeholders are possibly
   involved. It also calls for considerable analytical skills and the capacity to contextualize policy
   suggestions at several levels of analysis. Further, it calls for a coherent vision of national
   development and for a consistent inter-agency coordination among the many different actors
   involved in the industry. Formulating an effective industrial strategy is also a matter of building
   and consolidating consensus among the major stakeholders (private and state-owned companies,
   ministries and governmental institutions, support agencies and bodies, national and international
   institutions, industry representatives at large). The Syrian government ought to pay great
   attention to all these issues if it is to devise and implement the mentioned strategies effectively.

   1.2. Perspectives

   There are two opposing perspectives in formulating an industrial strategy.

   -   On one hand, the neoliberal approach favors the private sector and markets leading the
       development process, it also favors the removal of centralized government role and the
       privatization of public sector.
   -   On the other hand, the structuralist approach favors the proactive government role. It also
       accepts the need for sound macro management, greater openness to trade, technology and
       investment flows and more stable and transparent atmosphere.

   Given the nature of the Syrian economy, this report favors the structuralist perspective and thus
   proposes strategy interventions that complies with the social market economy Syria relies on.
   This appears to be the most suitable solution both in terms of continuity with the past – since it
   builds on the valuable public intervention of the Syrian government in the textile and clothing
   industry – and in terms of exploration of new paths, consistent with the current global scenario
   and Syria’s strategic capacity.

   1.3. Background

   This document builds on previous industrial strategy documents, such as:

   -   Manufacturing Industry in Syria Industrial Development Strategy (K. Abdulnur, 2004);
   -   Industrial Modernization National Programme in Syria (H. El-Laithy, 2004);
   -   Value Chain Analysis and Strategy Outline for Textile and Garment Industry (Gherzi team,
       2005);
   -   Industrial Public Sector Reforms: Key Issue and Options (A. Mreiden, Feb 2005);
   -   Industrial Assessment and Policy Recommendations (S. Lall and M. Albaladejo, 2005);

       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             10
-   Industrial Policy in Syria. Main Pillars and Components (K. Abdulnur, 2006);
-   Industrial Policy of Syria: Learned Lessons from Previous Studies (Z. Ayoub-Arbache,
    2006);
-   The Syrian textile & garment industry: strategies, action plans, implementation time frames
    and vision 2010 & 2015 (Gherzi team, 2009).

Likewise, it also builds on several other data sources, as shown in the methodology section
below, thus setting the discussion in up-to-date industrial scenarios.

1.4. Approaches

There are many ways to formulate an industrial strategy: top-down, bottom-up, or participated;
green-field or resource-based; macro oriented or micro specific. The final choice on how to
formulate an industrial strategy in a country should reflect the country’s level of industrial
development, its trade situation, resource base, level of market and institutions development,
structure of ownership (public, private or foreign) and the government’s ability to carry out
industrial policies. It is impossible to generalize about an ‘optimal’ strategy; each economy and
government must develop its own ideal set of policies in line with its own economic, political
and social circumstances. Similarly, it makes little sense to buy pre-packed strategies from
benchmark countries.
As a consequence, this document opts for a participated approach, as discussed in the
methodological section, where ideas are grounded on previous studies and industry experts’
opinions and subsequently discussed and refined with industry stakeholders. Furthermore, this
document intends to suggest strategic directions that will leverage the legacy of resources and
competencies that Syria can offer in order to upgrade its textile and clothing industry. Finally,
the strategies are suggested in three inter-twined levels of policy intervention: the macro level,
which provides the conditions for the overall business environment; the meso level, which is
critical for Syria, that lacks significant support institutions and intermediate industry bodies; and
the micro level, which addresses the needs of industry operators, both private and state-owned.

1.5. Phases

The basic components of an Industrial Development Strategy are:

1) Analysis of data;
2) Vision definition;
3) Strategy formulation;
4) Strategy put into action;
5) Monitor results and revise the strategy.

This document is supposed to be a position paper, and its goal is to clarify the strategic
perspective that the Syrian textile and clothing industry should employ in the next few years.

-   First, this document carries out an in-depth and accurate strategic assessment of Syria’s
    industrial situation within the macro economic framework, including the comparison
    between the performance of the Syrian industrial sector and that of other countries, in order
    to specify weaknesses and identify bottlenecks. This requires a large amount of data and
    statistics, which is not fully available for the Syrian textile and clothing industry.
-   Second, this document proposes a strategic vision, which can inspire policy makers to meet
    the interests of all different economic players. Such vision is not expressed in quantitative
    terms, it is not a mere target that the overall industry production and trading should reach in

    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              11
      vague terms, as some previous strategy documents have already proposed. Instead, it aimes
      at positioning the Syrian textile and clothing industry in the global value chains for the near
      future.
  -   Third, the document offers an articulated framework of strategic dimensions on which the
      Syrian government can rely on, in order to upgrade and modernize both its industrial context
      and its institutions and its firms, and thus enter the global competition.

  The objective of this document is not to provide a comprehensive ‘blueprint for action’ but
  rather to provide a starting point that will enable the government and the stakeholders to
  develop a consensus on the country’s industrial strategy vis-à-vis the 11th Five-Years Plan
  (FYP).

2. Methodology

  2.1. Pre-understanding

  The pre-understanding of the empirical field (the Syrian industrial context and the Syrian textile
  and clothing industry in particular) was built mainly on secondary data, collected from the field
  and from previous studies and reports. Secondary data played an important role in conducting
  the analysis, while primary data was used mostly for interpreting the situation of the industry
  and to elaborate a coherent industrial strategy.

  2.2. Use of archival data

  Archival data was collected from the field that is, the United Nations Industrial Development
  Organization - UNIDO archives, UMU’s (Unit for Modernization and Upgrading) project
  documents and reports, company analyses and briefs, World Bank reports and analysis, as well
  as reports from other institutions, such as the European Commission, the Oxford Business
  Group and the Italian Embassy in Syria. Additionally, data was also collected from national and
  international institutions and business associations belonging to the European, Chinese, and
  American textile industries. This was done in order to create a composite and reliable picture of
  the impact of the current financial crisis on the industry’s dynamics. A complete list of sources
  used in the writing of this document is reported at the end.

  2.3. Collection of primary data

  The collected primary data came from in-depth semi-structured open-ended interviews with
  national and international industry experts. Some core questions or themes, necessary for the
  study, were clearly formulated and others were left unstructured and open-ended, in order not to
  force interviewees along a predetermined path, but to encourage them to give a more fulsome
  picture of their thinking.
  Individuals to be interviewed were selected on the basis of industry knowledge, reputation and
  relation to the Industrial and Modernization and Upgrading Syria (I’MUP Syria) project.
  Experts were taken both from industry (managers/former-managers and entrepreneurs) and local
  institutions as well as from the United Nations (UN) network of experts and consultants.

  2.4. Panel discussion

  Finally, a panel of local industry experts and stakeholders commented upon a preliminary draft
  of the document, serving as a sounding board for this study. The panel was employed first to
  strengthen empirical understanding of the Syrian textile and clothing industry – complementing

      IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                            12
   considerations and analyses as well as guiding the elaboration of the strategy towards new paths
   – and then as a sounding board for preliminary considerations. Moreover, the panel played the
   role of a local collective memory on the evolution of the textile and clothing industry during the
   last decades. This furnished the study with supplementary information, as well as a better
   interpretation of data collected and policies suggested. The document was then, refined,
   amended, complemented and edited in its final form.

3. The world outlook

   3.1. The global economic and financial crisis

   Deep changes in the global economic and financial outlook characterized the year 2008:

   -   the international frame deteriorated sharply and the financial crisis exerted its effects on the
       real economy; the world economy sharply worsened during 2008;
   -   Turmoil in the financial markets sharpened, thus generating a crisis, which also affected the
       industrial system.

   The International Monetary Fund (IMF) estimated that the variation of the world Gross
   Domestic Product (GDP), both in real terms and based on purchasing power parity was on an
   average slightly above 3%. That rate is approximately 2% lower than the performance of the
   years 2006-2007. The Euro area showed the lowest growth rate since the adoption of the single
   currency. Emerging markets suffered from the weak international economic situation and could
   not compensate the demand decrease of industrialized countries through the expansion of
   domestic demand. Chinese and Indian economies continued to grow at a sustained pace, but
   slower than in the past. Brazil showed a relative solidity, while Eastern European and Russian
   markets particularly suffered from the credit crunch and rapid capital outflows from their
   economies. The contraction of demand in developed countries turned into shrinkage of volumes
   in goods exchanged and services globally, thus negatively affecting international trade. Prices of
   energy commodities and of their freight rental-rates fell after having reached record levels in the
   middle of 2008. Countries traditionally oriented to sell in foreign markets – such as Hong Kong,
   Singapore and Taiwan – suffered from the consequences of this development. The lack of
   liquidity in the markets then generated a lower tendency to finance import/export activities.
   Given that around 90% of goods purchasing is made possible through financing, the increasing
   difficulties in the credit market stopped or delayed some transactions, thus causing higher costs
   for companies. The lower availability of resources and the higher risk aversion showed by
   investors caused a decrease of private capital inflows into emerging economies, particularly
   damaging those countries characterized by a balance of payments deficit. The emerging Europe
   suffered the most from a lower inflow of resources. A reaction to the crisis through the adoption
   of protectionist measures is a response that many governments may be tempted to adopt, thus
   exacerbating problems that already exist, in the attempt to coordinate measures against the crisis
   at an international level.

   The year 2009 saw a slump in the global economy; the recovery in 2010 will be slow and
   incremental. The world economy in 2009 showed little inclination to recover and expectations
   for growth were not met. The turmoil that characterized 2008 did not ease off in 2009, but
   worsened the worst economic slump since WW2. Also the unemployment generated by the
   unfavorable cycle negatively affected economic growth. A drop in household consumption and
   in investment by companies could cause a sharp downturn in production systems, depressing
   international trade even further. The deterioration of economic conditions on the international


       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             13
level is negatively affecting export. The main challenge that enterprises have to face in this
context is to effectively meet world demand.

3.2. The global scenario for the textile and clothing industry

At the beginning of 2005, the Multi Fiber Arrangement (MFA, also known as the Agreement on
Textile and Clothing, ATC) has come to an end, effectively lifting quotas imposed on Asian
textile and garment exports, considerably increasing the competition facing our exports by the
products of these countries, China in particular. The competitive landscape of the global textile
and clothing industry was significantly affected by the end of MFA, which held back, for a long
time, textile and clothing exports to Europe and the United States (US) from highly efficient
producers in East Asia, thus protecting smaller exporters. Quota restrictions on low wage
exporters like China, India and Pakistan, with large cotton capacities, large textile industries,
thousands of export-oriented apparel firms and growing synthetic fiber industries, were
removed. In addition to that, many large cotton-based clothing exporters in South and Southeast
Asia and dynamic synthetic producers in Korea and Taiwan penetrated the market. Competition
in standard textile and apparel products intensified dramatically after 2005, with China offering
the most severe competition. China soon conquered the lion’s share of the global textile and
clothing market, growing larger every year. The only recourse for small producers with export
ambitions was to upgrade their product range significantly in order to stay ahead of China and
South Asia. The shakeup brought about by the end of the MFA seemed to be almost over during
2006 and 2007, when the textile and clothing industry timidly started to grow. The period
between 2006 and 2007, thus, provided a small window of opportunity for those countries
willing to upgrade their technology, improve their world-wide delivery capability and move into
higher value products. Competition in standardized and undifferentiated products like yarn, grey
cloth and low-end apparel was progressively reserved to China and other Asian countries, whilst
incumbents had to find niches in specialized products.

After encouraging performances during 2007, the analysis of economic trends of the textile and
clothing industry in 2008 showed a notorious set back, which further plummeted after the
autumn following the financial and economic crises. As a matter of fact, the balance of the
industry was again negative and 2008’s balance was lower than 2007’s. Also because of the
international economic and financial crisis, the business cycle progressively worsened in the
majority of the segments of the value chain: for this reason, 2008 turned out to be a negative
year not only for sales, but also in terms of export and domestic demand.

Globally, the textile sector was more affected by the decline in the domestic and external
demand. The sluggish world demand, the difficulties faced by some ‘textile end-users’ sectors
(i.e. construction, auto motive, housing) in combination with the increasing production costs
was detrimental to the textile industry. The performances of the clothing sector seem to be less
disastrous which proves the greater flexibility of this industry. The global household
consumption slowed down or even diminished in 2008 in response to the lower consumer
confidence. Indeed, the final consumption is estimated to have decreased by -1% in the clothing
sector, despite a reduction in consumer prices. If we look back at 2007, World Trade
Organization (WTO) indicates that global exchanges of textile-clothing products contributed for
4.2% of the world trade, a contribution that rises to 6.1% if we consider only the exchange of
hand-made products. From the perspective of a yearly-based analysis, the world trade of textile
products experienced growth of 9% , while the global exchange of clothing products increased
by 12%; these performances are correlated - though slightly lower - to the ones shown by trade
of the whole hand-manufactured productions, which raised by 15% in the same period.


   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                           14
Looking at the nature of trade (in terms of value and not of volume), there are two big poles in
the world trade of textile and clothing: Asia and Europe. Intra-Asian exchanges account for
22% of the textile industry and for 11.3% of the clothing industry, while intra-European
exchanges account for 29% of textile and clothing exports in Europe. An inter-area analysis
clearly shows, on the contrary, not only the increasing dependence of Europe and America, but
also of the rest of the World, on Asia. Inter-area flows are unidirectional, in the sense that the
amount generated abroad and coming in to Asia is still very small. On the basis of an analysis of
cumulative import quotas of textile machinery in the period 2003-2007, it is also worth noticing
that Asian countries, and in particular China, are at the top of world ranking. China in particular
accounted for more than 30% of the world import of spinning, weaving and knitting machinery..
The volumes observed in India and Pakistan, though noteworthy, are still small when compared
with what China invested in productive capacity.

In the international frame of textile-fashion trade, China further strengthened its leadership
position. In 2007 in fact it reached 21.1% of the world textile market and 33.1% of the fashion
industry, thus recording a new record year-on-year growth (+5.9% and +12.3% respectively)
(we ought not to forget Hong Kong , which accounted for 5% of the Textile industry and 8.3%
of the Garment industry). The world export rate of China itself, in the Garments industry,
widely exceeded the overall volumes reached by all other Asian countries (15.7%). As far as
import is concerned, the main importers of textile products are still the US (with a share of
10.3%) and China (9.7%), followed by Germany (5.9%) and Hong Kong (5.7%). As a
consequence of the blip recorded in 2007, these volumes remained stable in the years 2003-
2007, except for Hong Kong whose volumes decreased by 1.4%. Italy, ranked 5th among world
importers of Textile products, has a share of 4.7%, and records a stable +0.1% inthe examined
period.

With reference to clothing import, ‘big’ economies continue to assert their role in absorption
(and therefore in consumption) of commercial flows of finished products in the fashion
segment: US (with 25% volume), followed by Germany (8.8%), The United Kingdom (7.5%),
Japan (7.1%) and France (6.3%) are the main import countries. Nevertheless, US, Japan and
Germany show negative values (which is particularly clear in the case of US: -4.2% in the
period 2003-2007, -5.9% in 2007 alone), while United Kingdom and France, in 2007, grew by
2.3% and by 3.5% respectively (+0.2% and +0.1% in the five years).

Looking at the largest consumer markets on a global scale, a new scenario seems to emerge: the
appeal and the average expense for textile and clothing may be revisited in favor of other
product types (e.g. high-tech) or services which consumers are increasing their spending on.
Meanwhile, emerging consumer markets are over-performing: EU-27 shows a higher growth
rate than EU-15, but as expected Russian and Chinese markets are those showing double-digit
growth rates. High-income populations and, progressively, segments of the middle class, which
are significantly widening in these countries, are more sensitive to top-quality products and to
textile and clothing in general, thus becoming attractive and profitable markets.

If this proved to be true till the recent past, the world economic recession may soon induce a
new and perhaps very different consumer paradigm, whereby (as already happens in the United
States) the search for new values in products - as for instance higher quality standards which
are perceived as ‘authentic’ - can inspire consumption trends. In the case of emerging markets,
on the contrary, it is still premature and difficult (also from a methodological and temporal point
of view) to outline today how the crisis will influence consumption trends: it is also worthwhile
that the duration of the recession, protectionist risks, monetary instability, imbalances in the job
market, may indirectly affect people’s consumer habits, which are impossible to predict now.

   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              15
Appendix 1 comprises the profiles and main traits of the Chinese, American, European, Asian
and Arab textile/clothing industries.
3.3. The Syrian textile/clothing industry in the new global setting

The globalization induced by the increased circulation of human, technical and financial capital,
by the end of the MFA in 2005 and by the progressive dismantlement of quotas worldwide is
strongly accelerating the pace of change in the textile and clothing industry, revolutionizing the
organization of business processes and global value chains. Legislation is being relaxed in most
countries. Everywhere, flexibility and competition are replacing the status quo ante, marked by
legislation and bureaucratic controls.
The global geography of the textile and clothing industry has changed considerably during the
last decades with marked growth induced by new international players. EU-27 is still the world
leader, but with a considerable downturn, having lost in 20 years 16.1 billion Euro of export
volume (which is about -30%). Still EU-27 is the largest market worldwide for textiles and
garments, if we exclude China on the grounds that statistical aberrations make monitoring the
real numbers of its market and industry difficult.
Recent figures that document the impact of the global economic and financial crisis show a
slowing-down in the growth of emergent players – China in particular – and forecast further
reductions for the period 2009-2010, thus creating a very challenging and hostile scenario.
The textile and clothing industry is a demand-sensitive industry and clients’ and consumers’
needs and expectations have changed. A global consumer is emerging with similar but evolving
tastes. Clients and consumers demand more value for their money. They call for higher quality,
larger choice, new and fashionable designs, more convenience, comfort, safety and service.
They have become more sensitive to environmental, social and ‘ethical’ issues, but expect to get
all this at a still lower price. Innovation is one of the key success factors of winning competitors,
throughout the value chain: product/service design, fashion, communications and advertisement,
fabrics, logistics, management processes are all subject to incremental and radical innovation
processes. For this reason, technology plays an increasing role in the textile industry throughout
the various stages of the value chain, from raw materials to end products: new fibers and fabrics,
higher and more suitable perceived quality of intermediate products (yarn, fabric, linings,) as
well as in end products and packaging. Advanced automation and computerization facilitate a
reduction in material and/or labor costs (higher productivity) and more safety for the employees
and the environment. Computer technology is more and more used, not only to optimize
production processes, but also to automate the various administrative and management
information and control activities.
New entrants are appearing on the market. The new comers are stronger, more aggressive and
more competitive than the incumbents, including China. As a result of the aforementioned main
trends, the global textile industry is being reshaped continuously. Global clothing players tend
to focus on design, marketing, logistics and distribution. Transnational corporations are
outsourcing manufacturing operations, either in their own country or in remote countries or in
both. However, in both cases, they get themselves closely involved in the choice, the quality, the
process and even the price of their sub-contractors’ sub-contractors. The major clothing brands
control design, marketing and distribution, and determine the sourcing and choice not only of
fabric manufacturing and finishing, but also of yarn origin, suppliers, quality and other
conditions (such as labor standards and environmental protection). It is not unusual to see a
company purchasing fabric in Turkey, sending it for tailoring in Tunisia, then for specialized
operations in Italy and for final finishing, packing, marketing and distribution in and out of
France. New key players emerge also on the distribution side, rearranging the fashion filière
around them and imposing global standards in terms of quality and time-to-market. Large retail
chains are developing their own brands, thereby becoming competitors of their suppliers.
The core business (or value chain) definition itself is also changing. Global industrial value

   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               16
   chains are now organized more tightly than before and entry into these chains has become an
   important source of dynamic competitive advantage in developing countries. It is vital for
   countries aspiring to develop industrially to tap into these global value chains, both by building
   competitive domestic enterprises and by attracting international companies.
   The above trends represent significant opportunities for countries and companies who can
   acquire and develop competitive advantage to seize them. They also represent threats for those
   companies and countries that, missing the said opportunities, are overtaken by the more
   aggressive, more innovative and cannier competitors.
   The Syrian industry has many potential advantages. However, its recent performance has been
   weak.
   The private sector has been seriously constrained by policies that impose serious costs on its
   growth and functioning. The public sector suffers from widespread inefficiency. Syrian industry
   has been by-passed by international flows of capital, technology and know-how. With Syria
   opening up to global markets through various regional trade agreements, there is a pressing need
   for a comprehensive and coherent industrial strategy.
   Profiles of Arab competitors – that are the most direct ones both in terms of geographical
   proximity, market and industry structure and kind of products – are detailed in Appendix 1.

4. The industrial sector in Syria

   4.1. Overview

   The role of industry as a locomotive for economic growth, especially in developing countries,
   has been recognized internationally. Developing countries would have a competitive advantage
   if they focused on technology development, thus attracting Foreign Direct Investment (FDI),
   supporting Small and Medium Enterprises (SMEs) and adopting new strategies (governmental
   and interventional), especially if industrial activities are ‘fragmented’ globally, with processes
   and functions located across countries to take advantage of fine differences in cost, skill,
   technology and logistics.

       4.1.1. The protectionist background

      The Syrian industry was developed in a highly protected environment. This has led to a
      bizarre situation where a limited number of producers have monopolized the markets and
      selling at arbitrary prices. Implementing protectionist policies mechanically and without
      distinction was not balanced by a dynamic export-oriented strategy, as was the case in the
      Asian countries that successfully harmonized between gradual protection of the local market
      and active promotion of their exports in foreign markets. The Syrian industry was originally
      built on the principle of import substitution, which focuses on final products in the hope of
      applying modern technologies on a wide scale and manufacturing semi-finished as well as
      capital products such as equipment, machines etc. in order to achieve more industrial
      integration and provide locally manufactured products instead of imports.

       4.1.2. The current situation

      Unfortunately, that protectionist approach caused the situation to deteriorate where
      integration was concerned; imports increased rather than decreased, and the industries which
      limited themselves to the lowest steps of the production ladder were not able to create
      enough demand for intermediate and capital products of higher technological level and
      higher added value, because these products are not protected whereas end products are. All
      this confined the Syrian economy to low and outmoded technologies.

      IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                            17
    The Syrian industrial sector at present has too little structure and lags at the lowest steps of
    the technological ladder. This negatively affects its output and productivity and lowers its
    contribution to GDP from about 6, 5% in 2005 to almost 8% in 2008 (CBS, 2004-2008).
    Syria is facing a strategic challenge due to weak production performance, weak exports and
    weak industrial structure that impede the usage of technology and approaching more
    dynamic activities.

4.2. The Syrian industrial context

    4.2.1. A brief outlook of the evolution of the Syrian industry

    Syria has a mixed economic system based on a fast-growing private sector that dominates
    the service, trade and light manufacturing sectors; and a diminishing but still noteworthy
    public sector, made of a number of state-owned and often underperforming companies.

    -    In the late 1950s Syria adopted a centralized planning approach.
    -    During the 1970s the concept of economic pluralism was adopted to activate the role of
         the private sector and boost its participation in the economic life, but its response was
         below expectations.
    -    During the late 1980s the Syrian economy witnessed a hard time (internationally known
         as the ‘lost development decade’). This period was generally characterized by financial
         deficits and critical inflation rates, which dropped the GDP growth rate to 1.26%. The
         financial crisis prompted making serious transformations to expand the participation of
         the private sector and to liberalize trade. Syria, however, managed to overcome this
         crisis thanks to the oil and gas discovery and light oil exports in the early eighties on
         one hand, and also to the adoption of new economic policies to encourage private
         investment in agriculture and tourism (Decree No. 10, 1986). This doubled the GDP
         annual growth rates five times during the 1990s (at fixed prices), thus reaching 6.3%.
    -    In the 1990s, the average growth rate (at fixed prices) was 7.5%, which was in harmony
         with that of the eighties (7.1%). Between 1995-2001, the total output of the
         manufacturing industry increased by an annual rate of 9.2%. However, while this rate
         reached 21.6% in the first three years, it retreated between 1998 and 2001 to a minus of
         5.8%.
    -    After a decade of weak growth, the industrial sector has soared since mid 2000s,
         reaching almost 8% in 2006, almost 20% in 2007 and almost 10% in 2008, against a
         growth rate of the GDP of about 5%, 6% and 4,5% respectively (CBS, 2004-2008).
         Expansion has been supported by higher oil prices, private sector expansion and growth
         in non-oil exports to other Arab countries, favored by the entry in force of the Greater
         Arab Free Trade Area (GAFTA).

    4.2.2. The main characteristics of the Syrian industry

    The Syrian industry:

    -    has been based on local resources, particularly the food industry, cotton textiles,
         phosphate fertilizers, as well as on other imported raw and semi-finished inputs (the
         latter represents 55% of total imports);
    -    shows a high level of paralyzed production capacity in the public sector due to the huge
         stock accumulating because of the bad quality or the product nature that do not satisfy
         the consumers’ taste, and due to the low level of technology;


    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             18
     -   shows a production even in the private sector that is far less than the production
         capacity, because of the competition among similar, randomly established industries,
         the matter that increases the costs and limits the competitiveness;
     -   over the last decade has suffered a technological downgrading of both its production
         and export structures, becoming a supplier of low value added products within and
         outsidethe region;
     -   relies on production inputs that are mostly imported (Net Domestic Product - NDP of
         manufacturing industry is 20% of its gross production);
     -   is characterized by low human resources efficiency and productivity, coupled with
         qualifications that do not meet labor market needs;
     -   is characterized by micro, small and medium-sized family firms;
     -   Shows low performances, overwhelming domination ionof traditional activities,
         weaknesses in exports anda prevailing focus towards domestic markets.

4.3. The entrepreneurial climate

Traditionally Syria has adopted an interventionist approach to the economy, pursuing an active
vertical industrial policy and assigning to government institutions and state-owned companies
the role of steering economic development. As a matter of fact, Syria is still in the process of
making a strategic choice between the traditional industrial policy (based on intervention by
sectors and on the prominent role of state-owned companies and state-controlled institutions) and
a horizontal enterprise policy. Nowadays, the two policy approaches coexist in a difficult
compromise. However, in recent years Syria has started to progressively open its economy to
private entrepreneurship and to developelements of a horizontal policy, aimed at lifting some of
the constraints imposed on private companies and improving the operational environment.

A brief summary of main turning points is reported below.

-   The Investment Law no. 10 of 1991 was a fundamental step towards attracting local and
    foreign investments and foster entrepreneurship. As shown in the aftermath of this document,
    many laws were amended, several bilateral and multilateral trade agreements were signed
    and a number of other developments concerning the investment climate and the business
    environment have taken place in Syria during the past few years. However, starting up a
    company in Syria is still expensive, cumbersome and time consuming. Several different
    ministries handle the registration and licensing process, which slows down the
    entrepreneurial process significantly. Facilitation services exist only for companies operating
    in government-sponsored industrial zones.
-   In recent times, a number of changes have been introduced to the Syrian tax system as well.
    The results have been a simpler and more transparent tax system and a more modern tax
    administration. However, tax evasion is still a problem and deserves reforms.
-   Another key aspect concerns the finance system for entrepreneurship. Since the abolition of
    the State monopoly in banking activities in 2001 (now open to private and foreign investors),
    Syria has a mixed banking system, consisting of a number of state-owned specialized banks
    and a number of private banks, partially owned by banking groups from Arab countries. The
    government and the Central Bank have started a process of progressive liberalization and
    upgrading of the banking and financial sector, but the legal and regulatory environment
    remains relatively underdeveloped and the range of banking and financial services for the
    enterprises is still limited. A credit guarantee scheme is currently under preparation and a few
    micro-finance facilities exist. There are no equity funds operating in the Country and so far
    there is no legislation covering this issue.


    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             19
-   The 10th five-year development plan, approved in 2006, has set the agenda for a
    comprehensive program of economic reforms aimed at the expansion of the industry and at
    fostering internationally competitive enterprises. To this regard, a key component of the
    Syrian economic reform program is a progressive economic liberalization. The result is
    unilateral and multilateral trade liberalization agreements, which Syria signed with the
    GAFTA, a number of other countries and more recently with Turkey. Custom-exempted
    textile products from other Arab countries were permitted in Syria in 2005. Custom tax on
    imported equipment, raw materials related to the textile industry and textile and ready-made
    garments were brought down. Textile and ready-made garment were also allowed to be
    imported. Moreover, a project to computerize customs procedures has recently been launched
    by the United Nations Development Programme - UNDP and United Nations Conference on
    Trade and Development - UNCTAD. Finally – as it will discussed later on – in 2009 Syria
    has introduced a number of innovations to support export and trade to foreign markets: a
    national commission, a development fund an unions of exporters.
-   The transformation of the Syrian industry – from a resource based industry dominated by
    very small family businesses and focused on the domestic market, to a competitive industry
    associated with high value added, solid export orientation and modern enterprises – is also
    supported by permanent service centers, such as UMU (with the I’MUP Syria project) and
    the Syrian Enterprise Business Center (SEBC).

In conclusion, the current transitional period from an entrepreneurial climate dominated by
centralized planning and protectionism to a social market economy represents a critical stage for
both the decision makers and the business sector. This opens up to new challenges and issues
that deserve a clear strategic vision.

4.4. The Syrian competitive industrial performance

Competitive industrial performance is the ability of countries to increase production and exports
while deepening the production structure towards higher value-added activities and functions.
Syria’s competitive industrial performance is very poor to these respects.

-   Syrian industry has suffered a technological downgrading in its production and export
    structures, moving from skill and technology-intensive (medium and high technology) to
    simpler activities. It is becoming a bottom-end supplier of low value manufactured products
    within and outsidethe region.
-   Syria’s poor export performance partly reflects the legacy of its past ties with former Soviet
    countries. The demise of the Soviet system, which provided a ‘soft’ market that did not
    impose stringent requirements, exposed the competitive weaknesses of Syrian industry.
    Syria’s competitive position has deteriorated in the 1990s, losing ground in all manufacturing
    categories, including those where the country is supposed to have a comparative advantage.
-   According to the World Economic Forum (WEF) classification of national economies, the
    Syrian economy is listed among the group of factor-driven developing countries. In its debut
    in the Arab World Competitiveness Report 2007, issued by the WEF, Syria occupied 84 th
    rank out of 128 nations included in the report – ahead of many countries such as Georgia,
    Venezuela, Serbia and Paraguay. In the group of factor-driven developing countries, Syria
    occupied 12th rank out of 48 nations. The Global Competitiveness Report 2007-2008, issued
    by WEF, showed a fair progress in the general competitiveness indicator, where Syria
    jumped four points to occupy the 80th rank out of the 131 nations included in the report.
-   According to the World Bank’s Ease of doing business 2009, Syria is ranked 137 out of 181




    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                           20
        economies analyzed. The ranking1 is based on a set of regulations affecting 10 stages of a
        business’s life are measured: starting a business, dealing with construction permits,
        employing workers, registering property, getting credit, protecting investors, paying taxes,
        trading across borders, enforcing contracts and closing a business. If we compare Syria with
        other neighbor countries, such as Jordan, Lebanon, Turkey, United Arab Emirates (UAE) and
        Israel, they all perform better than Syria on this indicator. Nevertheless – as shown above –
        some positive reforms have been done in order to upgrade its ranking.

    4.5. A SWOT analysis of the Syrian industrial context

    In this section, main strengths, weaknesses, opportunities and threats characterizing the Syrian
    industrial context are summarized. These factors set the backbone for the development or the
    retrenchment of each industrial sector and – even if they go beyond the scope of formulating an
    industrial development strategy specifically for textile and clothing – may be carefully
    considered and relied on.

         4.5.1. Strengths

         Syria has important competitive advantages in resource-based and low-technology activities.
         They can also provide a base for a larger range of export activities if Syria can raise the
         technological capabilities of local firms, overcome weaknesses and tap into global value
         chains.

         -    rich in natural resources (oil and agriculture);
         -    good road infrastructures which guarantee adequate land transportations;
         -    long industrial and commercial tradition;
         -    cheap and disciplined labor force with good capabilities in traditional activities;
         -    well-located to serve both the Arab and the European markets;
         -    commitment to trade liberalization;
         -    positive attitude towards FDIs;
         -    consensus on reforming the public sector;
         -    The private sector is playing an increasing role in industry.

         4.5.2. Weaknesses

         Syria relies on an uncompetitive and isolated industrial sector cut off from global trends in
         technology, management and marketing. Moreover, Syria shows important weaknesses in
         industrial capabilities and policies.

         -    high cost and low quality productions;
         -    mainly oriented to thedomestic market;
         -    badly positioned for export growth;
         -    labor productivity in manufacturing is very low;
         -    technological backwardness;
         -    insufficient training;
         -    inadequate marketing;

1
  The low ranking of Syria is due to difficulties related to getting credit and enforcing contracts, as well asdealing with
construction permits, starting a business and employing workers. Syria introduced a new commercial code that
simplified business start-up by taking lawyers and the court out of the registration process. Reforms at the tax
directorate simplified tax registration for new businesses. The entry of private banks in the Syrian marketsped the
issuance of letters of creditlowering the overall time to import and export.

         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                               21
      - overstaffing, lack of motivation and poor management in public sector companies;
      - the governmentkeeps a tight control on industrial activity, limiting private initiative;
      - import protection remains high;
      - weak financial system (banking, credit system, private equity);
      - very diffused tax evasion;
      - Industrial support institutions are weak and de-linked from industry.
      4.5.3. Opportunities

      Syria has enormous opportunities for industrial development. It has so many comparative
      advantages that can be turned into competitive advantages..

      -    exploitingaccess to Arab and European markets both in terms of in-flows (FDI) and
           outflows (export);
      -    efficiently open up the economy and tap the sources of growth in the international
           economy;
      -    bilateral and multilateral trade agreements (e.g., GAFTA, EU, bilateral agreements)
           offer its industry to accessnew, but more demanding markets;
      -    taking full advantage of its location and its labor force towards European markets;
      -    upgrading its industrial value chains towards niche positioning;
      -    better public-private partnerships that can allow Syrian industry to move downstream
           and upstream in the value chain, increase value added and compete in export markets;
      -    Benefiting from international programs regarding industry modernization and
           upgrading, such as the I’MUP Syria program, launched by UNIDO.

      4.5.4. Threats

      Syria is not free from potential threats, especially with reference to its global
      competitiveness and trade relations.

      -    regional political uncertaintiescan negatively affect the overall regional attractiveness
           and discourage FDIs;
      -    slow pace of policy reform and lack of coherent strategy through liberalization could
           condemn Syria to low attractiveness and competitiveness;
      -    rapid liberalizationcan have ruinous consequences when capabilities have not been built
           up to face the new challenges;
      -    the costs of liberalization could be huge for Syria if these strategic elements are not put
           into place by the government;
      -    the competitive threat from other developing countries is increasing as they restructure
           their industries and institutions;
      -    The spread of European value chains to other countries in the periphery of Europe and
           in neighbor Arab markets can relegate Syria amongst the followers and erase the
           opportunity to tap into global value chains.
      -


5. The Syrian textile and clothing industry

   5.1. Industry overview

      5.1.1. Industry size


      IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             22
        The textile and clothing sector in Syria is one of oldest and most important industries in
        Syria.Syria The value of output reached 2,195 billion US$ in 2007 (24% of tol production
        value output not including oil revenues; 45% of total exports not including oil). This sector
        employs about 350,000 workers whilst official statistics report 100,000 workers.

        5.1.2. Industry structure

        The Syrian textile and clothing industry is composed by:

        Large public firms. There are 27 public sector textile mills. The 27 state-owned textile mills
        are coordinated and supervised by GOTI (the General Organization for the Textile Industry),
        which is the government institution serving the textile industry as it happens for other
        different industries, according to the Syrian industry governance model. The 27 GOTI mills
        have inherent problems that are a legacy of their public ownership, resulting in central
        administration decision takers controlling the businesses;; limited human resource skills;;
        weak management;;over-staffeded with low productivity; tooproductivitytoo high
        conversion costs; excessive stocks and without marketing activities. Public sector textile
        companies continue to have the major part of the country’s cotton and wool yarn spinning
        capacities and blanket production. Of the 27 GOTI mills it is reported by GOTI that: 8 are
        profitable companies, 13 companies reach the break-evenand 6 companies are losing money.

        Private SMEs. As far as private sector firms are concerned, a survey conducted by the CBS
        shows a manufacturing base, which is dominated by micro firms. Some 24.000 textile plants
        of all sizes are registered in addition to an unknown number of unregistered manufacturers.
        Micro-sized firms (less than 10 workers) are about 73% of the total production value, small-
        sized firms (10-50 workers) represent 18% of the total production value and value added,
        and, 11% of workers number, medium-sized firms (with 51-250 workers) in addition to a
        limited number of large-sized firms (with more than 250 workers) represent about 11% of
        the total production value and value added, and almost 6.5 of the workforce. In the textile
        and clothing industry the dominance of micro-small firms is even more stressed.stressed
        19.657 have equal or less than 5 workers, 2.179 from 6 to 9, 564 from 10 to 15 and only
        872more than 15 employees. Private companies have the total capacity of the country for
        manufacturing bed sheets, tricot, silk yarn and fabrics and synthetic yarns; more than 90% of
        socks, ready-made garments – outwear and underwear, synthetic fabrics, wool/wool mixture
        fabrics together with a major share cotton fabric and carpet/rug production.

        5.1.3. Internationalization of the industry

        Out of 24.000 firms only a small proportion exports2. For the most part, export is still in its
        infancy and exported products are basic, low priced and directed to the lower market
        segments, even if there are several best performers, positioned in high-end segments. Even
        companies manufacturing products for export are almost invariably small- to medium-sized
        companies and dependent on other companies for their raw material supplies. The
        distribution channels mostly used are those of commercial exporters (shipping companies,
        buying houses, buying agents). The major disadvantage of this export approach is that these
        Syrian companies rarely get the opportunity to understand the dynamics of the markets and,
        thus, they are hampered in catching all the opportunities that global markets could offer.


2
  There no official data on the number of private textile/clothing firms neither on the number of exporters that range
from 400 to 4000, depending on the source. Thereforeis misleading to put any number since sources are unreliable. In
any case the proportion of exporters on the total number of firms is quite small.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                           23
        5.1.4. Industry segments

        There are two main segments in the industry, cotton textiles and clothing and synthetic
        textiles and garments. The clothing segment (garment manufacturers) has the largest number
        of enterprises and some skilled producers, but a very large partlags behindquality and design
        standards in world markets. The clothing and apparel segment has several competitive
        enterprises, but its export performance is very poor. Most enterprises produce basic clothing
        articles (underwear and lingerie, seamless underwear, sweaters, T-shirts, socks, stockings
        and pantyhose, children wear, casual wear and jeans) with little value added, for mid-class
        market segments, local and international. Moreover, there are companies specialized in
        Dying and finishing on commission and many others focused on weaving and
        manufacturing home textile and fabrics.

    5.2. Performances of the textile/clothing industry3

        5.2.1. Industry growth

        Between 1995 and 2007, the private sector contribution to processed fabric production has
        grown notably. This contribution has increased from 72% to 81% during this period, whilst
        the share of the public sector went down from 28% in 1995 to 19% in 2007.

        5.2.2. Industry investments

        In cumulated terms, the textile sector received in the period 1995-2007 more than 70% total
        public investments in the manufacturing industry andcotton spinning alone took 80% of
        these investments (SYP 28 billion)to finance the spinning projects in Lattakia, Idleb and
        Jableh. The spinning sector is relatively large, but weaving and finishing are under-
        developed. Production lines were upgraded in other public sector plants, increasing
        production notably. The private sector has also set up new modern enterprises producing
        yarn, textile and garment. All of this has boosted production remarkably between 1995 and
        2007. The value of yarn and textile products went up from 833 million US$ in 1995 to 1535
        million US$ in 2000 and 2195 million US$ in 2007.

        5.2.3. Industry production4

        In 2007, Syria produced 618,000 tons of lint cotton that were made into 212,000 tons of
        ginned cotton. 45,000 tons of that were exported while the rest went to the local market.
        Organic cotton has recently been produced and spun in Syria. The total production of yarned
        cotton is estimated at 146.000 tons of which around 111.000 tons are produced by the public
        sector. Around 49.000 tons of this was exported and the rest was made locally into different
        garments and home fabrics (towels, underwear and curtains). 37.000 tons of cotton
        garments, 14.000 tons of woolen-synthetic fabrics, 12 million dozens (12 piece set) of
        underwear, 92 million pieces of ready made garment, 28 million pieces of tricot, 9 million
        dozens of socks, 15 million pieces of towels and bed sheets, 6 million m2 of carpet, 33.000
        tons of processed fabric. Silk production, for which Syria has been famous throughout the
        ages, has fallen back greatly.


3
  Data presented in this sectionare taken from “Arab Federation for Textile Industries. Executive Summaries of
National Case Studies: Egypt, Jordan, Syria, Tunisia. Syria Case Study” by Fouad Al Laham, 2009.
4
  Dataare taken from “The current situation of the Arab Textile Industry”, prepared by the Arab Federation of Textile
Industries in 2009.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                          24
5.2.4. Industry consumptions

Official and unofficial data regarding local textile consumption are not available for the
period 1995-2007. Nevertheless, apparent consumption can be calculated from subtracting
the value of exports from that of import and production. Syrian textile apparent consumption
is, therefore, estimatedat around 743 million US$ in 1995, 1346 million US$ in 2000 and
2894 million US$ in 2007.

5.2.5. Industry export trade

Syria exports most of its textile production to Arab countries (53%), which was 28% in
2005. The value of these exports increased accordingly from 23 million SYP in 2001 to
almost 99 million SYP in 2007 (CBS, 2001-2007). This increase can be attributed to the
completion of the Arab Trade Free Zone in 2005. The share of Syrian textile industries in
total manufacture exports to Arab countries also increased from 16% in 2002 to 26% in
2006 and 2007. While textile exports to Libya, Saudi Arabia, Mauritania and Algeria fall
mainly into ready-made garment, fabrics and other manufactured products, Egypt imports
cotton yarns only. Textile imports from Arab countries are relatively modest. They were
only 6% in 2007. The cash value of these imports went up from 1,4 million US$ in 1996 to
16,7 million US$ in 2002, about 23 million US$ in 2006 and 27 million US$ in 2007. Saudi
Arabia, Egypt, Lebanon, UAE and Jordan are the major importers of Syrian textile products.
The textile trade of balance between Syria and the Arab countries is positive. The surplus of
this balance was 991 million US$ in 2006 and 1046 million US$ in 2007 in favor of Syria.
Europe ranks second with a share of 22%. Asian countries (excluding Arab countries and
China) became part of the Syrian export market with share of 13% in 2006 and 22% in
2007. The rest of the production is exported to other regions (Africa, America, China, etc.).
A large part of the Syrian cotton crop is exported in raw form. Processed product exports are
primarily low value products: public sector firms are concentrated in yarn production and
the private sector in the low end of the clothing value chain. While several international
fashion firms are present in Syria, they are not using it as a significant base for export
activity; they mainly serve the local market and permit exports to a few Arab countries.
Syria has not been able to attract significant international subcontracting in the apparel
industry – it has missed out on one of the main recent engines of export, employment and
production growth in the developing world. Yarns, underwear, bed sheets, bed covers and
ready-made garment constitute the majority of exports. Syria’s export performance has been
very poor in the past and total export earnings in the industry are, however, low and the
industry has not been able to move into high value segments.

5.2.6. Industry import trade

On the import side, the Syrian textile industry has to compete with other suppliers, even in
the Syrian market, which is now full of Chinese,, Turkish products. In these new conditions,
the Syrian entrepreneurs realize that they need to put big efforts in order to face challenges,
and strengthen their position in the local, regional, and international markets. Until the
gradual liberalization of the Syrian market, private and public textile industries had operated
in a totally protected environment. Assaid, the liberalization alloweda textile and garments
to be imported. Nevertheless, the Syrian textile import remained almost constant around 20
million SYP from 2001 to 2007 (CBS, 2001-2007). The main source of Syrian textile
imports in 2007 are Asian countries (excluding Arab countries and China). Their share of
the total textile imports was 55%. Imports from India, Malaysia, Turkey and Bangladesh

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                            25
        were the majority. China came second with a share of 21% followed by Europe (15%).
        Imports from Italy and Germany were the most important among the European imports.
        ImportIs fall mainly into synthetic yarns and fibers, which are produced locally in
        inadequate quantities or not at all produced. Synthetic fibers and threads made up 73% of
        these imports in 2007.

    5.3. Main challenges

    The Syrian textile industry, like all other industries, faces numerous external challenges that
    deserve much attention in order to design proper strategies.

      1. The globalization of the market is the primary challenge for the Syrian economy,, which
         would deserve a gradual exposure to the international competition. The economic
         globalization accelerates the technological change, eliminates distances, imposes
         integration with the world economy and allows the emergence of international rivals. This
         new situation is a very important challenge for Syria to achieve effective integration with
         the international economy through exporting products with ever increasing technological
         and cognitive content, and not reactive solely via liberating imports.

      2. Competition in the local and traditional international markets is a related challenge. This is
         due to the liberalization of markets (regardless of the type of ownership) as this industry
         has grown in a totally protected environment. The economic policies of the second half of
         the 1990s, which have driven tradevia liberalization, did not pay attention to the vital need
         to upgrade Syrian textile industries, which has started only partly to happen in 2005.
         However, this upgrading process was left incomplete.incomplete Some local textile
         importers abused the tax reductions on importing from Arab countries. Certificate of
         origin were launched to benefit from tax reductions when importing from Arab
         countriesnot to mention altering the real value of these products, whichwent unnoticed
         because of the lack of adequate control.

      3. Due to the increasing competitive pressures, Trans-National Corporations (TNCs)5, global
         retailers and international buyers started to change the international labor division, so that
         they maintain the first link of the technological chain (design) and the last one (assembling
         and marketing), and manage all the links between them, producing the final products or
         their components in other countries including developing countries. Of course, some of
         them look for low-cost/low-quality high-volume productions, while some others do prefer
         flexibility, high quality and small volumes. These latter are more suitable for the Syrian
         industryy profile. Syria has to benefit from this new situation and get an appropriate
         sharein the international market after defining the niches in which it might succeed or
         compete, going beyond the availability of natural resources, the favorable geographical
         location and the cheap workforce. All developed countries and newly-industrializing
         countries are building up strong, and well-funded and well-staffed investment promotion
         agencies as part of their competitiveness strategies. Syria has recently started an
         investment promotion agency – the Syrian Investment Committee – thanks to the Decree
         no.7 of 2006.


5
  TNCs account today for a large share of the world trade, and tapping into their production and sourcing networks is
increasingly important not only for export activity, but also because through partnerships or FDIs they are the main
source of innovation and technology transfer today, and many technologies are not available without direct participation
by their affiliates. They also transfer the modern skills and organizational techniques that enterprises need to compete
internationally.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                             26
  4. Further, Syria faces another challenge in the form of competitive pressures from at least
     the following sources:

                  - Arab countries that have achieved economic openness earlier and took
                      positive stepsto improve their competitiveness such as Tunisia and
                      Morocco and partially Saudi Arabia, as well as pressures resulting from the
                      wrong application of GAFTA and other bilateral agreements;
                  - the Asian and East European Countries playing significant pressure through
                      their advanced productive structure, employment of technical workforce,
                      modern and intensively-financed production lines to produce higher value
                      added and higher quality products;
                  - countries with cheap workforce such as China, India and even Bangladesh
                      (cotton garments) that could strongly enter the world markets, these
                      countries as well play competitive pressure on countries like Syria which
                      have cheap workforce and limited-quality industrial exports;
                  - Turkey, whose competitive pressure on the Syrian local market has been
                      progressively increasing also as a consequence of the trade liberalization.

Serious external challenges and risks are thus threatening the Syrian textile industry. The
consequences of these challenges can be now seen as some private enterprises failed. Some
manufacturers turned to importing or went on to invest in other countries, which offer a better
environment than Syria. This is signaling serious risks for the present and future of this industry.
These risks surrounding the textile industry have become more eminent due to the International
financial and economic crisis, whose affects are yet to be seen, even if – as shown above – there
is a generalized downturn in textile markets worldwide.

The Syrian textile/clothing industry should also face several internal challenges.

  5. Syrian textile industries are still lacking many necessary support institutions to enhance its
     competitiveness. Such agencies, which can provide support the textile industry to improve
     competitiveness, are nonexistent in Syria. Although there are currently a number of
     support institutions – such as The Syrian Arab Standards and Metrology Organization
     (SASMO), Industrial Testing and Research Centre (ITRC), Vocational Training Centers,
     two Intermediate Institutes for Textile Industries in Damascus and Aleppo and the
     departments of textile industries in faculties of mechanical engineering in Damascus,
     Homs and Aleppo – these facilities belong to the public sector and operate with
     bureaucratic government regulations and standards. They need to be utilized and linked to
     the market needs. The capacity of their staff needs also to be built and refined.

  6. Moreover, there is a lack of funding sources. This makes the textile industry rely totally
     on its own sources to finance operations. This results in inadequate start-up capitals and
     negatively affects competitiveness. The Syria 2006-2007 report published by the Decision
     support Office of the Ministers Council claims that the industrial and mining sectors
     enjoyed a share of only 4,9% of bank credit in 2007. The commercial sector had a share of
     48,4% and 13,5% went to the agricultural sector. Venture capital and private equity
     operators are almost non-existent in Syria.

  7. Industrial competitiveness depends on the intensity and effectiveness of efforts to absorb,
     adapt and improve upon imported technology. There are no published data on R&D in
     Syria, but it appears from the public sector’s lack of innovativeness that industrial R&D is
     negligible. In the private sector, the structure of industry – dominated by small traditional

   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              27
       family-run enterprises operating in labor-intensive activities and serving local markets –
       also suggests that R&D is very low. Moreover, compared to countries in the region, Syria
       lags in all Information and Communication Technology (ICT) indicators apart from
       telephone mainline.

  8. Finally, Syria is challenged also with respect to human capital. The need is not just for a
     general upgrading of skills – modern manufacturing calls for a range of new and
     specialized technical and managerial skills. It also calls for new forms of organization and
     ‘multi-skilling’ of the workforce. In spite of its long entrepreneurial tradition, Syria still
     suffers from widespread illiteracy with a quarter of its population unable to read and write.
     The Syrian educational system is not producing the quantity and quality of skills needed
     for industrial regeneration. Training is seen as a cost rather than as an investment.
     Training in public textile companies do occur but it is not systematic, widespread or well
     funded. There is a lack of skilled workers in weaving, dyeing, printing and finishing. And
     in GOTI, which manages public textile companies, only 3% of workers have university
     degrees. Without a skilled workforce quality upgrading and increased productivity cannot
     be achieved. According to United Nations – Economic and Social Commission for
     Western Asia (UN-ESCWA) estimates, Syria shows nearly one-third of the productivity
     of Jordan and almost one-fifth of Lebanon, Oman, and Saudi Arabia. Additionally,
     manufacturing wages in Syria are among the lowest in the region. However, this potential
     advantage requires high levels of labor productivity, whilst Syria appears to have one the
     lowest labor and firm productivity levels in the region. This reflects many factors:
     obsolete technology, poor technical competence, inefficient factory layouts, insufficient
     training and weak marketing and management skills in many manufacturing firms, notably
     in the public sector. Wages are low and hamper productivity. Skilled workers often move
     from the public to the private sector. Similarly, experienced managers and technicians
     frequently move to private companies. Public companies lose experienced human
     resources, hence increasing the relative number of unskilled shop floor workers.

In conclusion, Syria is stuck in the middle of several potential competitive advantages that are
not properly or entirely exploited, and this situation challenges the future competitiveness of the
Syrian textile industry.


5.4. A SWOT analysis of the Syrian Textile/Clothing industry

Summing up the discussion above, the Syrian textile and clothing industry shows several
strengths that need proper strategies in order to catch opportunities on national and international
markets. Nevertheless, Syria has to rapidly intervene to recover from its weaknesses that may
hamper its exploitation of opportunities and to prevent from threats that can slow down or
impede not only the upgrading and modernization of the industry but even determine the overall
retrenchment of the Syrian textile and clothing industry.

   5.4.1. Strengths

   The Syrian textile and clothing industry has several strengths. They are:

   -     full production cycle in the cotton industry: from raw materials to final apparels;
   -     highest cotton productivity in the region and second (next to Egypt) largest producer of
         textile in the region;
   -     qualified spinning technicians, skilled workers and experienced entrepreneurs;

   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             28
-    diffusion of micro and small firms that allow organizational and production flexibility,
     i.e. the ability to offer little batches, matching the international markets taste, in addition
     to the high speed in overland shipping to Europe;
-    proximity to regional and European markets and favorable positioning in the
     Mediterranean;
-    road networks are quite good and allow easy and quick transportations through neighbor
     countries and even towards Europe;
-    the Lattakia seaport has ample container space and is a crucial hub for textile;
-    adequate electricity and Internet facilities are increasingly available;
-    Renewal of iesmachineries and equipment for spinning, weaving and dyeing in some
     state-owned firms.

5.4.2. Weaknesses

Unfortunately, the Syrian textile and clothing industry is not free from weaknesses as well.
In summary:

-    lack of coordination and integration between yarn production capacity and textile
     production capacity;
-    lack of integration in the textile and clothing value chain which is weak especially in
     high value added components;
-    weak entrepreneurial structure made of micro family firms fragmented in geographical
     terms;
-    lack of effective support agencies and intermediate institutions as well as a credit/capital
     system able to secure financing;
-    production is seldom compliant with international standards;
-    gap between fashion design level in Syria and international requirements;
-    lack of international market knowledge and of professional technical, design, marketing
     and management skills in public and private companies;
-    strong bureaucracy and slow decision-making process in state-owned firms;
-    low productivity and low utilization of existing capacity;
-    lack of research and innovation and slow response to environmental issues;
-    lack of experienced technicians for weaving, dyeing, finishing and a lack of effective
     integrated training which links to market demand;
-    high production costs and absence of production/quality procedures;
-    lack of marketing policy combined with a poor market and customers knowledge;
-    lack of an entrepreneurial mentality and a strong industrial wisdom to rely on;
-    Lack of a clear, shared vision and an agreed strategy to develop textile industry.

5.4.3. Opportunities

The Syrian textile and clothing industry has been offered many interesting opportunities that
deserve proper strategies to be caughtcaught. These opportunities are selective in nature, i.e.
they are reserved solely to those firms (either public or private) able to comply with
international requirements and capable to construct and defend a proper market niche in a
high value segment. The opportunities are:

-    increasing the share of home textiles and ready-made garments on international
     markets;
-    reaching the same level of competitiveness and efficiency of competing countries;


IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                 29
       -    the possibility to significantly increase export to Arab countries, Turkey, Europe and
            Russia;
       -    leveraging low labor costs, paired with an increased productivity and efficiency to
            prepare the ground (in terms of competencies, facilities, infrastructures and financial-
            fiscal conditions) to attract significant FDI from Turkey as well as from Europe;
       -    leveraging Syrian strategic localization to become a hub for Turkish productions
            directed towardsFar East;
       -    repositioning itself to higher market segments through new products and designs, new
            fibers and technologies, such as:

            o producing higher quality cotton yarns to meet market needs for high quality textile,
              including colored and organic cotton yarns;
            o investing in modern irrigation and water saving to reduce production costs;
            o expanding organic cotton production and related products;
            o fully utilizing all local cotton production in local industries especially in value added
              production chains;
            o Cooperating in the area of scientific research to develop into a modern, efficient and
              green cotton industry.

       5.4.4. Threats

       As shown above, threats are several and they are mainly related to two issues: timing and
       globalization. These threats may occur when:

       -    international exposure is not gradually programmed and assisted by a gradual
            strengthening of the local industry;
       -    crucial industry reforms will not be completed when the textile/clothing market will be
            ready to restart, thus preventing Syria from entering the global competition as a real
            player;
       -    the failure to address origin certificate laundering and the phenomenon of false invoices
            negatively affect the market and by-pass custom taxestaxes;
       -    an inadequate control over imported textile goods may assault the local market with
            cheap and unsafe products;
       -    The decline in land area dedicated to cotton production may result into the following
            decline of cotton production (high costs and not competitive context conditions for
            farmers).


6. The ‘way forward’: a strategy for the Syrian textile and clothing industry

The Syrian textile and clothing industry is a promising strategic sector in the Syrian economy,
anchored in ancient traditions and on a valuable cotton industry.

Nevertheless, the Syrian textile and clothing industry starts with a legacy of inefficiency,
protectionism and inadequacy to the current global context.

Syria has the full textile production chain, which gives it a great advantage. However, this industry
cannot yet compete in the international market. The essence of current competitiveness lies in
innovation and knowledge, as well as in technological, organizational and networking issues.
Global competitors struggle for absorbing new resources and competencies and for recombining
them in innovative manners. To this regard, the full control of up-to-date production technologies,

       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             30
as well as effective and efficient organizational measures are fundamental. In most competitive
countries, being mthem industrialized or new-industrializing countries, these upgrading processes
are not achieved by firms in isolation but in collective arrangements, such as innovative milieux,
industrial clusters, regional innovation systems or industrial areas. In some cases, as in the case of
industrial districts, these phenomena are spontaneous iin many others they are the result of well-
grounded industrial development strategies.

In this document, strategies are organized on three distinct levels of intervention that should be
closely interconnected when applied.

-   The highest level of strategic intervention to upgrade and modernize the Syrian textile and
    clothing industry is the macro-level. At this level, strategies aimed at setting proper conditions
    for the overall business environment are formulated.
-   The intermediate level of intervention is the meso-level, where strategies are directed to
    complement and strengthen all those service and support institutions and agencies that are too
    weak or non-existent in the Syrian textile and clothing industry, but they proved to be
    fundamental in other industrial context to pursue an effective upgrading strategy.
-   Finally, strategies are suggested also at the micro-level, i.e. the level of industry operators, with
    a distinction between those strategies directed towards the upgrading of private firms and those
    specifically needed in the state-owned firms.

    6.1. Vision, mission and objectives

    Vision, mission and objectives are the most important pillars in every strategy and should
    constitute a coherent and integrated framework. So far, such a strategic framework has been
    missing or appeared to be blurred with reference to the Syrian textile and clothing industry. As a
    matter of fact, some previous strategy documents and important industry stakeholders account
    for the lack of a strategic vision and effective policies, which aymay enable manufacturers to
    compete locally and internationally. The time frame considered for starting major strategic
    interventions in the industry is the end of the next FYP, i.e. 2015. As it will be explained in each
    strategic intervention suggested below, this does not mean that they should be completed by
    2015 but that their main components should be put in place.
    The absence of a comprehensive industrial development vision and strategy, which should be
    the country’s economic ‘constitution’, prevents the identification of where and how the
    government should intervene (less, more or differently) and what to invest on.
    For these reasons and in order to comply with the analysis sketched above, some key questions
    emerge:

                      - Where the Syrian textile and clothing industry should position itself in 2015?
                      - Which are the competitive priorities for the Syrian textile and clothing
                         industry, with regard to the challenges examined above?
                      - How can the Syrian textile and clothing industry be upgraded and modernized
                         in order to become a real player in the global competition?

    The aftermath of this section deals with such questions, first of all proposing a vision for the
    entire Syrian textile and clothing industry in 2015. This vision is then detailed in strategic
    objective and, thus, in strategic directions.




       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               31
6.1.1. Vision

There is a tremendous need in the Syrian textile and clothing industry to look at the future!
Many things have changed in the global scenario and Syria needs to position itself in it. As a
matter of factfact, a vision is the desired future for a business. The more focused is the
vision; the more useful it is to define the right strategic options. The vision should answer to
the following key questions:

-   ichWhich is the desired usstatus of the Syrian textile and clothing industry in 2015?

Complying with these considerations and the above-illustrated analysis, the following vision
is proposed:

‘The textile and clothing industry is the flagship of Syrian growth in local and global
markets (with a focus on specific product niche markets) and a valuable strategic partner of
leading textile manufacturer worldwide (through efficient and effective clusters and
industrial zones)’.

Consequently, the proposed vision focuses on two key aspects:

(a) the Syrian textile and clothing industry will leverage its legacy from the past and its
    worthy cotton resources to maintain its key role in the Syrian economy, strengthening its
    performance both on local markets – which are still underdeveloped compared to other
    countries and deserve major changes now that the industry is open to foreign competitors
    – and international markets – where Syria export is still in its infancy. This means that
    the Syrian textile and clothing industry needs proper strategies (as detailed below) to
    become the engine of growth for the Syrian economy, thus contributing positively and
    fully to the realization of the ambitious objectives of the 10th and 11th national FYPs
    (2006-2015), all within the framework of economic reform of all Syria.
(b) Syria must positively integrate with the world economy through tapping into global
    value chains, as a partner for foreign manufacturers and international traders. This means
    that the textile and clothing industry has to be helped to restructure and upgrade to
    increasingly attract FDI from global players, benefiting from various kinds of spillovers.
    Being attractive means providing suitable industrial and financial context where
    terrelations among manufacturers and between them and support institutions are at the
    maximummaximum, such as in industrial clusters.

As a general precondition, such vision requires taking a clear and unquestionable attitude
towards the interrelation between the state and market economy, and the interrelation
between public sector and private sector.

6.1.2. Mission

The mission should be consequential to the vision and provide concrete indications on how
to translate the overall strategic orientation in the definition of where, why, how the Syrian
textile and clothing industry should be.

Where. The ‘where’ definition should make reference to the potential positioning of the
Syrian textile and clothing industry in the global value chain, based on the exploitation of its
two main comparative advantages: availability of cotton and vertical integration. To this
regard the Syrian textile and clothing industry has a dual mission:

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             32
(a) On one side, Syria should position itself in local and international markets focusing its
    specialization on a few segments. In terms of geographical market we refer first to the
    near Arab region (where free trade agreements are already operating) and to Turkey
    (where progressive liberalization of trade and the flourishing economy are promising)
    and second to Russia (for historical connections and the fact that is one of the few
    growing markets for textile and clothing even in times of crisis) and the EU-27 (where
    newly added countries are growing and easier markets to addressaddress). In terms of
    product market we refer first to home textile (towels, carpets, and sheets, household
    linen and white goods in general) where the expertise, the tradition and availability of
    high quality raw materials should position Syria in top segments of the global market.
    Second, Syria has a long tradition, diffused expertise and competitive advantages in the
    underwear segment, where high-end lingerie has nothing to envy to Italian and French
    fashion maisons. Third, Syria should leverage its competencies in the above-mentioned
    segments and a pre-existing presence in the uniforms business, to tap into the technical
    textile industry, addressing market niches such as underwear and garments for
    pregnancy, hospital and medical care, surgical treatment clothing, etc. The technical
    textile business is growing globally and Syria can play a role in it.
(b) On the other side, Syria should leverage its vertically integrated industrial structure,
    composed by a great number of flexible micro and small enterprises to position itself
    into global value chains, as a partner for foreign manufacturers and international traders
    searching for convenient, reliable and quality-oriented subcontractors or sub-
    subcontractors. This is a great opportunity for all those Syrian firms owho are unable to
    play a direct role on international markets but owho can play a significant role in
    supporting the de-localized production of TNCs, global retailers or international buyers
    and so acquiring valuable resources and competencies.

How. The ‘how’ definition should make reference to the overall modernization and
upgrading approach that the Syrian textile and clothing industry should adopt to reach the
desired positioning. To comply with it, interventions are required at both the macro level,
i.e. the overall business and market conditions, the meso level, i.e. the institutional support
by agencies, bodies and associations, and the micro level, i.e. the firm level. In general
terms, the Syrian textile and clothing industry should undergo a major restructuring and
upgrading that: on one side should exert all efforts to meet local market needs and export,
utilizing opportunities resulting from joining the GAFTA, the bilateral agreement with
Turkey and other regional agreements, promoting private sector to invest locally and
globally and raising the public sector to international performance levels; on the other, it
should foster the formation of dynamic clusters of small enterprises, with modern equipment
and ICT facilities, advanced skills and delivery capabilities, which can be attractive for
FDIs, TNCs, global retailers and international buyers.

Why. The ‘why’ definition should make reference to the general reasons why the Syrian
textile and clothing industry needs a major redefinition of its role, structure and positioning.
The main reason resides in the valuable unexpressed potential that the local textile industry
has in terms of comparative advantages that can be transformed in competitive edges. For
many decades the industry potential was hindered by monopolistic and protectionist
policies, which on one side protected the local industry from global threats, but on the other,
prevented the industry to convey its latent qualities and abilities into a thorough competitive
advantage. The time is now! Syria has to invest now on dramatic reforms to get ready to
enter the global competition as a player and not set apart as an observer. As shown above,
the global textile and clothing market is suffering from the current financial crisis, thus is

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             33
   difficult to penetrate international markets now, unless through aggressive product/quality
   ratios that only China and other South-Asian countries can afford. What is feasible now is to
   invest in the xtnext future, to get ready when the global market will restart. Syria has already
   missed another window of opportunity similar to the present one, immediately after the end
   of the MFA, and not catching this new occasion in a proper way may imply the exclusion of
   Syria from world textile and clothing scene for a long time. In conclusion, the main reason
   why the Syrian textile and clothing industry should engage in such a substantial
   restructuring is that now it is time for Syria to be pro-active towards the future
   competitiveness of its industry. Not complying with these needed strategic interventions
   would hamper not only the sustainability of the Syrian textile and clothing industry, but it
   would also affect the entire Syrian economic system. For this reason, each of the strategic
   interventions suggested below stresses also what would happen to the industry if such
   interventions are ignored.

6.2. Strategic governance: towards an Industry Strategic Board

Set up an Industry Strategic Board (ISB) for the governance and meta-management of the entire
textile and clothing industry should be the starting point of any effective strategic intervention in
the industry. The ISB is meant to be a think-tank for the textile/clothing industry on issues such
as technological development, sector needs, export, education, etc. It is conceived to have also
authority for execution and implementation, i.e. executive power and not just a consultative role

   6.2.1. The need for a new governance body

   There is a growing awareness among policy makers that one of the main drivers of
   competitiveness of industries, especially the ones based on a network of micro and small
   firms, is the establishment of a governance body for the industry. As a matter of fact, in the
   Syrian textile/clothing industry there is a gap between localized technical competencies
   (often very strong) and diffused strategic thinking capabilities (often very weak), in
   particular as far as collective strategies are concerned. This has underlined the relevance that
   collective meta-actors could exert in such industrial contexts for recovering an overall
   strategic vision of the system and for sustaining the competitiveness and the existence of the
   industry itself. The reference here is to meta-management institutions and bodies who can
   assure the governance of the entire industry. There is the need to establish a national textile
   and clothing industry’s board, which may include all different production cycles and related
   services from the public to private sectors (from cotton farming to design and support
   services), in the form of a public-private partnership. It should be an arena were all key
   industry stakeholders are represented and a number of specialized experts aresupporting
   them.

   6.2.2. Organization and composition

   In order to successfully orchestrate the activities of the Syrian textile and clothing industry,
   the ISB needs an organizational structure agile enough to permit it to flexibly address
   different issues. Its governance structure has to be carefully designed in order to facilitate its
   work and avoid paralysis. Even if it is too precipitate to enter details in defining the board’s
   composition, election/nomination criteria and duration – and this should be part of a specific
   Term of Reference – it is preferable to assure a wide representation of stakeholders and a
   time-horizon long enough to follow the implementation even long-term strategies. In
   general, it is suggested that:


   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               34
        -    the number of members should be kept to the minimum even if guanteeing that all
             relevant stakeholders are represented;
        -    the participation of members should be guided by their willingness to be part of the
             board and their active involvement in it;
        -    all the Ministries directly concerned with the definition and implementation of the
             textile/clothing industrial strategy should be represented in the board and this should
             guarantee an executive power to the board;
        -    all other actors (public or private) who are important stakeholders in the textile/clothing
             industry should be represented in the board;
        -    the board should rely on the external support of specialized pools of experts;
        -    actors with specific competencies in the textile/clothing business as well as consultants
             may be invited in a consultative role to take part to the board;
        -    the board should have a direct channel to the Government in order to assure immediate
             implementation of decisions taken;
        -    the internal decision process should be similar to the one of a Board of Directors, i.e.
             every issue brought by members or external stakeholders to the attention of the board,
             should be delegated to a specialized sub-group for analysis and elaboration, then
             discussed in plenary and then – if it is the case – delegated to an executive sub-group of
             members for its implementation or execution;
        -    this means that the board may have a smaller executive board inside.

        6.2.3. Expected roles

        The setting up of an ISB is the real starting point of the overall industry strategy formulation
        and implementation. There are three main roles the ISB could as an industry meta-manager.
        In all the subsequent strategic interventions suggested in this document these three roles
        may occur simultaneously or not, in relation with the role played by other stakeholders in
        the textile/clothing industry. So, for instance, there might be strategic actions where the ISB
        will act only as a supervisor, some others where it will act both as a supervisor and a
        planner, thus being the main responsible for that strategy to take action. The roles are:

        - the planner, that acts as a planner for the whole industry and that is in charge of the
          analysis and integration of various demands, emerging from different institutions and
          firms, promoting strategies at the macro-, meso- and micro-level;
        - the sponsor, that is in charge of the legitimization and sponsorship of local development,
          of the creation of good business conditions and of the gathering of those human, financial
          and physical resources needed for the implementation of the industry strategy;
        - The supervisor, that is in charge of translating collective strategies in actual programs and
          action plans, coordinating the accomplishment of each strategy direction orchestrating
          different actors6 and monitoring the achievement of strategic objectives.

        6.2.4. Expected activities




6
  The ISB is expected to favour coordination in the formulation of policies and development strategies between private
and state-owned firms. This should be done in liaison with the National competitiveness observatory, building on the
National Program for Industrial Modernization and Upgrading. In particular, the ISB would benefit much from the
transformation of the National Program for Industrial Modernization and Upgrading into a permanent National facility,
even with the support of a National Industrial Modernization Fund. Funding could come from donor governments and
agencies and from a share of the fiscal and custom system of the industry.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                           35
         The ISB is meant as an arena for strategizing at the textile/clothing industry level, similarly
         to what iis proposed in this document. This can be done at least on three different
         aspectsaspects:

         -    Industry strategy7. This kind of strategy should be addressed towards obtaining a strong
              consensus8 from the main institutional actors (firms, business associations, chambers,
              public administration offices, trade unions, service centers, institutional agencies, etc.).
              The industry strategy should focus both on the contributions that the main industry
              actors could provide and the benefits they collectively could get.
         -    Marketing and communication strategy. This kind of strategy should focus on
              ‘marketing’ the entire textile/clothing industry, stressing its strengths, tradition,
              competencies, flagship products, entrepreneurial spirit, etc.
         -    Competitive strategy. This kind of strategy is aimed at identifying the competitive
              arenas for the firms operating in the industry, the strengths and weaknesses of their
              businesses, their key competitors, the threats and the opportunities they might face. This
              represents a concrete support to the competitiveness of the industry and should be
              revised systematically.

         Additionally, the ISB is expected to take care of the following specific activities:

         -    the creation and continuous support in maintaining a favorable socio-economic context,
              through the presence of efficient and effective infrastructures, the supply of services
              towards the business environment, the promotion of the image of the industrial district,
              the development of collective marketing strategies, etc.;
         -    the identification of collective strategies for the local development;
         -    the promotion of entrepreneurial initiatives;
         -    the use of central government resources for local industrial policies;
         -    the generation of a shared consensus around the activities of the committee;
         -    the representation of local industrial interests towards national and international
              institutions.

         The ISB should supply in joint with specialized actors those services that are considered to
         be fundamental for the continuous modernization and upgrading of the industry
         (intelligence, training, consultancy, strategic planning, financing, etc.). The ISB should
         insure total coordination and integration amongst existing and future industrial
         modernization programs such as supporting competitive readiness program – UMU, SEBC,
         the vocational education development project, quality assurance project, SME support
         project and others. This should be done to insure integration and avoid duplication of roles
         as it happens to be the case now. This will increase the effectiveness of these programs to
         better achieve their goals and reduce time and costs. This will also encourage donor agencies
         to continue proving support. To this regardregard, the ISB should rely on a small amount of
         financial resources, specifically dedicated to its operations, whilst having the possibility to
         orchestrate external financial resources – without directly owning them – for launching
         projects and initiatives in the industry.

         6.2.5. Critical remarks


7
  This ISB will have to prepare and periodically revise a strategic plan to develop the operations of this industry and
cater for its requirements as well as achieving coordination and integration within the industry to be competitive.
8
  The first step will be to have all the Ministries agree around the overall strategic principles for the textile and clothing
industry.

         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                 36
   The responsibility for this first strategic intervention in the textile/clothing industry, i.e. the
   establishment of the ISB, should be attributed to the MoI, who may seek advice from the
   Chambers of Commerce and Industry and other business associations, with the support of
   international institutions already operating in the industry. The establishment of the ISB is a
   precondition for all the other strategic interventions suggested in the document.

   In conclusion, it is important to pay attention to the fact that:

   - This board is urgently needed in the textile/clothing industry for the fine-tuning and
     implementation of those strategic directions needed to comply with the proposed vision;
   - It is not compulsory to create a new board, but it is also possible to reconvert one of the
     existing industry boards or committees;
   - It is crucial to avoid the creation of another useless committee erewhere members just sit
     therethere, but to create a really participated arena for collectively strategizing;
   - The board is requested to be organizationally agile, committed and competent.

   All this calls for a detailed definition of the Committee composition, structure and duties and
   second for a specific training to its members with a look at international benchmarks. This
   should be part of a specific project devoted to design a Term of Reference for the board
   governance and organizational structure.


6.3. Strategic directions

If Syria really wants to upgrade and modernize the textile and clothing industry answering to the
above mentioned strategic objectives and move along the proposed vision/mission, it has to go
along the following 15 strategic directions that deserve various levels of intervention and
attention to interrelations.

Macro-level strategies:

               Strategy 1.           Trade liberalization in the textile/clothing market;
               Strategy 2.           Upgrading of textile/clothing-specific infrastructures;
               Strategy 3.           A new industrial mindset for the textile/clothing industry;
               Strategy 4.           Marketing of the entire textile/clothing industry;
               Strategy 5.           Innovation and research for the textile/clothing industry;
               Strategy 6.           Textile/clothing-specific intelligence system;
               Strategy 7.           Textile/clothing-specific financial system.

Meso-level strategies:

               Strategy 8.           Clusters and industrial zones for the textile/clothing industry;
               Strategy 9.           Training for the textile/clothing industry;
               Strategy 10.          Services and consulting for the textile/clothing industry;
               Strategy 11.          Textile/clothing-specific business associations;

Micro-level strategies:

               Strategy 12.          Restructuring textile/clothing private and state-owned firms;
               Strategy 13.          Prioritizing geographical textile/clothing markets to target;
               Strategy 14.          Focusing on key strategic textile/clothing products;

   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                  37
                      Strategy 15.        Upgrading           management         practices      and     strategies      of
                          textile/clothing firms.


    6.4. Macro-level strategies

    The overall strategic orientation at the macro-level should be to continue to modernize and
    upgrade the textile/clothing industry, guaranteeing a favorable context where firms and
    institutions could operate. At this level, strategies for setting proper conditions for the overall
    business environment are suggested. The reference is not to the macro social, political,
    economic and legal framework – which for sure provide the cover that regulates the production
    process and consequently the sustainability of growth and competitiveness – but to those
    contextual elements that are more industry specific.


         6.4.1. Strategy 1:         Trade liberalization in the textile/clothing market

                  Goal              Driving gradual trade liberalization of the textile/clothing market with
                                    a focus on certificates of origin, customs controls and proper supports

                  Scenario          If Syria wants to position its textile and clothing industry on global
                                    markets it has to be much more open to trade than it has been in the
                                    past and it is now. The affirmation of global markets is pushed by the
                                    falling costs of distance and the liberalization of trade and the free
                                    movement of capitals. One important result of this is that national
                                    value chains are more closely linked to global value chains. Global
                                    value chains are now more tightly organized, with a few lead players
                                    acting as focal points for securing raw materials, locating production,
                                    transferring information and technologies, organizing the logistics of
                                    transportation and handling marketing and promotion. In particular,
                                    the role of TNCs and global retailers is growing in the world
                                    manufacturing and trade, as they become the main engines of product
                                    and factor mobility, handling around three-quarters of world trade.
                                    After a long period of total closure towards international trade started
                                    in the 1960s, during the last decade the Syrian Government issued
                                    several decrees and laws for the gradual liberalization of trade and the
                                    support of export and FDIs. In 1998, Syria was among the first
                                    countries who joined the GAFTA, according to which import duties
                                    on products coming from that Arab area were gradually reduced by
                                    10% each year, until a complete liberalization occurred January the 1st
                                    2005. Nowadays, countries belonging to GAFTA are 17 (Saudi
                                    Arabia, Bahrain, Egypt, United Arab Emirates, Jordan, Iraq, Kuwait,
                                    Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Syria, Sudan,
                                    Tunisia and Yemen). In 2002 Syria signed a bilateral trade agreement
                                    with Lebanon, which brought to the total elimination of custom duties.
                                    Similarly, Syria signed agreements with Jordan and Saudi Arabia. In
                                    2004 Syria signed a free trade zone bilateral agreement9 with Turkey,

9
  The objectives of this agreement are: a) to increase and enhance the economic co-operation and to raise the living
standards of people in both countries; b) to gradually eliminate difficulties and restrictions on trade in goods, including
agricultural products; c) to promote, through the expansion of reciprocal trade, the harmonious development of the
economic relations between the Parties; d) to provide fair conditions of competition in trade between the Parties; e) to

         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                              38
                                   that – starting from January 2007 – defined the gradual elimination of
                                   custom duties on the trade of products and raw materials and an easier
                                   exchange of capitals. This agreement is particularly important for the
                                   Syrian textile and clothing industry, given the geographical and
                                   market positioning of Turkey. In 2006 Syria signed the ‘Convention
                                   on the Settlement of Investment Disputes Between States and
                                   Nationals of Other State Countries’. Moreover, Syria agreed on the
                                   application of trade standards imposed by the WTO. At the end of
                                   2008 Syria signed an association agreement with European Union that
                                   implies the complete dismissal of custom duties along 12 years-time
                                   and the immediate reduction of custom duties below 50%. Syria is
                                   also thinking about the settlement of a free trade area with Iran and the
                                   opening of special trade corridors with China and India. With this
                                   latter, Syria signed in 2008 an agreement on the protection and
                                   promotion of investments.

                 Challenges       The Syrian textile and clothing industry deserves strategic intervention
                                  towards favoring trade liberalization as a governed and controlled
                                  process.

                                   Governing gradual trade liberalization of textile and clothing
                                   products. Joining free areas without careful consideration of potential
                                   negative impact resulting from the similarity in production structures
                                   as well as from the inequality among the member states in work
                                   conditions, which might hinder, if not block, the successful
                                   implementation, especially with the absence of clear and detailed rules
                                   of origin that guarantee the right solution for trade disputes. In fact,
                                   the Syrian industry found itself facing severe and risky competition
                                   without getting ready in terms of reconstructing public and private
                                   industrial frameworks through modernizing and re-qualifying the
                                   existent industries. Even if the role of trade policy in industrial
                                   development is controversial, the commercial openness adopted by
                                   Syria via liberating exports, GAFTA, the bilateral agreements signed
                                   with several Arab countries in addition to Turkey and to the Syrian
                                   European Partnership have be considered very positively. However,
                                   liberalization graduation is not enough alone to help the industry get
                                   ready for competition; it should be accompanied by the availability of
                                   other components of competitiveness such as technical skills,
                                   technologies, information, management systems, infrastructure and
                                   institutional support. As a matter of fact, the current market
                                   mechanisms and institutions cannot alone provide the economic
                                   players with reliable guidelines that enable them to define options and
                                   mobilize capabilities. Therefore, government interference on the
                                   strategic level is inevitable. Of course, regulating trade liberalization
                                   is something that goes beyond the scope of this document and the
                                   specificity of the textile and clothing industry. Nevertheless, it is
                                   actually in the textile and clothing industry that most of the problems

contribute by the removal of barriers to trade, to the harmonious development and expansion of world trade; f) to create
conditions for further encouragement of investments particularly for the development of joint investments in both
countries; g) to promote trade and co-operation between the Parties in third country markets.


        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                             39
                         related to globalization, trade liberalization and even dumping
                         manifested globally in their hardest form. If we refer to what has
                         happened in US and EU after the end of MFA and the consequent
                         fierce and somewhat unfair competition from new entrants, this
                         clarifies why regulating the process of trade liberalization for the
                         textile industry is particularly important. Moreover, textile and
                         clothing products are globally one of the categories mostly affected by
                         fake productions, thus custom controls; certificate of origin and
                         traceability should go hand in hand with the trade liberalization of the
                         Syrian textile and clothing industry.
                         Special recommendations are directed to the textile and clothing trade
                         occurring in the Arab region, where there is the need and the
                         opportunity to develop Arab cooperation in textile industries along
                         several directions.

                         Increasing controls on certificates of origin. One specific issue that
                         deserves strategic intervention concerns the certificate of origin. As a
                         matter of fact, a serious threat coming from trade liberalization is the
                         certificate of origin laundering in some Arab countries to take
                         advantage of the free trade agreements. This means manipulation of
                         custom manifestos and of the real value of imported textile/clothing
                         goods to avoid high taxes and noncompliance with standards and
                         specifications. Applying rigid control over certificates of origin for
                         imported goods. These certificates should meet the required criteria
                         especially achieving a locally added value of at least 40%. In addition,
                         this rigid control should be allied to verifying prices and specifications
                         regardless of origin. Indicative process should be applied also to
                         mitigate negative impacts on national industries resulting from price
                         or certificate of origin manipulation. Another important issue to
                         garrison pertains the phenomenon of the accumulation of certificates
                         of origin, whose objective is to expand the originating zone by
                         considering materials originating in partner countries as originating in
                         the country where the production process takes place.

        Actions

                         To contrast manipulation, by-passing and laundering of certificates of
                          origin.
                         To issue as soon as possible theneeded regulations and legislationsto
                          reinforce custom controls and the traceability of products, stopping
                          fake manufacturing and the entry of products that may hamper
                          customers’ health (as it was the case of some Chinese products in the
                          EU markets).
                         To balance trade liberalization with the concurrent reinforcement of
                          the competitiveness of Syrian firms – as it is clearly illustrated in
                          other parts of this document – otherwise free trade becomes
                          synonymous of substitution of Syrian textile products with foreign
                          ones.
                         To start an Arab Observatory for textile industries whose role will be
                          to follow up on developments in the industry on Arab and
                          international markets and provide data on the different aspects of

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                40
                          trade to members and related agencies.
                         To create new investment opportunities in the textile industries,
                          favoring coordination in investment flows and the free circulation of
                          capital among Arab countries.
                         To create and e-commerce website for the textile industriesto promote
                          trade between Arab countries and other countries as well.

        Actors           The overall responsibility for this strategic intervention should be of
                         the MoET, with the support of the MoI, the Chamber of Commerce
                         and the Chamber of Industry, the Syrian Textile and Garment
                         Exporters Association (STGEA) and the General Directorate of
                         Customs (GDoC). The ISB has the responsibility to superintend and
                         coordinate the interventions of every institution involved in order to
                         keep timing, objectives and interventions on track.

        Risks            Trade liberalization and bilateral or multi-lateral agreements without
                         the concurrent interventions here suggested may be highly risky for
                         the Syrian textile and clothing industry, which may lose competitive
                         positions and assist to an invasion of foreign products on its market.

        Time span        Long term.


6.4.2. Strategy 2:       Upgrading of textile/clothing-specific infrastructures

        Goal             Investing in the modernization and upgrading of physical,
                         technological and utilities infrastructures

        Scenario         The Syrian textile/clothing industry can rely on an adequate
                         infrastructure in terms of road network, seaports, airports, railway
                         network, generation and distribution network of electric power, water
                         network, and, communication systems connecting Syria to the outside
                         world. Accessing adequate industrial infra structure sue is being dealt
                         with. Efforts have been done to better provide electricity,
                         communications and transportation. This is especially true for
                         industrial zones, as it will be discussed below in this document.
                         Chambers have committees dealing with problems related to the
                         infrastructure of these zones.

        Challenges       Even if the modernization and upgrading of physical infrastructures is
                         beyond the scope of the textile/clothing industrial strategy here
                         proposed, it strongly conditions strategy results. Hence, key
                         challenges are illustrated and actions are proposed.

                         Becoming a logistic hub for the area. Despite the fact that the
                         infrastructures textile/clothing firms can rely on are considered
                         sufficient and in some cases good, they are still of average quality in
                         terms of performance when compared to global standards. For its
                         geographical position Syria could play a much significant role as a
                         global hub for the trade of raw materials, finished and unfinished
                         products, etc. both within its region and between Europe and Asia,

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             41
                         especially for neighbor countries like Turkey. This of course implies
                         an efficient and modern transportation network at all levels, with a
                         specific focus to those infrastructures connectinging and serving
                         industrial zones that should be internallyconfigured at the best, but
                         also strongly intertwined among them.them The level of
                         infrastructures in industrial zones is moderately good, but is not
                         geared to thatat export dynamism that the textile/clothing
                         industrydeserves now. It was set up to provide bulk transport for
                         commodities like petroleum products rather than toperishables or
                         fashion products that need rapid delivery – and that can lead the
                         growth of newexports from Syria. Upgrading and modernizing the
                         transportation infrastructure constitutes a basic but fundamental
                         precondition for sustaining the competitiveness of local companies
                         (state-owned and private) that may suffer from the inefficiencies of
                         the context they are in, a prerequisite for enhancing the attractiveness
                         of the Syrian textile and clothing industry vis-à-vis FDIs.

                         Infrastructuring industrial zones and clusters. A part from the
                         transportation infrastructure industrial zones and clusters
                         needmodernization efforts also on industrial infrastructures, such as
                         energy plants, waste management facilities, water pipelines and
                         telecommunication networks, where commonefforts wouldould
                         produce external economiesfor several firms. In particular, major
                         efforts are needed in the improvement of network infrastructures
                         (Internet first) and the settlement of environment-friendly and energy-
                         saving plants. Similarly, even the technological infrastructure that
                         supports research and development needs further improvements, when
                         it comes to science parks, technology cities, incubators and
                         institutions that provide the human capital for technology. As it will
                         be discussed with reference to training institutions and technology
                         centers they constitute important ingredientsof attractive business
                         environments.

        Actions
                         To engage in a comprehensive mapping of all the transportation
                          infrastructures in Syria impacting on the industrial localization of
                          textile and clothing firms, to identify critical points and bottlenecks
                          not just vis-à-vis the present industry configuration but also the
                          expected one in the future, and to prioritize interventions and suggest
                          solutions to the Government and the institutions involved.
                         To arrange shared high level infrastructures (such as energy plants,
                          utilities, telecommunication networks, laboratories, hospitality
                          structures, waste-management centers, etc.) for SMEs operating
                          within industrial zones and clusters, in order to get positive
                          externalities and economies of scale.

        Actors           In this case the main responsibility pertains to the Ministry of
                         Transportation (MoT) and the MoI under the coordination of the ISB
                         that should dialogue also with firms through their representatives
                         (chambers, associations, industrial zones, clusters, etc.).


IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              42
        Risks            Not complying with this strategic intervention would hamper the
                         competitiveness of firms – not properly supported by local
                         infrastructures – and inhibit the attraction of FDIs and firms start-ups.

        Time span        Mid term.


6.4.3. Strategy 3:       A new industrial mindset for the textile/clothing industry

        Goal             Fostering the formation of an entrepreneurial mindset and strengthen
                         the industrial wisdom at large (for private and state-owned companies)
                         throughout the entire textile/clothing industry.

        Scenario         The entrepreneurial mindset is the characteristic of an industry and/or
                         a society better equipped to respond positively to change and new
                         opportunities, to create and implement new ideas and ways of
                         working, and make reasonable assessments of risk and rewards and
                         act upon them. Even the European Commission has asserted that
                         stimulating an entrepreneurial culture implies the need to focus on
                         fuelling a more positive attitude towards entrepreneurship and risk-
                         taking, on encouraging more people to become entrepreneurs and on
                         supporting them to develop and grow by addressing issues such as
                         entrepreneurship education, the balance between risk and reward and
                         promoting entrepreneurial growth. It also implies providing dingan
                         enabling environmentfor entrepreneurs with a sufficient flow of
                         financingand a friendly regulatory and administrative framework.
                         Hence, there seems to be a widespread recognition that
                         entrepreneurship is the engine driving the economy and society of
                         most nations. This has emerged for a number of reasons, such as the
                         fact that entrepreneurship is perceived as bringing benefits at both the
                         macro level of economic development and also the micro level of
                         personal satisfaction and achievement. Thus, entrepreneurship has
                         become an important issue for policy. At one level, enterprise creation
                         is recognized as important for employment growth and effecting
                         structural change;; at another, there isconcern to encourage existing
                         firms (private and state-owned) to become more entrepreneurial as a
                         means of enhancing international competitiveness. Many governments
                         are seeking to develop a culture of entrepreneurship or an
                         entrepreneurial society, but what is it? Some may conclude that the
                         overall challenge of an entrepreneurial society is to ensure that there
                         are abundant role models for individuals to follow, wide opportunities
                         for the practicing of entrepreneurial behavior, local empowerment to
                         enable things to happen, a belief in trust as a guideline for regulations
                         to be minimized, and the encouragement of initiative at all levels.

        Challenges

                         Developing an entrepreneurial culture in the textile/clothing industry.
                         In the Syrian textile/clothing industry there is the urgency of changing
                         mentality in both public and private sectors as well asenhancing the
                         capabilities of businessmen,developing their way of thinking and

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               43
                                    encouraging them to develop their competencies, relations and
                                    business models towards a more entrepreneurial mindset.
                                    Policymakers are responsible for fostering an environmentconducive
                                    to the growth of the entrepreneurial spirit. As a matter of fact, if
                                    entrepreneurship is a system that includes entrepreneurs, institutions
                                    and government actions, and the desired policy outcome is an
                                    increased level of entrepreneurial activity, then the role of institutions
                                    and governments is to foster environments that will produce a
                                    continuous supply of new entrepreneurs as well as the conditions that
                                    will enable them to be successful in their efforts to start and grow
                                    enterprises. Fostering entrepreneurship in the Syrian textile/clothing
                                    industry means acting on three distinct but inter-twined issues:
                                    orientation (mindset and spirit), opportunities (availability and
                                    accessibility) and skills (competencies and tools). The challenge for
                                    the Syrian textile/clothing industry is to work on the soft side of
                                    entrepreneurship, addressing the issue of entrepreneurial orientation –
                                    i.e. the formation of an entrepreneurial mindset in the industry –
                                    which is more social than economic but that is deemed fundamental
                                    for industrial upgrading and modernization. Entrepreneurial
                                    orientation is concerned with pro-activeness10, innovativeness11 and
                                    openness towards risk12. Pro-activeness in competition, innovativeness
                                    and willingness to take risks are increasingly seen as crucial activities
                                    in the development of competitiveness by all types of business. The
                                    formation and dissemination of an entrepreneurial mindset across the
                                    textile and clothing industry can be reached only through a massive
                                    and extensive training program, designed to address several
                                    educational levels and professional profiles.

                                    Strengthening the social capital of the textile/clothing industry. For
                                    entrepreneurial orientation to produce significant effects on the
                                    competitiveness of the textile/clothing industry there is the need for
                                    high levels of social capital. Social capital represents the active
                                    connections between people, including trust, mutual understanding,
                                    shared values, and behaviors that bind together the members of
                                    groups, networks, and communities and make cooperation possible.
                                    Moreover, social capital comprises the norms and relations embedded
10
    Proactiveness simply is the ability to take the initiative, the ability to take the initiative whenever the situation
demands Proactiveness is thus not only in defence, but in offence as well. Actually, entrepreneur’s risk handling
capability andproactiveness are the competence of assessing and addressing in advance from all sources the risks that
threaten the achievement of an enterprise’s strategic objectives and effectively find solutions in advance to these risks.
Conclusively speaking, pro-activeness is concerned with ‘first mover’ and other actions aimed at seeking to secure and
protect market share and with a forward-looking perspective reflected in actions taken in anticipation of future demand.
11
    Innovativeness is an essential element pertaining to entrepreneurship and entrepreneurial orientation. Innovativeness
is the basic property that distinguishes an entrepreneur from other professionals. Innovativeness is concerned with
supporting and encouraging new ideas, experimentation and creativity likely to result in new products, services or
processes. Innovativeness of entrepreneurs is their propensity to innovate their business (for example, innovation
applied to organization, products, processes, technologies and materials, etc), their willingness to try the ways which are
different from the existing, the enthusiasm to adopt new ideas or new methods to their business operation, and the
eagerness to implement the innovation strategy in their business.
12
    Risk handling can be roughly defined as any set of actions taken by individuals or corporations in an effort to alter
the risk arising from their business. Risk handling is the process in which potential risks to a business are identified,
analyzed, mitigated, and prevented, along with the process of balancing the cost of protecting the company against a
risk vs. the cost of exposure to that risk.

         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                              44
                                    insocial structures that enable people to coordinate action to achieve
                                    desired goals. We know that entrepreneurial orientationhas a positive
                                    effect on the capability of an industry to manage knowledge, innovate
                                    products or processes, and upgrade firms’ competencies as well as on
                                    organizational effectiveness. Nevertheless, it is the industry social
                                    capital that moderates the effects of entrepreneurial orientation on the
                                    industry itself. The individualism of entrepreneurs and a weak
                                    relational structure, plus a lack of social relations and collective
                                    initiatives that characterize the Syrian textile and clothing industry
                                    may hamper the new entrepreneurial mindset to have an effect. This
                                    gradually may cause an increasing lack of trust, a tendency towards
                                    formalization of relations,relations the prevaprevailing of competitive
                                    behaviors over cooperative ones and – above all – more intense
                                    isolation of entrepreneurs and institutional actors who will react
                                    autonomously and scantily to the challenges of the industry, without
                                    sharing, withouting ideas. This is something to be avoided and
                                    contrasted severely within the local textile/clothing industry. In fact,
                                    quality and quantity of what we might define ‘social networks’ among
                                    entrepreneurs and institutional actors is connected to the strength of
                                    intangible institutions,institutions such as trust, identity and
                                    citizenship behaviors. This means that when there is a lack of
                                    spontaneous associationism and cooperative attitude this may prevent
                                    the ‘learning dynamic’ that characterizes successful industrial fields,
                                    according to which firms are constantly modifying their behavior and
                                    developing new strategies in reaction to the moves of other firms to
                                    whom they are connected by networks. As a matter of fact, innovation
                                    depends on the amount of relational capital (i.e. shared vision and
                                    trusting co-operation) developed at the industry level. The cognitive
                                    structure13 of an industry, as a carrier of norms, values, and cultures,
                                    provides the foundation for ongoing relations and gives meaning to
                                    the idea of social capital. An industrial wisdom supporting neither
                                    trust nor networking prevents social learning and social networking,
                                    leading to a poor base for accumulation of social capital and, hence,
                                    preventing economic development and entrepreneurial growth,,
                                    reinforcing the impoverishment of industryy infrastructures. Studies
                                    on shared cognitions indicate that it is possible to revitalize an
                                    industry, changing beliefs and, thus, altering stocks of social capital.
                                    To this regard, the Syrian textile and clothing industry needs an
                                    industrial wisdom capable of fostering economic renewal.
                                    Unfortunately, it is not so easy to address this issue suggesting a neat
                                    strategic intervention. Empirical evidence from other countries has
                                    shown how frequent and close interaction among individuals bring to
                                    the sharing of a set of common beliefs (i.e. an industrial wisdom),
                                    which enablethem to function successfully as a group.

                  Actions

                                   To foster entrepreneurship at all levels in the Syrian textile and

13
   The cognitive aspects of industrial fields constitute the ‘meat’ of social relations, mirroring collective beliefs about
economic and social exchange.

         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                               45
                                   clothing industry, since this industry has been long dominated by
                                   large state-owned firms and constrained by protectionismsm and
                                   closurethat have hampered the formation of a widespread
                                   entrepreneurial mindset.
                                  To strengthen the social capital of the Syrian textile and clothing
                                   industry, fostering a wider sharing of values and beliefs oriented
                                   towards cooperation. These could be reached through ‘collective
                                   encounters’, i.e. situations14 where individuals (entrepreneurs,
                                   managers, consultants, civil servants) may have the opportunity to
                                   discuss issues that are of concern to the industry, communicate
                                   problems, explore possible outcomes of actions,, test and debate
                                   solutions and interventions. These do not have to be formal forum,
                                   but events, arenas or projects where shared feelings, visions or
                                   strategies are collectively experienced by the group.

                 Actors           This is a very sensitive and crucial area of strategic intervention that
                                  deserves the direct involvement of the ISB, in association with
                                  chambers, business associations, training institutions and the Ministry
                                  of Education (MoEd).

                 Risks            It is highly required that efforts will be put even in this strategic
                                  direction, since disregarding this soft side of business may negatively
                                  affect all the other hard interventions which will target an
                                  individualistic, conservative and poorly entrepreneurial population of
                                  firms.

                 Time span        Long term.


        6.4.4. Strategy 4:        Marketing of the entire textile/clothing industry

                 Goal             Developing marketing and promotion at the industry level to support
                                  export and build up industry attractiveness for FDI.

                 Scenario         What the Syrian textile and clothing industry has done so far partially
                                  met the objective of developing a marketing and promotion strategy,
                                  but still much is needed.

                                   As far as making the Syrian textile and clothing industry more
                                    attractive, as mentioned, the Investment Law no. 10 of 1991 was a
                                    fundamental step towards attracting local and foreign investments.
                                    The Law no. 32 of 2007 allowed foreign investors to buy with no
                                    restrictions lands and buildings licensed under the Law no. 21 of
                                    1958 and located in industrial zones. The Law no. 24, with the will
                                    to further increase industrial investments, introduced a significant
                                    reduction on company taxes from a maximum of 63% to a
                                    maximum of 37%, and then the Decree no. 51 further decreased the

14
   Quite recent occurrences in the industry, such as the positive experience of the STGEA or the public-private nature
of the Steering Committee for the I’MUP Syria project of UNIDO – just to mention a couple of examples – might
become seedbeds for the development of shared visions and beliefs, thus fostering the accumulation of social capital.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                           46
                                      maximum company taxation to 28%. In total, 14 textile enterprises
                                      were licensed under Investment Law no. 10 and its amendments
                                      between 1991 and May 2008. The total investment cost of these
                                      projects was 4, 8 billion SYP, providing all together 1718 new
                                      employments. Actual textile Arab15 and foreign investment
                                      implemented are 11 projects. Their actual cost is 3, 3 billion SYP
                                      for a total of 1210 employees. A number of enterprises were also
                                      established by Arab and foreign nationals residing in Syria
                                      (Palestinians, Iraqis, Jordanians and Turks) sometimes jointly with
                                      Syrian investors. In the area on ban Arab investment, Syria appears
                                      as an investment exporting country, according to Inter Arab
                                      Investment Guarantee Corporations. Syrian investment abroad was
                                      540 million US$ while Arab investment in Syria was 370 million
                                      US$. Ban Arab investment is mainly concentrated in the services
                                      (44%) and property (35%) sectors. Syria has also taken partto
                                      ANIMA (the Euro-Mediterranean Network of Investment
                                      Promotion Agencies program), funded by EU Commission,
                                      reinforcing the need to create an Investment Promotion Agency
                                      even in Syria. The MoI, in collaboration with the SEBC published
                                      a set of promotional tools, such as booklets, brochures,, CDs under
                                      the program ‘Attractive Environment for Your Business’, with the
                                      intent to inform the business community and potential investors
                                      about start-up procedures in Syria and investment methods (free
                                      zones, industrial estates, etc.).

                                    To industrialize for export is another important slogan of the 10th
                                     five year plan. Its implementation requires encouraginging Syrian
                                     exporters to expand production facilities and seek export markets in
                                     replacement of or in addition to local market. In order to achieve
                                     this important task, export promotion must bea high priority and a
                                     long-term strategy for everybody. Along this line the Syrian
                                     Government has recently issued the Decree no. 6 in 2009,
                                     establishing the Exports Developing and Promotion Commission
                                     (EDPC), whose main objectives are very ambitious and broad:

                                      o    implementing the exports development and promotion strategy
                                           in coordination with public and private commissions;
                                      o    putting efforts to improve the products’ quality, and improve
                                           their competitiveness;
                                      o    promoting Syrian products together with other stakeholders at
                                           national and international fairs and conferences;
                                      o    issuing periodic and annual bulletins about international and
                                           Syrian trade systems;
                                      o    encouraging investments aiming at export;
                                      o    analyzing economic indicators, in order to improve the export
                                           environment;


15
   If we compare the investment cost factors of Syria with those of other Arab competitors, we notice that the Syria is
much cheaper in terms of building construction costs (120 US$/sqm vs. 150, 180, 192 of Egypt, Jordan and Morocco
respectively), whilst is more expensive in terms of land value (55 US$/sqm vs. for instance 18 US$/sqm of Egypt).
Source: Arab Federation of Textile Industries (2009).

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                            47
                                      o     running surveys and field investigations about international
                                            markets and export opportunities;
                                      o     creating database information about national and international
                                            trade, cooperating,ing with related institutions;
                                      o     providing consultancy (technical and administrative) to
                                            companies and exporters about products and quality required
                                            in the target markets;
                                      o     encouraging the establishment of companiestargeting export
                                            markets;
                                      o     taking part to all high bilateral, regional,, international
                                            committees and governmental commissions involved in the
                                            definition of foreign trade policies;
                                      o     cooperating with similar public and private institutes,tes
                                            international organizations, centers and commission to provide
                                            assistance to export;
                                      o     managing the programs that are provided by international,
                                            national and regional funds for all areas related to export;
                                      o     participating in solving the difficultiesexporters might face and
                                            in removing the obstacles exporters may face;
                                      o     submitting necessary studies and consultancies about the
                                            market status of imported materials,, needed for the Syrian
                                            industry;
                                      o     training personnel involved in marketing and export activities;
                                      o     helping establishinging direct contacts between Syrian
                                            exporters and foreign importers;
                                      o     Providing suggestions and recommendations to link attractive
                                            foreign investment policies with local export development
                                            projects.

                                   Syrian export hassbeen recently strengthened also by the
                                   establishment of other two important pillars: Syrian Exporters Unions
                                   (SEU)16 and Exports Development Fund (EDF)17.

                 Challenges        One challenge that should be taken in much care is the definition of a
                                   marketing and communication strategy at the industry level, with a
                                   twofold purpose: attractive (foreign manufacturers coming to Syria)
                                   and aggressive (Syrian manufacturer going to foreign markets):

                                    the overall marketing and communication strategy at the macro
                                     level has an attractive purpose whenever it pursue the ‘marketing of
                                     a country’ towards foreign investors and stakeholders; increased;
                                     increasedattractiveness of the country for a specific industry,

16
    On the 26th of October 2009 the Syrian Parliament approved the establishment of the SEU, with the aim to:
• transfer information to and from exporters and producers;
• organize training programs for the producers which are registered in the Union as exporters, in order to improve their
  performance and support them meeting the product requirements for export markets;
• clarify the export market situation of foreign countries and their demand profile.
17
    The decree no. 19 of 2009 establishes the setting up of EDF for the support of the entire national industry towards
export. The EDF has been designed to enhance the competitive position of Syrian products towards foreign competitors
and to support the penetration of foreign markets. With no doubt the fund is an incentive for the consolidation of the
STGEA and the affirmation of SEU.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                             48
                           increased ease of doing business and FDIs are the main objectives
                           of an industry level marketing strategy;
                          Further, the marketing and communication strategy at the industry
                           level is expected to have also an aggressive purpose (i.e. a
                           competitive function), when it supports exportand penetration of
                           foreign markets,promoting the collective brand of Syrian textiles at
                           the industry level.

                         Attracting FDI in the textile/clothing industry. Investments in the
                         industry are still modest. One reason is the lack of FDIs aimed at
                         export markets. Another is the paucity of large local firms able to
                         produce large orders on contract from international buyers. The main
                         drivers of clothing exports in developing countries – the ‘full package’
                         suppliers from Hong Kong (these are subcontractors from US and
                         European retailers who gain orders, allocate garment production
                         across the world, provide designs and materials and handle shipping
                         and delivery) – are conspicuously absent from Syria. So are European
                         clothing designers and manufacturers who have been actively sourcing
                         in countries like Morocco, Tunisia and Turkey, and relocating high-
                         end facilities in East Europe. There is no doubt that FDIs are the entry
                         point to developing the textile industries in Syria to make use of
                         therelative advantages of location,, availability of raw materials such
                         as cotton and the workforce. These relative advantages will then be
                         transferred to completiveletive advantages by moving to the higher
                         value-added cycles of production with competitive prices and
                         qualities. FDIs will facilitate know-how and knowledge transfer in the
                         areas of design, management and marketing to the local market. This
                         will stimulate the creation of support institutions needed for the
                         ongoing development of this industry. FDI are a good tool to stimulate
                         growth and obtain technology but they are not the only meansince
                         theyare complementary of national investment not a replacement.
                         However, advertisements, welcome campaigns and a package of
                         generous incentives are no longer enough to attract investments
                         especially in a world were investment systems are more and more
                         becoming similar and where countries of the world arecompetingto
                         offer unique incentives. There are many countries offering to be host
                         countries and the competition among target countries is huge. Those
                         countries that have proven to be the most successful host countries for
                         foreign investments are those that allow the foreign partners to operate
                         without bureaucratic hassle at competitive costs and o make good
                         returns on their investments. For sure, capacities can no longer be
                         planned centrally and private investors cannot be prevented in
                         investing in their choice of activity in order to protect existing
                         investments. So there must be an extensive and costly promotional
                         activity conducted by a specialized, skilled and highly qualified work
                         team to target certain countries, industries and even firms. The
                         continuous improvement of the investment environment to attract
                         foreign investments for textile enterprises should be at the center of
                         attention of the authorities concerned especially the Syrian Investment
                         Agency (SIA), together with the Supreme Investment Council (both
                         created after the legislative Decree no. 9 of 2007), in accordance with

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              49
                         the proposed ISB. Further, there is the urgency to rationalize business
                         procedures through the settlement of ‘one-stop-shop’ agencies (OSS),
                         where computerized, simplified systems can serve the needs of all
                         Ministries and other institutions, without the need to repeat visits to
                         several places. In December 2008 Syria has activated a OSS in the
                         SIA, to provide services to investors, representing the relevant
                         Ministries and public bodies. The starting point is to identify the basic
                         information that each Ministry and institution requires from
                         companies in terms of content, frequency, etc. and to see if the
                         information requirements can be rationalized in a single form that
                         meets all information needs. The textile and clothing industry, through
                         its ISB, can act as a pilot for this system to be extended to the entire
                         Syrian industry through the activities of SIA.

                         Penetrating foreign markets with the Syrian textile/clothing export.
                         Promotion and marketing efforts in the Syrian textile/clothing industry
                         need to be boosted and, in particular, all aspects of the investment
                         environment in Syria and the promotion of its export need to be
                         improved, a part from issuingregulations. First, to attract and benefit
                         from FDIs strong domestic capabilities, efficient local enterprises and
                         dynamic clusters and industrial zones are needed. Further, an active
                         and skilful promotion and a proper targeting of interested foreign
                         TNCs, global retailers and international buyers has to be settled.
                         Second, targeting host markets deserves a coordinated effortof all the
                         parts involved: firms, institutions, export associations, public agencies,
                         etc. On the export side, the Syrian textile and clothing industry is
                         already organized to move on the right direction, especially after the
                         issue of decrees 6 and 19 of 2009 and the introduction of SEUs. The
                         newly established EDPC, SEU and EDF are fundamental to foster the
                         export development of the Syrian textile and clothing industry, but
                         their scope is general for the entire Syrian industry and not
                         textile/clothing-specific. Therefore, there is the need to bring to the
                         attention of the EDPC those issues that are textile specific;; to convey
                         funds from the EDF to the textile and clothing industry;; to promote
                         the diffusion of SEU among textile producers,leveraging the pioneer
                         experience of STGEA. This means that the government should not
                         substitute to firms and their export associations,, unions and consortia
                         indefiningingthe products to export and analyzinging their
                         potentialities.Thus suggestions support and guidance by governmental
                         institutions is beneficial but central planning may be detrimental.

        Actions (for FDI attraction)

                         To prepare the industry investment map, in coordination with SIA and
                          all the relevant bodies, especially mapping potential investments in
                          the two zones indicated by Decree no. 8, 2007.
                         To provide the basics of desired investment climate to attract Arab,
                          European and Asian producersto establish export-oriented plants in
                          Syria. In particular, Syria could prepare its industrial environment to
                          attend the opportunity to become a hub for Turkish productions,
                          especiallydirected towards Far East. This implies:

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                50
                                  -   To set all the conditions (legal, financial, technological and
                                      cultural) to become an attractive host country for foreign
                                      textile/clothing manufacturers;
                                  -   To guarantee economic policy stability and availability of proper
                                      infrastructures;
                                  -   To reduce business costs and indirect expenses;
                                  -   To modernize and upgrade the banking system;

                                 To attract the most important buyers18 known as ‘one-package
                                  suppliers’ to deal with the Syrian manufacturers on order basis.
                                 To simplify regulations and revise procedures such as licensing,
                                  investment permissions, land purchases, customs (import/export)
                                  duties, corporate tax, duplicated administration controls over
                                  companies by several Ministries, etc. with the aim to reduce the time
                                  and cost to companies of working with cumbersome procedures.
                                 To provide consultation, information and data to the investors,
                                  through SIA and OSS.

                Actions (for export promotion)

                                 To support export associations, unions and consortia in preparing
                                  export promotion strategies for specific products, offering guidance
                                  on which specific products to focus on and to whichmarket.
                                 To favor the development of Syrian exports in terms of technology
                                  and added value focusing on the segments illustrated in the mission
                                  statement, which is the only way to compete with Chinese and Asian
                                  products, since it is very difficult to competecompete with their
                                  typical products of lower technology at low prices.s.
                                 To allow the Syrian exporters to get all local as well asimported
                                  production inputs (raw materials and capitalist and semi-finished
                                  goods) at the international prices,s, reducing customs clearance costs
                                  by rationalizing and simplifying its procedures and alleviating
                                  transport and insurance complexities and costs, even through indirect
                                  subsidizing;
                                 To favor the establishment and multiplication of export associations,
                                  unions, consortia and export-oriented trading houses, which are
                                  expected to specialize in exporting certain items, to help many Syrian
                                  SMEs get involved in export activities.
                                 To strengthen the role of commercial representation: :based on other
                                  countries’ experience a strong and wide network of commercial
                                  representation in different countries is key to boosting Syrian exports
                                  and it helps improvinging timely access to detailed information on
                                  different foreign markets and establishing key long term relationsin
                                  different countriesto the benefit of Syrian exporters and the Syrian
                                  economy.
                                 To facilitate export financing, which is a key component of any

18
   These buyers mostly located in Hong Kong and Japan can conclude huge contracts all over the world, o supply the
European and North American markets, providing the subcontracted manufacturer with designs and materials, and
deliver the orders to the relevant customers.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                       51
                          program for export promotion,conveying resources from the newly
                          established EDF.
                         To encourage the creation of companiesspecialized in supporting
                          Syrian enterprise involvement in international textile and garment
                          fairs as well asorganizing an annual exhibition for textile products
                          and equipment/machinery.
                         To review the work presently undertaken by the two institutions and
                          to propose changes to satisfy the industry’s needs.
                         To favor the dissemination of competencies on the forms suitable
                          forinternationalization of companies – from the simple use of
                          shipping agents and international buyers to more sophisticated forms,
                          such as trading companies, piggy-back alliances, foreign branches,
                          licensing, joint ventures, etc. This could be arranged through local
                          business associations, textile centers and other institutions both in the
                          form of consulting and/or training.

        Actors           The responsibility for this intervention is mainly of the MoET, with
                         the support of the SIA and its OSS, the newly established SEUs,
                         EDPC and EDF and the STGEA. The ISB should favor the dialogue
                         between them and involve other specific stakeholders in the process –
                         such as the Chamber of Commerce and the Chamber of Industry, the
                         Export Promotion Bureau (EPB) and the General Organization for
                         Exhibitions (GOE), international organizations such as UNIDO,
                         UNDP, European Commission, and the Arab Federation for Textile
                         Industries – when required. In particular:

                          -   The EDPC, EDF and SEUs have the main responsibility for
                              promoting textile/clothing firms abroad;
                          -   The ISB – together with Chambers and interested stakeholders –
                              should act as a bridge between the problems that characterize the
                              Syrian textile and clothing industries and the opportunities offered
                              by the activity of SEU and EDPC and the resources of EDF;
                          -   The SIA has the main responsibility for the attraction of FDI and
                              should rely on the ISB to fine-tune its activities in coordination
                              with other industry stakeholders.

        Risks            Not complying with this strategic intervention would mean on one
                         sideletting single SMEs address foreign markets, with all the
                         difficulties connected to this, alone. This may result in weak and
                         uncoordinated efforts andthe overall image of the Syrian textile and
                         clothing industry would be damaged. On the other side, missing the
                         opportunity to attract investors, global retailers, international buyers,
                         TNCs and FDIs would mean missing the opportunity to absorb new
                         knowledge, both on markets and technologies and management
                         practices, hence to starta sudden obsolescence of the industry.

        Time span        Long term.




IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                52
6.4.5. Strategy 5:       Innovation and research for the textile/clothing industry

        Goal             Setting up a comprehensive innovation policy for the support of
                         research and development,technology enhancement and knowledge
                         acquisition,, development and diffusion

        Scenario         Asfor other macro strategies, even the definition of a comprehensive
                         innovation policy transcends the specific sphere of the textile/clothing
                         industry but it is a core issue in creating the needed ground for a
                         specific industry to flourish. This is also the case of the textile
                         industry, even if this issue can be extended to the entire Syrian
                         industrial context. As a matter of fact, policies o foster innovation in
                         enterprises are in their infancy in Syria, particularly at the national
                         level. Syria has not paid enough attention to building a national
                         technological base grounded on extensive R&D, which is a
                         precondition for industrial development. R&D activity is the
                         cornerstone of the national technological platform, and supporting and
                         developinging it should become a priority strategy for Syrian
                         government. Nevertheless, the public sector companies have not been
                         exposed to external competition, which typically fosters continuous
                         innovation and their regulationsdo not oblige them to develop their
                         technological capacities. Further, the government R&D funds do not
                         exceed 0.2% of the GDP and are generally directed toward higher
                         education sector. This has created many drawbacks and
                         inconveniences. First of all, the Syrian industry has no R&D
                         components whatsoever. There are no research centers for industrial
                         development and technical centers have just started in the textile
                         sector – as discussed below. Second, there are concerns with human
                         resource development since the Syrian universities, junior colleges
                         and vocational institutes’ curricula need radical revision, benefiting
                         from fresh knowledge and industry-specific innovations. Further,
                         there is an extensive lack of national consulting bodies – as it will be
                         discussed later on in this document – which can play the role of
                         pollinators among firms, facilitating knowledge sharing and thus
                         favoring innovations. Finally, so far there has been a failure to
                         concentrate on know-how transfer across firms and institutions,
                         especially when it is the case of foreign partnersfrom whom local
                         manufacturers may gain a lot in terms of innovation and knowledge.
                         As far as a national innovation policy is concerned, Syria so far has
                         been buildingon four pillars, through the Higher Commission for
                         Scientific Research: a) elaborating a comprehensive national policy
                         for scientific research and technological development; b) providing
                         full coordination among the scientific research bodies; c) supporting
                         scientific research organizations to achieve their goals; d)
                         strengthening the mechanisms linking scientific research organizations
                         with public and private production and service sectors. Additionally,
                         there are several plans for operational incubators in Syria (e.g. the
                         pilot project run by the Syrian Computer Society in Damascus; a
                         technology park planned by the Syrian Ministry of
                         Telecommunications – MoTel and Technology in Dimas, etc.).


IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              53
        Challenges       Still much it is needed for the Syrian textile and clothing industry to
                         rely on an articulated innovation policy. Key challenges are reported
                         below.

                         Conveying resources to textile/clothing-specific R&D. A radical
                         revision of the resources allocation policy should be made in
                         coherence with developing the national technological platform,
                         sinceso far resources for innovation, technology upgrading and R&D
                         have been scanty. Mobilizing resources should not be exclusively a
                         responsibility of the Government and of public institutions, but there
                         is also the urgency to encourage industrial companies to mobilitoze
                         their technological efforts, especially in the R&D field (product
                         development, manufacturing processes etc.) as a parallel
                         activityACTIVIty to production. This requires an effective and
                         efficient incentive system that may include a full tax exemption for
                         R&D expenses; the provision of easy loans for product development;
                         different incentives for the employees with concrete achievements
                         whether in research laboratories or in factories;exemptionon imported
                         R&D equipment from customs duties.

                         Filling the gap on incubators and parks specific for the technological
                         needs of the textile/clothing industry. Scientific incubators and
                         technology parks are globally recognized as a tool for building the
                         scientific and technological capacity of an industry. Even traditionally
                         low-tech industries, as the textile-clothing one used to be, establish
                         their competitiveness in such facilities. They provide necessary
                         ground for closer cooperation among research centers, higher
                         education institutes, industrial and services projects interested in
                         acquiring and developing new technologies, funding and quality
                         bodies etc. Further,providing a suitable infrastructure in terms of
                         industrial zones and technological parks would facilitate the
                         emergence of unions or societies, with each zone gathering a number
                         of similar and/or integrating facilities belonging to the textile and
                         clothing industry. This is expected to encourage SMEs belonging to
                         the textile industry into forming a kind of unions or cooperative
                         societies so that they can increase their productionon and economic
                         efficiency, advancing towards cluster-like forms of cooperation.

                         Supplementing textile/clothing firms’ competencies with the support of
                         technology and R&D centers. Specialized technology centers are
                         crucial in the current global scenario of the textile and clothing
                         industry, where fibers, fabrics and finished goods require continuous
                         product and process innovation as well as quality certifications and
                         controls. Technology centers are meant to provide specialized
                         technical services to industrialists in the areas of technology of
                         production and innovation. These centers will function as institutional
                         support unitsto spread scientific communication, diffuse new
                         technologies, strengthen and support technical services,
                         contributinging in the upgrading of textile equipments and
                         operations,training staff to improve productivity and product quality
                         (mainly for micro- and small-sized firms). To this regard,

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              54
                         technological centers – as it will be discussed later on – may organize
                         seminars and conferences too provide information on new
                         technologies; invite machinery suppliers to provide information on
                         new technologies; participate in trade fairs to share experience and
                         learn from bestst practices; set up an international award for
                         innovation in the textile sector research,to incentivize and foster R&D.

                         Creating a triple partnership between government, university and
                         private sector. A final major area of strategic intervention concerns
                         establishing active, mutual interrelations between the industry on one
                         side and the universities,technical institutes and research laboratories
                         on the other. This can be achievedhaving as a model the so-called
                         triple helix regime. A triple helix regime typically begins as
                         university, industryyy andgovernment enter into a reciprocal
                         relationship in which each attempts to enhance the performance of the
                         other. Most such initiatives take place at the regional level to address
                         problems in industrial clusters, gaps in academic development and
                         lack of governing authority. The first step usually involves
                         collaboration among universities, firms and governments in a project
                         to create/enhance a local cluster, as discussed below. Lack of fit
                         between academic capabilities and firm needsis a typical issue in such
                         arrangements and the Syrian education system is not free from this
                         problem with regard to the textile and clothing industry. To address
                         such problems each triple helix partner ‘takes the role of the other’
                         and learns to ‘take the view of the other’ as well. In doing this, the
                         role of coordinator that a ISB might play is fundamental. Universities
                         develop some business capacities even as firms increase their
                         academic capabilities, including the ability to share knowledge with
                         each other. The message of the triple helix model is not that
                         universities become firms or governments become businesses. Rather,
                         as each assumes some of the capabilities and perspectives of the other,
                         each institution maintains its primary role and distinct identity. Each
                         institutional sphere is thus more likely to become a creative source of
                         innovation and to support the emergence of creativity that arises in
                         other spirals. Such an arrangement favors knowledge acquisition,
                         development and diffusion.
                         Finding ways to enhance nascent triple helixes in the Syrian textile
                         and clothing industry is a challenge, since there is a low level of
                         research intensity and other innovation gaps, as said above. In
                         countries like Syria where the Government has previously dominated
                         the other institutional spheres, there is a need for differentiation of
                         institutions and the establishment of clear boundaries among the
                         institutional spheres so that they can begin to interact from a position
                         of independence and relative equality. The emergence of university-
                         industry-government relations is the great transformation that the
                         Syrian textile and clothing industry deserves. This would favor also
                         the creation of the so-called ‘entrepreneurial universities’ embedded in
                         triple helix relations, i.e. universities that not only encompass
                         traditional academic responsibilities for human capital formation and
                         research, but also provide services to a specific industry. Such a
                         confederacy between universities and the textile/clothing sector would

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              55
                         favor the development of specific education methods and convoy
                         industrial needs.

        Actions

                         To conduct a comprehensive survey of technological activity and
                          capabilities in the textile and clothing industry, mapping what is
                          available and what is not and what needs intervention and/or what
                          needs coordination.
                         To design an effective and efficient incentive system that may include
                          a full tax exemption for R&D expenses; the provision of easy loans
                          for product development; different incentives for the employees with
                          concrete achievements whether in research laboratories or in
                          factories; exemption on imported R&D equipment from customs
                          duties.
                         To set up a technology finance system to favor the triple helix to start
                          and function properly.
                         To set up a technology import information service or database to
                          collect data on foreign sources of technology and benchmark against
                          foreign competitors.
                         To establish a triple helix regime in the textile/clothing industry, with
                          the active, mutual interrelations between the industry on one side, the
                          universities, technical institutes and research laboratories on the other
                          and the government on the third.
                         To establish specialized technology centers devoted to research and
                          development in the textile/clothing industry.
                         To start-up of some incubators and techno-parks able to serve the
                          needs of the textile/clothing industry.
                         To initiate a radical revision of the resources allocation policy should
                          be made in coherence with developing the national technological
                          platform, since so far resources for innovation, technology upgrading
                          and R&D have been scanty.

        Actors           This is a very composite and articulated area of strategic intervention
                         that requires the active involvement and responsibility of the ,ISB, that
                         should facilitate the activation and functioning of the triple helix
                         starting a dialogue between training institutions (universities in
                         particular), government institutions (the MoI and the MoEd in
                         particular) and firms (through their representative bodies). In triple
                         helix strategies, the role of coordinator that a ISB might play is
                         fundamental.

        Risks            Not complying with this strategic intervention would mean relying on
                         scentobsolescent technologies, being excluded from circuits of
                         innovation and not dialoguing with all those institutions that through
                         research aymay push the Syrian textile and clothing industry forward.

        Time span        Long term.




IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                56
6.4.6. Strategy 6:       Textile/clothing specific intelligence system

        Goal             Constructing an efficient and reliable industry and competitive
                         intelligence system

        Scenario         In the Syrian textile/clothing industry the economic and industrial
                         information is not systematically collected, handled and analyzed.
                         Moreover, there are inconsistencies among the data produced by
                         different institutions and throughout the country. As far as the textile
                         and clothing industry is concerned – apart from value chain analysis
                         done in recent years – there is a lack of quantitative monitoring data
                         and it is difficult to get accurate up-to-date overview oftextile sector
                         given scarce and unreliable statistics. Too little is really known about
                         the textile and clothing industry in Syria and its contribution to the
                         local economy in terms of occupation, investments, trade and
                         competitiveness. To support the industry in its process of upgrading
                         and modernization it is necessary to understand the main dynamics of
                         the industry and the issues (local and foreign) that influence its
                         competitive performance.

        Challenges       The textile/clothing industry is poorly documented and this results in
                         difficult interventions from the Government, the industry operators
                         and foreign analysts and investors. Hence,

                         Relying on a comprehensive, up-dated and trustworthy industry
                         dataset. The decision-making process in the industry must be based on
                         a rich and sufficient database which providesregular flow of
                         information constantly collected, classified and updated, whether in
                         regard to policy identification formulation, selection of best
                         alternative, selection of best investment opportunities, selection ofbest
                         technologies, targeting certain markets and targeting specific brackets
                         in those markets. For these reasons, industry actors (firms and
                         institutions) should rely on information on regional and international
                         markets, with a focus on consumers and customers’ profiles, their
                         precise needs and expectations, their purchasing criteria and
                         processes, as well as on distribution channels. Further, the
                         Government should have an accurate reference to the number of
                         companies, their products, employment levels, investments, turnover
                         and sales to the local and export markets, to monitor the industry and
                         plan regulations and interventions. Additionally, information should
                         be gathered also on foreign competitors, with a focus on their volumes
                         and sales, strategies, marketing policies, offerings, prices and trends.
                         This industry and competitive intelligence database will foster
                         marketing and sales know-how and firms’ capability, as well as the
                         efficacy of policy interventions. For that purpose, the Syrian
                         textile/clothing industry urgently needs an efficient information
                         system, rich in information and regularly updated. The main obstacle
                         relates to the fact that firms provide unreliable and incomplete data on
                         their businesses, because of the widespread diffusion of the
                         phenomenon of tax evasion. Only a more favorable tax system would
                         incentivize firms towards accurate accounting systems and hence to

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               57
                         reliable and complete data on the textile and clothing business. The
                         availability of data is the first step towards an industry intelligence
                         system. The second step is the collection and organization of
                         information. This can be achieved, building the capacities of the CBS
                         and statistics departments of public and private sectors institutions as
                         well as universities, so they can provide systematically data on textile
                         industries in all areas. The industry and competitive intelligence
                         system should guarantee the collection, classification, organization
                         and credibility of information; guarantee speedy flow of information
                         between various ministries, public bodies (such as the chambers of
                         commerce and industry) and NGOs; avoid the duplication of efforts
                         (occasionally parallel and sometimes conflicting); guarantee the
                         redesigning of this base; unify industrial concepts and ensure their
                         dissemination and easy access of themthem. This would also help in
                         cementing a shared industrial wisdom in the entire Syrian textile and
                         clothing industry.

        Actions
                         To set-up of an intelligence unit within the CBS, specifically
                          dedicated to textile and clothing, in conjunction with international
                          experts and consultants.
                         To study in-depth the current state of industry information and
                          congestion spots in information flow.
                         To benchmark with the experiences of other countries, in order to
                          pave the way for redesigning the industry database according to the
                          best practices.
                         To define of what pieces of information are needed, which are the
                          possible sources and ichwhich are the priorities.
                         To set up a permanent access to global sources of industry-specific
                          information to complement local one.

        Actors            The main responsibility for this strategic intervention pertains to the
                          CBS, under the supervision of the ISB who should act as a sounding
                          board for information needs expressed by governmental institutions
                          and firms.

        Risks             Not complying with this strategic intervention would mean
                          continuing ingstrategizing without the possibility to assess current
                          situations and expected results. This is equivalent to drive a car
                          without the cockpitcockpit: it is feasible but it is risky and
                          misleading.

        Time span         idMid term


6.4.7. Strategy 7:       Textile/clothing-specific financial system

        Goal             Modernizing the credit and capital system, setting up policies and
                         initiatives to foster the increasing use of external capitals and funds
                         among small and medium textile/clothing firms.


IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              58
                 Scenario         In 2001 the state monopoly in banking activities was abolished and
                                  the market was virtually opened to private and foreign investors.
                                  Nowadays, Syria has a mixed banking system, with both state-owned
                                  specialized banks and private banks, partially owned by banking
                                  groups from Arab countries.

                 Challenges       Despite the process of progressive liberalization and upgrading of the
                                  Syrian banking and financial system, still there ismuch to do in order
                                  to support the growth and competitiveness of textile/clothing firms.

                                  An equity market in its infancy. First of tthe entire legal and regulatory
                                  environment pertaining the financial system remains relatively
                                  underdeveloped and the range of banking and financial services for
                                  firms is still limited. Most of the textile/clothing firms opt for
                                  reinvesting dividends and finance their own development, with the
                                  result that in most of the cases companies’ growth and
                                  competitiveness is hampered for a lack of funds. This might be partly
                                  due to the small size of most of the Syrian textile/clothing companies
                                  and to the long habit of a monopolistic bank system. Nevertheless,
                                  investors and entrepreneurs are unable to finance all projects needs
                                  with their own resources and commercial banks are also unable to do
                                  that because their work nature is oriented towards financing and
                                  implementing commercial deals which are basically short-term
                                  operations. Therefore other financing resources must be found for
                                  those activities such as investment banks and speculative capital
                                  institutions. There are no equity funds operating in the country and
                                  there is no legislation covering this issue. On the credit side, a
                                  guarantee scheme is under preparation and a few micro-finance
                                  facilities exist19. Finally, it is expected the rapid launch of the DSE. So
                                  far, the employ of short- and long-term bank funds is very scarce and
                                  the use of third-parties equity is null. Further, bank funding for
                                  investments is in general rare and investors have to finance their
                                  projects by their own resources. As a matter of factfact, Syria suffers
                                  also from the complete absence of capital companies and joint stock
                                  companies whose viability has been proven through the history of
                                  economic development in mobilizing individual savings to finance
                                  different industrial projects and activate a positive investment circle in
                                  general. Therefore, Syrian industry has been living a unique situation
                                  where industrialist investors are forced to fully finance their activities
                                  from their own resources. This is unique because the startingstarting
                                  capital to be provided by any investor usually does not exceed 20-40%
                                  of investment costs while the rest is covered by medium-term or
                                  mostly long-term loans. This is not the case of many other
                                  industrializing countries, where governments offer financial support to
                                  their private sector companies in order to improve their
                                  competitiveness in the export markets and sustain local growth. It is
                                  invariably the case in textile and clothing exporting countries that
                                  investments would not be made unless governments offered soft loans

19
   UMU specifically designed a credit line together with the Italian Government to finance the machinery upgrading in
the textile and clothing industry.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                          59
                            for capital investments especially in the costly, technically demanding
                            sectors as dyeing, printing and finishing. This is the situation, for
                            example, in many countries, where soft loans are offered at reduced
                            interest rates with an open-ended fund to meet the industry’s needs.

           Actions

                            To realize a country-wide campaign on media and through local
                             business associations and chambers of industry and commerce to
                             increase the orientation of firms towards third-parties’ capitals, either
                             in the form of debts or risk equity, since most of mthem have been
                             used to rely only on their own funds and there is the need to teach
                             them what business finance is.
                            To train, consult and transfer business models to commercial banks in
                             order to support them to operate closer toneeds of textile/clothing
                             firms.
                            To set up an open-ended fund for the modernization and upgrading of
                             the textile and clothing industry. The fund may be either locally
                             generated or based on foreign funds or both. Private commercial
                             banks could supply the funds at specific interest rates for capital
                             investments in the textile and clothing industry for projects aimed at
                             growth, export, upgrading, modernization and restructuring.
                            To boost the capital market, both through the acceleration of the
                             launch of the Damascus Stock Exchange and the attraction of
                             investment banks and equity funds that so far have been totally absent
                             from the Syrian industrial landscape. This implies:

                             -   The definition of a proper legislation;
                             -   The promotion of the new financial environment to firms, through
                                 conferences, workshops and seminars;
                             -   The identification of possible investors (investment banks, equity
                                 funds, venture capitalist, etc.);
                             -   The settlement of consulting services to support Initial Public
                                 Offers (IPOs) and other corporate finance operations.

           Actors           The MoET, together with the MoI and the support of international
                            institutions like UNIDO and UNDP have the main responsibility for
                            this strategic intervention, under the supervision of the ISB who
                            should facilitate funds collection and arrangement.

           Risks            Not complying with this strategic line would mean lacking those
                            resources that are fundamental for the development and growth of the
                            Syrian textile and clothing industry, whose firms can no longer rely
                            only upon their own funding.

           Time span        idMid term.


6.5. Meso-level strategies

In the Syrian textile and clothing industry there is a stunning call for service support institutions.

   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                60
Strategies suggested at the meso-level are directed towards complementing and strengthening
all those service and support institutions or agencies that are too weak or non-existent in the
Syrian textile and clothing context. On the opposite,opposite, such meso-level institutions
proved to be fundamental in other industrial contexts to pursue an effective modernization and
upgrading strategy. Support institutions should include:

-   technical/testing facilities and labs that are approved internationally;
-   business associations;
-   training and education centers;
-   export associations and consortia;
-   Consulting services.

The presence of a rich net of meso-level institutions is a vital element, which contributes to
improving investment conditions and the competitiveness of the Syrian textile industry alike.
There is a mix of publicly funded and private business service providers in Syria. Some of them
are textile-specific; many others do play a role for the entire Syrian industry. Nevertheless, all
existing facilities and institutions need to be coordinated and modernized, whilst other agencies
and institutions should be totally developed from scratch.
In order to strengthen meso-level institutions, four main strategic interventions are suggested.

1. First of all, it is a matter of rethinking the structure of the industry through the creation of
   meso-level institutions such as cluster-like forms of networking and agglomeration, which
   could leverage the recent experience of industrial zones, favoring integration along the value
   chain and the spreading of positive externalities for micro- and small-sized firms. Further,
   knowledge, competencies and human capital emerge as being the sources for international
   long-term competitiveness. They are the ‘new lenses’ that must be used in order to identify
   emerging needs that can be satisfied by a specific knowledge accumulated by the firm.
   According to such a scenario, international competitiveness of boththe firms and the
   territory they operate in, will emerge from knowledge, competencies, and quality of the
   human capital. In particular creating a learning environment in which the single company
   and the systems of companies can learn faster is becoming more and more important.
2. Human resources’ training is often decisive in determining local productivity levels and the
   capacity to increase them; likewise, the shift to high-value services is very important to
   foster change in the textile and clothing industry. This calls first to a revision of the training
   system of the Syrian textile and clothing industry, restructuring institutions (at various levels
   of education) and aligning curricula and teaching methods to industry needs and up-to-date
   business and technical issues.
3. Additionally, it is crucial that the Syrian textile and clothing industry relies on an modern
   and efficient system of real services and consultancy for its modernization and upgrading.
   This is especially true for SMEs that should master industry standard management tools and
   approaches as well as rely on up-to-dated and strategic information from experts.
4. Finally, there isneed to enforce the role of business associations at ,large, both in
   geographical terms all over the country and in business terms along the industry value chain.
   Business associations may act on three levels: first, as a ‘social glue’, strengthening industry
   cohesion through social networking, cooperation and business alliances; second, in cognitive
   terms, cementing an industrial wisdom in the Syrian textile and clothing context, through the
   creation of an industry identity; third, as service providers, favoring the dissemination of
   information, knowledge, competencies.

Many Arab competitors have invested a lot on meso-level institutions for strengthening their
textile and clothing industries. For instance, Tunisia has become much competitive and

    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              61
attractive through a combination of: technical centers to help the improvement of quality and
productivity, infrastructures for clusters and industrial zones and continuous development of
rules and regulations.
In the aftermath of this paragraph several strategies are suggested to strengthen the meso-level
of the Syrian textile-clothing industry.


   6.5.1. Strategy 8:       Clusters and industrial zones for the textile/clothing industry

           Goal             Fostering the creation of cluster-like forms of industry networking and
                            agglomeration and enhance the experience of the industrial zones in
                            the entire Syrian textile and clothing industry.

           Scenario         The Syrian textile and clothing companies are small-sized, family run
                            and specialized on specific phases of the entire value chain. Often it is
                            possible to identify companies that excel for their internal features but
                            that are weak because they cannot take advantage of external
                            economies. In these cases, cluster-like forms of agglomeration and
                            aggregation will accommodate the essential services firms deserve
                            such as utility businesses (power, gas, water supply, waste water
                            treatment, fuel oil, etc.); banks; courier services; paper and packaging
                            businesses/warehouses; bonded warehouses for duty free imports; dry
                            ports; medical services and clinics; schools; etc. However, the most
                            important contribution that cluster offer pertainsfirms’ collaboration.
                            Industry competitiveness grows faster where firms can share
                            knowledge, skills and innovation, and promoting dynamic clusters is
                            now an important tool of competitiveness strategy for the Syrian
                            textile and clothing industry. Policy makers and practitioners have
                            long recognized geographically defined regional clusters of
                            specialized firms as relevant socio-economic engines for the
                            competitiveness and growth of regions and countries. The notion of
                            regional groupings of firms has been the subject of research for over a
                            century. Concepts like innovative milieux, regional innovation
                            systems, learning regions and regional clusters have underlined the
                            importance of the phenomenon. The general claim is that firms might
                            enjoy advantages related to spatial juxtaposition. Italian industrial
                            districts, in particular, have proven to be a model for local socio-
                            economic development. As several studies have shown, industrial
                            clusters are core in today’s economies and successful regional
                            clustering of firms to be important for understanding patterns of
                            competitiveness in many industries. World experiences report the
                            great success of cluster-like forms of industry networking and
                            agglomeration. The experiences of developed and developing
                            countries have proved that the effective support of such projects
                            represents a significant and basic contribution in ascending the
                            technological ladder and achieving economic integration, along with
                            achieving the international levels even in high technology industries.
                            As a matter of fact, wwhen industries organize in clusters the benefits
                            for single companies and for the competitiveness of the industry as
                            whole are huge. The members of the cluster ouldcould achieve
                            economies of volume whether in acquiring the production needs,

   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               62
                         marketing or providing big purchase orders. Aggregated firms can
                         also be strong enough to face the changes that occurring on the
                         international levellevel, never being prevented by limitedness from
                         benefiting flexibility and small dimensions. They also could take hold
                         of issues such as obtainment of information about markets, snooping
                         around in the cluster; training and best use of machines; and could be
                         oriented towards integrated specializations, which means more
                         effective work division; making use of the collective educational field,
                         where ideas and knowledge are shared and developed, resulting in
                         collective initiatives to improve the quality of products and take hold
                         of a bigger share in the market. This strategic cooperation enhances
                         the flexibility of institutions reaction and their capability of invention,
                         productivity, design, quality and best use of the local resources.

        Challenges       The Syrian textile and clothing industry deserves strategic intervention
                         towards ingfavoring agglomeration and networking among micro and
                         SMEs.

                         Leveraging the experience of industrial zones and cities. The Syrian
                         Government has promoted the creation of industrial zones and cities,
                         in order to encourage the foreign investments in Syria, and to better
                         organize the industry. The sites were prepared with the suitable
                         infrastructures such as: electricity power, water, roads, custom
                         services, banks, etc. at very low prices to encourage the development
                         of industrial cities. So far, there are four industrial cities in Syria.
                         They are located in Damascus (Adra site); Aleppo (Sheikh Najar site);
                         Homs (Houssia site); Deir lel Zour. This last one,just startedstarted,
                         has no textile mills as opposed to the other three, which have 63, 109
                         and 17 textile mills respectively. There are also six industrial zones
                         spread throughout Syria, which focus on the provision of basic
                         establishment services. The move to industrial zones may be
                         considered the first step toward the growth of industrial clusters, but
                         despite the establishment of many industrial cities in all governorates,
                         a large percentage of Syrian industries are still concentrated in
                         scattered places, especially in Damascus and Aleppo, which impedes
                         the growth of industrial clusters. This requires the expansion of
                         industrial zones and the improvement of operations performed in the
                         existing ones. Hence, there is the need to assess the experience thus
                         far within existing official industrial zones to improve performance
                         and set proper rules for the establishment of new industrial cities.

                         Governing firms agglomerations and clustering. The recent
                         experience of Syria in setting up industrial zones/cities for textile and
                         clothing is a crucial starting point for creating clusters. The spatial
                         juxtaposition of several SMEs specialized on different phases of the
                         textile iveproductive line may favor cooperation, positive externalities
                         and the exploitation of shared facilities. Nevertheless, clustering by
                         itself does not necessarily create strong local links or facilitate




IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                 63
                                   interconnected and cumulative growth20. Hence, the geographical
                                   positioning of a number of small firms is not enough to achieve the
                                   desired success. The advantages of clusters do not appear
                                   spontaneously or automatically. So it is inevitable to have an
                                   intelligent governmental interference policy that provides support
                                   structures, training centers, funding, incentives and other facilities.
                                   Effective institutions are a necessary condition in order to make
                                   external economies possible within clusters. First of all, public
                                   institutions must assure the basic conditions for the entrepreneurial
                                   activity: from security and legality conditions to the availability of
                                   transportation, water supply and energy facilities. Clusters can hardly
                                   rise and develop if institutional bodies are not able to supply public
                                   goods that companies need.

                                   Creating textile/clothing clusters throughout Syria. Preliminary data
                                   show that most of Syrian textile and clothing firms agglomerate in the
                                   areas of Damascus, Aleppo and Homs/Hama. The experience of both
                                   developed and developing countries shows that clustering firms
                                   making similar products in the same location helps create the strong
                                   and effective links that sustain competitiveness and upgrading.
                                   Nevertheless, for Syria to create clusters in the textile/clothing
                                   industry space agglomeration is not enough. First, cluster may
                                   originate thanks to the effective combination of productive factors that
                                   are already present within the territory or that can be easily acquired
                                   from the outside. This means that synergies along textile productive
                                   lines or concentration of specialized firms with similar needs (e.g.
                                   dyeing companies with environmental issues) can be the initiator of a
                                   cluster form. The hhuman capital is another productive factor that
                                   often represents an important ground for the development of a cluster.
                                   A rich endowment of human resourcesresources, especially when they
                                   are educated and provided with a capital of knowledge, should
                                   represent a starting point for the development path of a cluster. This
                                   brings back in the issue of textile-specific training. Further, the
                                   availability of financial capital is necessary in order to support the
                                   growth of new clusters. AdditionallyAdditionally, the available
                                   resources within a territory must be combined with technology in
                                   order to produce a good or a service. The technological capability can
                                   lead to an effective use and an efficient combination of productive
                                   factors. This is for example the case of waste recycling plants or
                                   shared logistic platforms. Another case occurs when universities and
                                   research centers generate new knowledge that could be incorporated
                                   in new products realized by local enterprises. This takes backthe issue
                                   of textile-specific universities and research facilities.

20
   The birth and development of new clusters can be one of the most important ways for the regional development and
industry competitiveness. Nevertheless it is not an easy and quick process. Then, it is important to understand the
dynamics that can represent the basis and the conditions for the birth and development of cluster-like forms of firms
networking and agglomeration. Empirical evidence and previous cluster policies suggest that a cluster rises: a)
combining productive factors that are present within a certain region; b) through a convenient technology; c) thanks to
the action of one or more leading enterprises; d) if it can reach a critical threshold of demand and production; e) if the
region is characterized by a social and economic context that do not hinder the development process and by the
presence of intermediate institutions that can support it; f) if it becomes competitive.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                              64
        Actions
                         To assess the experience of current industrial zones and industrial
                          cities in the textile-clothing industry to improve current operations.
                         To favor the extension of industrial zones to other textile areas of
                          Syria, through the disposition of additional financial resources and
                          proper infrastructures. This should occur only where socio-economic
                          conditions allow it and local business associations are able to
                          orchestrate the project and involve companies prior to governmental
                          investments.
                         To map potential industrial clusters throughout the textile and
                          clothing industry in Syria. Hence, the implementation of cluster-like
                          forms of agglomeration and aggregation should pass through several
                          steps:
                              a. Geographical mapping of all textile and clothing firms
                                  agglomerations in Syria;
                              b. Identification of those clusters/agglomerations with the
                                  potential for further development and future connections with
                                  the global economy;
                              c. Closely study international benchmarks that could be applied
                                  to the Syrian case in implementing textile clusters;
                              d. Provide technical assistance to textile/clothing companies and
                                  institutions in zones with cluster potential.
                         To select some small textile/clothing companies and support them
                          financially and organizationally to connect them together as pilot
                          micro-clusters. This is expected to create productivity lines to
                          enhance the productivity and the competitiveness of single firms.
                         To start supporting pilot projects of textile firms clustering. Projects
                          can start from mapping textile firms having similar productive or
                          technological needs. For instance, this is the case of firms specialized
                          in dyeing fabrics and fibers or textile printers, which have strong
                          environmental duties and would benefit much from clustering around
                          common facilities.

        Actors           The ISB, in cooperation with the MoI and the Chamber of Industry
                         and local textile/clothing business associations, have the responsibility
                         to design, support and coordinate the formation of efficient industrial
                         clusters throughout the Syrian textile/clothing industry.

        Risks            Failing to proceed along the settlement of industrial zones and cluster-
                         like sforms may hamper the upgrading of the Syrian textile and
                         clothing industry. In fact the textile industry is mainly populated by
                         SMEs which are unable to recap individually all those resources,
                         competencies and supports needed. Hence, externalities deriving from
                         agglomeration and aggregation – such as common services, shared
                         testing centers, circulation of market and technological knowledge,
                         diffusion of updated management practices, etc. – are crucial for the
                         survival and competitiveness of Syrian textile and clothing SMEs.




IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               65
                 Time span         Mid term21.


         6.5.2. Strategy 9:        Training for the textile/clothing industry


                 Goal              Revising training institutions at all levels in the textile/clothing
                                   industry, with a focus on the link between the education system and
                                   the industry.

                 Scenario          There is an urgent need to rethink curricula in textile-related
                                   educational institutions (at all levels) to meet the requirements of this
                                   industry and to support its growth and development. This should be
                                   done in liaison with the private and public sector as the major
                                   stakeholders. Technical skills deserve to reach international standards
                                   both in private and state-owned companies. Likewise, management
                                   skills need to be developed in terms of marketing, including selling
                                   techniques, new product development and design. There is also the
                                   need to define a list of institutions certified to train personnel and
                                   workers for the textile/clothing industry. This should be done in
                                   cooperation between the MoI, the Chambers of commerce and
                                   industry and coordinated by the MoEd.
                                   In general, up till the early 1990’s Syria had achieved a notable
                                   progress as regards the number of students, including higher
                                   education. Meanwhile, the education quality had deteriorated. As a
                                   matter of fact, the education budget of all levels represents 7% of the
                                   state budget; that is about 2% of the GDP, much less than half the
                                   average in advanced countries. Training is believed to have a huge
                                   impact on the productivity and the competitiveness of the
                                   textile/clothing industry, especially with the trends in the global
                                   economy, which has transformed it to a knowledge-based industry
                                   with an extensive utilization of technology. Among the main
                                   weaknesses in the textile/clothing industry there are also the quality of
                                   management schools and the extent of staff training, despite the fact
                                   that several ‘intermediate institutes’ for technical education and
                                   vocational training have been set up over the past two decades.
                                   Nevertheless, modernizing the textile education system is of utmost
                                   importance for countries that wish to elevate their economies toward
                                   higher rankings in terms of the production chain and added value.

                 Challenges        The Syrian textile and clothing industry deserves strategic intervention
                                   at several levels of its training institutions.

                                   Professional training – technical. At the professional level, training
                                   centers are highly significant for bridging the gap through providing
                                   trained workforce, productivity control, and making the best use of
                                   available capacity, along with enhancing managers’ competence in the

21
   Please note that the proposed time span for this strategic intervention does not refer to set up clusters and networks
of SMEs throughout the entire Syrian textile and clothing industry, but rather to start with the actions indicated above.
This means creating the pre-conditions for clusters to flourish and offer occasions to managers and entrepreneurs to get
used with networking and agglomeration, thus appreciating much this new industrial organization.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                              66
                                  textile/clothing industry. Particular care should be put on the
                                  promotion of professional training centers specialized in the
                                  textile/clothing industry. Of course, enterprise-based training yields
                                  higher private returns than other post-school training. Nevertheless,
                                  there are many reasons why firms are reluctant to invest in training
                                  their employees, for instance that employees leave the firm after
                                  training and the employer does not recoup the cost of training in terms
                                  of higher productivity. In general, firms do not adequately recognize
                                  the potential of human resource development as a factor in promoting
                                  competitiveness. Syrian business associations and institutions,
                                  operating in the textile/clothing industry, should establish a systematic
                                  survey to determine skill gaps and skill weaknesses as well as
                                  identifying skill requirements. Further, they should systematically
                                  engage in persuading public and private companies to consider
                                  training as an investment rather than a cost. A joint effort between
                                  groups of private textile/clothing firms with similar training needs
                                  (e.g. business associations) and public institutions (e.g. textile training
                                  centers or textile vocational centers) seems to suit best. This also calls
                                  for organizing an annual seminar to discuss and introduce
                                  developments in the textile/clothing industry, with foreign experts and
                                  guests. Among the most important topics for professional technical
                                  training in the textile/clothing industry there are: garment
                                  technologies, production engineering management, CAD systems,
                                  productivity and quality control, new product design and styling, total
                                  quality management systems, fabric technologies, etc. Finally, there is
                                  a tremendous need of language training courses, especially with
                                  reference to textile technical language.

                                  Professional training – managerial/entrepreneurial. Professional
                                  skills in the textile/clothing industry deserve maintenance not only at
                                  the technical level but also at the managerial/entrepreneurial one.
                                  There is a strong need to spread entrepreneurship education at large if
                                  the competitiveness of the Syrian textile and clothing industry is to be
                                  reinforced. So far, entrepreneurship as a key competence remains to
                                  be introduced into the teaching and learning processes, whilst many
                                  other developing countries insist much on this aspect, which is
                                  believed to be an antecedent of innovation, creativity and risk-
                                  orientation. While there are some excellent examples of
                                  entrepreneurship promotion22, particularly involving enterprises these
                                  efforts lie outside the general curriculum and are limited to a selected
                                  group of schools. Likewise, managerial training specific for the
                                  textile/clothing industry should devote more space to topics, such as:
                                  production management appreciation, productivity improvement
                                  techniques, marketing, pricing and costing, English language for
                                  textile, plant organization, competitive analysis, strategic

22
   A good example on this side is the ‘The Business Awareness Program’ conducted by Shabab, part of the Syria Trust
for Development, that included a tour of schools during the academic year 2007-2008, conducted by 157 volunteers
from the business community towards over 4.000 students, spreading across 141 schools. Shabab is a non-governmental
organization that helps youth prepare for private sector work or to start their own business. The program was aimed at
bridging the gap among young people between the educational and the professional phases of their life and addressed
topics in marketing, customer service, human resources, and management.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                           67
                                   management, etc.

                                   Vocational training. The Human Resources Development Center
                                   (HRDC) established by Damascus Chamber of Industry (supported by
                                   CIM-Germany) is currently offering training courses in various fields
                                   of subjects even for the textile/clothing industry. It is intended to
                                   become an internationally accredited center for Vocational Training. It
                                   is meant to evolve into granting certificates upon completion of pre-
                                   set modules of training rather than passing exams of school courses in
                                   a predetermined path. In addition, HRDC is administering the
                                   Apprenticeship System (Dual Education), which aims at providing
                                   skillful labor force at the end of school/institute years. To this regard,
                                   the huge EU-Modernization of Vocational Education and Training
                                   Program in Syria is another initiative aimed at helping improve the
                                   quality of vocational manpower needed for the development of the
                                   textile/clothing industry, with a focus on: building capacity for private
                                   sector and employers organizations, improvement of their human
                                   resources development functions, building capacities for 16 vocational
                                   training centers and building capacity for the employment offices. In
                                   its objective to develop the manpower skills: the Vocational Training
                                   Complex (VTC), which is under MoI, is the major provider of trained
                                   manpower and it runs several high schools in several Syrian cities.
                                   The VTC in collaboration with Chambers of Industry can play an
                                   important role in the textile/clothing industry. Vocational training in
                                   the textile-clothing industry should favor both the learning of up-to-
                                   date techniques in knitting, weaving, printing and dyeing as well as
                                   reinforce manual creativity in styling, cutting and sewing apparels.
                                   Supervision over these various vocational education and training
                                   programs devoted to the textile-clothing industry is needed, in order to
                                   coordinate resources and curricula.

                                   University training. As far as university education is concerned, only
                                   three public universities have a textile section (Damascus, Aleppo and
                                   Homs) out of the six public universities in Syria. In addition, many
                                   private universities were opened in the last years and some of them
                                   offer textile/clothing-specific programs. All university training
                                   programs for the textile/clothing industry have common weaknesses:

                                   -     insufficient teaching and training staff
                                   -     ineffective training courses
                                   -     hands-on course are held in state-owned companies where only
                                         some old fashioned technologies are present
                                   -     poor and not upupdated curricula
                                   -     lack of basic literature, magazines, leaflets, etc. as references

                                   Firms and industry experts complain that curricula23 specialized in the
                                   textile and clothing industry are out-dated and do not respond to the

23
   Recently – at the level of higher education – many projects have been initiated in order to enhance the capabilities of
higher education institutions in countries in transition. One example is the Trans-European Mobility Program for
University Studies (TEMPUS). Another one is the Higher Institute for Business Administration (HIBA) that provides
the labor market with skilled executives and top managers that acquire internationally recognized MBA & EMBA.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                               68
                         labor market needs. University education would benefit much in
                         dialoguing with the Chambers of Industry and business associations,
                         to align university programs and degrees to real market needs. For
                         instanceinstance, there is a need to align textile engineering curricula
                         to international standards, to benchmarking programs and most of all
                         to firms’ needs. Industry-specific university curricula should also
                         favor the development of competencies in the fashion business,
                         training future local designers. Additionally, curricula in management
                         should be expanded as well, in order to inject in the growing textile
                         and clothing industry not only fresh technical competencies but also
                         managerial ones. In particular, there is the need to align management
                         competencies to those provided by international business schools,
                         since so far the Syrian managerial and entrepreneurial class in the
                         textile/clothing industry has been too much conditioned by
                         protectionism. Course programs should focus more on marketing,
                         sales and distribution, global markets, management for growth,
                         entrepreneurship, innovation and new product development, service
                         management, design and style, small business development and family
                         business management.

        Actions
                        To encourage in-house training by textile/clothing firms, supporting
                         groups or associations of firms to edialogue with training institutions
                         in order to design tailor-made programs.
                        To promote on-the-job training in textile/clothing firms, even through
                         fiscal incentives and ad-hoc consultancy (for instance, using UMU
                         experts).
                        To activate and develop the current textile vocational centers
                         (technical institutes, industrial secondary schools and training
                         centers), by radically revising their curricula towards modern
                         pedagogic methods and programs that link practice to theory.
                        To set a nation-wide coordination of curricula, programs and
                         resources for textile-clothing vocational training.
                        To modernize equipments and iesmachineries of textile training
                         centers, so that they can respond to real market requirements.
                        To design textile/clothing-specific curricula for universities, technical
                         institutes and vocational schools for short-, medium- and long-term
                         courses.
                        To further develop at the university level textile faculties and
                         departments, linking them more to firms needs both on the technical-
                         technological side as well as on the fashion-style side.
                        To increase the number of students in the textile/clothing industry
                         specialized in SMEs management, family business management and
                         entrepreneurship.
                        To ensure scholarships at the best European and American universities
                         specialized in textile/clothing business management and technology,
                         to send the most brilliant Syrian graduates, thus favoring the entry of
                         the Syrian university system into international exchange programs.
                        To attract international visiting professors to freshrefresh local
                         curricula, research streams and pedagogical approaches for the
                         textile/clothing industry.
IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               69
                        To develop textile/clothing specific libraries, laboratories and
                         technical facilities in the Syrian universities.
                        To modernize junior colleges, as a first step toward satisfying the
                         needs of the textile and clothing industry.
                        To establish a higher institute for advanced studies in the textile and
                         clothing industry, following the benchmark of several European and
                         Asian countries that did so.
                        To cooperate with other countries specialized on the textile/clothing
                         industry, to share experience of training schemes, governance of
                         higher education institutions and curricula definition.
                        To set up an Arab Textile Industries Institute, under the mandate of
                         the Arab Federation of Textile Industries, to train and develop workers
                         for textile sectors (university level and long and short term training
                         courses).

        Actors           The MoEd has the main responsibility for this strategic intervention. It
                         should act in coordination with public and private universities that
                         have textile/clothing specific courses, faculties or departments, and the
                         whole textile/clothing training system. The ISB should favor the
                         dialogue of the above-mentioned actors with the MoI, the Chambers
                         of Commerce and Industry, the Arab Federation of Textile Industries
                         and all those other foreign institutions (universities, organizations,
                         research centers, etc.) that could act as partner in the restructuring of
                         the textile/clothing-specific training system in Syria.

        Risks            First of all, we have to take into consideration that reforming the
                         education and vocational training systems is a difficult and time-
                         consuming task and deserves high levels of coordination and robust
                         funds. Moreover, investing on education, training and dissemination
                         of managerial and technical culture requires no short-cuts and
                         deserves an extreme care by firms and institutions in the
                         textile/clothing industry. This strategic line is crucial both for the
                         present competitiveness of the Syrian textile and clothing industry (to
                         keep it updated and informed) and most of all for its future. Investing
                         in the revision of the textile/clothing-specific training system –
                         continuously injecting the industry with new competencies,
                         information and skills – is the fuel for future development and growth.

        Time span        Mid term.


6.5.3. Strategy 10: Services and consulting for the textile/clothing industry

        Goal             Promoting the creation of real service centers and consulting
                         specialized in the textile and clothing business, thus favoring the
                         dissemination of global state-of-the-art practices in the industry.

        Scenario         In the global textile and clothing industry, a crucial role is played by
                         real services and consulting. Over the last 30 years, numerous
                         industrialized countries and regions have developed business service
                         programs to increase the knowledge recognition, transfer, and

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               70
                         assimilation capacity of small and medium-sized businesses. In
                         addition to conventional consulting services such as accounting, legal,
                         payroll and simple marketing services, which are designed to reduce
                         the costs of conducting business, so-called ‘real services’ have been
                         identified as activities that explicitly attempt to improve the
                         competitiveness of businesses. The primary distinguishing
                         characteristics of conventional versus real services is the extent to
                         which the latter’s provision is explicitly targeted toward altering the
                         behavior of the recipient firm. In other words, real services have as
                         their intent altering firms’ behavior over time to increase their
                         capabilities and therefore their effectiveness. This may and often does
                         include services and capabilities for which firms are not consciously
                         aware that they need or are missing in their daily and longer-term
                         business practices.
                         Real services include everything from shop-floor reorganization,
                         strategic planning and materials acquisition, to human resources
                         planning, labor force retraining, and continuous process improvement
                         activities. Public-sector provision of such services is not the only
                         model of real services provision but even private sector can contribute
                         to it as well as public-private partnerships.
                         A part from technical centers, there might be productivity centers,
                         small-business service centers, exhibition centers, training centers, etc.
                         each one with a major specialization. Certainly, not every service
                         provider should cover all of these areas and service provision is
                         usually tied to the original rationale for establishing that specific
                         program or institutions. So for instance, technological textile centers
                         may also offer market analysis services or financial consultants may
                         also help in international tenders.

        Challenges       The design and provision of real services and consultancy in the
                         Syrian textile and clothing industry should face several challenges.

                         Modernizing and expanding real service centers. There are already
                         institutions designed to provide service support to the Syrian textile
                         and clothing industry, especially on the technical side of testing and
                         certification. Nevertheless they are considered weak and deserve
                         international accreditation. In general they show low levels of
                         utilization, lack of some significant instrument,instrument, old
                         instruments, no accreditation or international recognition, lack of
                         industrial experience, low practice of using instruments, poor (nearly
                         zero) relationships with similar foreign institutes as well as with
                         foreign colleagues, low working activity rate, very poor sales price
                         level for the service. In general terms, the real weak point assessed by
                         the I’MUP Syria project is the low connection between the existing
                         centers and enterprises and the need to shift from testing centers to
                         service centers. Existing centers comprise the Damascus Institute for
                         Textile Industries (DITI), whose laboratories and equipments are
                         finalized to didactical issues, no test is provided to enterprises and it
                         has no image of being a technical textile center; SASMO that has the
                         traditional equipments for textile physical tests and some equipments
                         to perform special tests, nevertheless its instruments are seldom used,

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                71
                         it has too little space and it shows incompatibility between the activity
                         of standardization and the one of testing certificates deliveries; ITRC
                         would be the best conservative solution since its ieslaboratories
                         spaces, layout, instruments and , neverthelessfacilities, nevertheless its
                         market is too small and annual requests for tests are too few; GOTI
                         has large ieslaboratories areas and lot of space for extension, it can
                         rely on a standard equipment for testing, with more modern
                         instruments, and it is well-known in the public textile field yby its
                         image needs to be improved, especially vis-à-vis private companies.
                         The Syrian textile and clothing industry can also rely on a textile
                         technical center in Aleppo – namely the Clothing and Textile
                         Development Center (CTDC), formerly known as the Aleppo Design
                         Center. This center is in the process of modernization thanks to the
                         I’MUP Syria project of UNIDO. A similar center is also based in
                         Damascus at the Chamber of Industry and it is called the CTDC of
                         Damascus. I’MUP Syria is also working on the establishment of a
                         nascent technical center in Damascus, through a public-private
                         partnership and the technical and financial support of UNIDO. This
                         center – which will start mainly as a testing center – will support the
                         production process along the whole textile-chain, consolidating the
                         attitude of using quality standards and assuring a constant quality level
                         of semi-finished and final products. The objective of the proposed
                         center is to put in place an efficient and market-responsive system of
                         support agencies, providing assistance to the textile industrial sector,
                         consisting mainly of public and private small and medium enterprises,
                         and in particular to firms seeking to become more internationally
                         competitive. There are several benchmarks worldwide that can inspire
                         the activities of the nascent Damascus textile testing center in
                         providing real services and consultancy for the Syrian textile and
                         clothing industry: in France the Institute Francais de l’Habillement et
                         du Textile (IFTH); in Belgium the Belgian Textile Research Center
                         (Centexbel); in Italy the Cotton Textile and Clothing Center
                         (Centrocot) and Como Textile Center; in Tunisia the Technological
                         Textile Center (CETTEX); in India a regional Textile Testing
                         Laboratory. The activities of the nascent textile center will cover a
                         broad range of services, which will be introduced gradually:
                         monitoring and follow-up; applied research and development;
                         technical assistance; technical expertise; information and training;
                         trade development support (fairs, visits, events, joint-ventures, export,
                         etc.); project design and management, etc.

                         Strengthening the consultancy sector. With regard to tthe Syrian
                         consultancy sector, this is still underdeveloped, especially with
                         reference to specialization in the textile and clothing industry. UMU
                         in charge of the local implementation of the UNIDO I’MUP Syria
                         project can be considered a provider of consultancyconsultancy, since
                         it has provided technical assistance, marketing and product innovation
                         consultancy, financial advising, training to firms and national
                         consultants, company check-ups and strategic assessments, design and
                         orchestration of new service centers, etc. Further, the I’MUP Syria
                         project has contributed in updating national consultants’ competencies

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                72
                         and approaches, having 52 attendees and ingselecting 20 professionals
                         in the end. This experience is noteworthy but deserves larger numbers
                         of consultants involved and a continuous follow up by permanent
                         service centers, such as UMU could be. UMU needs further
                         development of its internal staff competencies and external
                         reputation/legitimization together with an agile steering committee if
                         it wants most to become autonomous and permanent. The Syrian
                         textile and clothing industry is also served by SEBC, which is a
                         European styled Syrian operated and managed business institution
                         with roots stretching back to the first EU program implemented in
                         Syria after the Barcelona Declaration, namely the Syrian-European
                         Business Centre. SEBC is now serving as an implementation agency
                         for projects aimed at developing the private sector, acting as catalyst
                         institution for private sector development and growth in Syria. In its
                         consulting activities SEBC assists Syrian private sector enterprises to
                         access international markets, to cope with organizational and financial
                         issues, providing management consultancy. The necessity of a well-
                         developed consultancy industry derives also from the urgency of
                         helping micro and small textile firms applying the strategies here
                         suggested (i.e., studying markets, profiling customers, innovating
                         product design, controlling costs, etc.).

                         Expanding the range of consultancy and real services. The range of
                         real services and consultancy that Syrian textile-clothing firms can
                         rely on is very limited and deserves extension to the areas listed
                         below.

                         - Corporate finance. The growth process of textile and clothing firms
                           calls for advisory services on non-ordinary financial operations
                           (M&A - mergers and acquisitions to grow in size; JV - joint
                           ventures to internationalize; LBO – leveraged buy-out to acquire
                           national and international firms via debt; local stock exchange
                           quotationquotation; financial restructuring and debt consolidation
                           to secure reduced interest rates; etc.).
                         - International marketing. Firms opening to international fashion
                           markets need: assistance for tenders of the EU, World Bank,
                           UNIDO, etc.; assistance to direct investment abroad; assistance to
                           inward investors; legal and financial assistance; market information
                           or other economic information; organization of and participation in
                           trade fairs and other promotion events; international partner search
                           for business-to-business operations; quality certification and
                           labeling.
                         - Technology management (product/process innovation). The
                           competitiveness of Syrian textile productions passes through
                           innovation, i.e.: analysis and certification laboratories; assistance
                           on environmental and quality systems; assistance on patent and
                           license matters; assistance with grant applications; assistance with
                           in-house R&D activities; assistance to subcontracting with research
                           institutes; competitive intelligence (technology benchmarking,
                           technology maps, information on emerging technologies);
                           demonstration centers and test factories; energy audits; innovation

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             73
                           diagnosis; materials engineering; participation in and organization
                           of technology exhibitions; partner search for innovation and
                           technology development; productivity assistance; review of current
                           and proposed manufacturing methods and processes; technology
                           brokerage.
                         - Management and organization. Micro and small family firms
                           operating in the Syrian textile-clothing industry lack managerial
                           iescompetencies and deserve assistance in enterprise creation;
                           interim management; logistical assistance; organizational
                           consultancy; strategic check-ups; business planning; feasibility
                           studies; market opportunity analysis
                         - Communication. A major weakness of Syrian textile-clothing firms
                           pertains communication at large: advanced services for data and
                           image transmission; assistance to communication strategies;
                           assistance in telecom network connections; assistance in the
                           implementation of electronic data interchange systems and
                           programs; database searches; web portals and business-to-business
                           interactions; advertising campaigns; visual and trade
                           merchandising; etc.
                         - Design. To compete internationally in the fashion business requires
                           strengthening the design competencies of Syrian firms, thus calling
                           forfor: training courses on design for the textile and clothing
                           industry; training on industry-specific CAD software; design
                           repository; intelligence on up-to-dated designs; access to a network
                           of ad-hoc and interim designers; cooperation with international
                           design agencies; etc.

                         Stimulating the demand for consultancy and real services. An
                         additional challenge is to actually change how Syrian textile firms
                         learn about problems, acquire information to resolve problems,
                         internalize the information, and then act to resolve problems. This of
                         course requires firms’ time, previous experience, specific training and
                         upgrading in competencies, previous exposure to real services and
                         participation in learning networks. Firms may lack the internal
                         translation capabilities needed to benefit from the new information
                         received through real services and consulting. Such information is
                         often so foreign to firms as to be deemed worthless. Firms – especially
                         SMEs – frequently do not know how to value such information, nor
                         are they able to price it for their own purchase and use. Consequently,
                         help should be provided to enable companies to use external
                         consultants to undertake audits on the owners’ behalf and to prepare
                         strategies together with them. Translation becomes the key, but who
                         will do the translation? Why firms will trustto do this? Who will pay
                         for it? As a matter of fact, firms are most likely to purchase services
                         that can absolutely be linked to immediate needs, and are far less
                         likely to pay for those activities that are more strategic and longer
                         term in nature. They are more likely to buy what they know and are
                         far less likely to make risky investments in untried activities, even if
                         they will provide a longer-term gain. This simply reflects the way
                         firms learn which is based on repetitive behavior and past successful
                         experience. Firms are willing to use the services provided by a center

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              74
                         but are less willing and open to experimentation if they have to pay
                         for them in advance. In general terms, Syrian textile and clothing
                         firms should be more willing to pay for services and consultancy,
                         since paying implies commitment and appreciation that may lack
                         when services are provided for free by grants or international funds.
                         To disseminate information widely and with as a little bias as possible,
                         orchestrating media campaigns, public workshops and seminars, as
                         well as specific training in order to help firms understand the benefits
                         of real services and consultancy, towards which SMEs in particular
                         are always skeptical.

        Actions
                        To have a comprehensive program for cooperation between public and
                         private sectors in modernizing and upgrading textile-specific service
                         centers and consultants.
                        To establish the new textile technical center – designed by UNIDO -
                         as soon as possible. This facility should start up as an internationally
                         approved textile laboratory, and then expand its operations to training
                         in design, studies, information and industrial consultancy services in
                         all areas.
                        To facilitate the establishment of an efficient network of business
                         support institutions providing all those real services that the Syrian
                         textile and clothing industry needs for sustaining its competitiveness.
                        To support programs and initiatives like I’MUP Syria aimed at
                         building a high quality network of national experts. The ISB should
                         have a list of approved consultants so that one may be delegated to
                         each company that matches the company’s needs most exactly.
                        To regulate the profession of consulting through existing associations
                         to enable them for ongoing self-development. The objective is to rely
                         on a professional network of qualified consultants capable to aid
                         individual companies ingformulating their strategies and action plans
                         for the further development of their businesses.
                        To provide governmental or international grants and funds to
                         companies willing to buy consultancy from national and international
                         institutions.
                        To favor real services providers in assisting firms to become truly self-
                         conscious and therefore capable of acting autonomously and
                         continuously in response to an ever-changing environment.
                        To start nation-wide communication campaigns to incentivate textile
                         firms use real service centers and consultants in their operational and
                         strategic activities.

        Actors           The ISB – in accordance with the MoI – should take the overall
                         responsibility of garrisoning the conditions for a fine-tuning of real
                         service providers and consultants with the current and changing needs
                         of the textile and clothing industry. A key role should also be given to
                         UMU that has already started a process of upgrading textile-specific
                         real service centers and consultants. The ISB will have the
                         responsibility of coordinating the various actors involved in the
                         process as well as disseminating information, as stated above. This
                         should be done in coordination with current players – both service

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               75
                         centers and consulting institutions.

        Risks            Not complying with this important strategic intervention may affect
                         the capacity of single firms to upgrade and modernize and to face
                         global competitors, since both private and state-owned firms are
                         unable to comply with the needed upgrading in their business
                         formulas and management practices without the possibility of relying
                         on a proper external net of services.

        Time span        Short term.


6.5.4. Strategy 11: Textile/clothing-specific business associations

        Goal             Supporting the development of textile/clothing-specific business
                         associations at various levels, to complement the role of the chamber
                         of commerce and industry.

        Scenario         The main difficulties related to an industrial structure composed
                         mostly by micro- and small-sized firms – as in the case of the Syrian
                         textile and clothing industry – derive from a lack of resources and
                         services that firms, by virtue of their small scale, are not able to secure
                         for themselves but which market forces are not yet able to offer
                         efficiently and at competitive prices. It is in such a context that a
                         continuing need for business associations’ support exists. Business
                         associations are organizations specialized in aggregation, selection,
                         defense and promotion of interests and collective aims of
                         entrepreneurs; their original purposes were to bring social order and
                         contribute to the economy regulation. Typically, business associations,
                         besides the function of representing the associates’ interests, supply
                         services and encourage the promotion of economic development
                         policies. This aspect has to prevail in business associations of minor
                         companies (micro- and small-sized), whose services demand is bound
                         to the low rate of internal administrative functions, accounting, fiscal
                         assistance functions, but also to the major difficulty to implement
                         internally more complex services. Together with local government
                         agencies, business associations are considered the main institutional
                         actors in an industry. Business associations have the task toeto serve
                         their members in offering services, in representing their members’
                         interests towards the local and national government, and in offering a
                         social forum. A functioning business association will have a positive
                         influence on the development of its members, and thus on the
                         industrial context where it operates. In other terms, business
                         associations should play the role of constant support to the creation of
                         the right context for the management and development of the
                         associates. This is even more important when business associations
                         operate at the cluster level, where they can play a critical role in the
                         provision of acceptable working conditions, garrisoning the factors
                         affecting competitiveness, such as the quality of the environment and
                         social relations, the material and immaterial infrastructural networks
                         and institutional arrangements. Although entrepreneurial and

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                 76
                         managerial qualities are important, a firm, especially small or micro,
                         is not an abstract entity, isolated and separated from the wider
                         economic, social and cultural context in which it works. This context
                         can provide competitive advantages depending on factors such as an
                         area’s learning capabilities, the access provided to information
                         regarding new technologies, the availability of finance, the
                         opportunities for establishing relations with international companies,
                         and the quality of the social environment.

        Challenges

                           Strengthening the presence of business associations in the
                           textile/clothing industry. First of all, the local chapters of the
                           Chamber of Commerce and Chamber of Industry are very active all
                           over the country, rooted in the Syrian business and political
                           environment and involved in many policy interventions. Chambers
                           are the main organization that provides effective business support
                           schemes and services. Chambers are working on building their own
                           capacities to serve the member companies, and on organizing the
                           private sector’s participation in the national economy. They are also
                           active in solving the issues related to the industrial zones in
                           cooperation with the governmental bodies. The Federation of Syrian
                           Chambers of Commerce has jointly established a national company
                           which aims at organizing fairs and sales markets inside and outside
                           Syria, promoting Syrian national products, conducting studies,
                           researches, decoration projects, and applying for tenders related to its
                           activities. Moreover, Chambers of Industry and Commerce continue
                           to be a source of valuable information about Syrian economic data.
                           A new generation of business associations is appearing on the scene.
                           This refers to Syrian Young Entrepreneurs Association (SYEA) and
                           the Junior Chamber International – Syria (JCI-Syria). SYEA is very
                           active in organizing and participating to fair, business plan
                           competitions, workshops and lectures and other networking
                           activities. All these collective institutions have specific internal
                           committees and referees for the textile and clothing industry, but –
                           for their nature – they are not exclusively linked to that industry. An
                           industry-specific business association is named STGEA – the Syrian
                           Textile and Garment Exporters Association. This association is not
                           only industry-specific but also function-specific, since it is mainly
                           concerned with the exporting activities of its associates. Moreover, it
                           is actively involved in many policy issues andmembers are
                           committed to renovate the industry profile through modernization,
                           cooperation and internationalization at large. The experience of the
                           STGEA is quite recent but still considered to be significant and
                           capable of a positive impact on the competitiveness of the industry.
                           Additionally, an important role in the textile and clothing industry
                           can be played by the recently established Syrian Association of
                           Fashion Designers (SAFD), whose role is particularly important for
                           the improvement of textile designers’ qualifications and skills and
                           the overall upgrading of the Syrian textile and clothing industry. To
                           this regard, SAFD is active in organizing training programs and

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                77
                           thematic workshops, organizing on the job visits abroad and
                           accompaning designers to international textile fairs. The role of
                           SAFD should be increasingly important in filling the gap between
                           the fashion design level in Syria and the international demand. This
                           gap can be reduced by participating to international exhibitions as
                           well as connecting with other fashion designers association and
                           institutions in Europe or bechmarking some foreign experiences.
                           Current business associations operating in the Syrian textile and
                           clothing industry (including chambers, exporters association and
                           young entrepreneurs association) have the advantage of being (in
                           general) trusted by private sector producers. Consequently, they have
                           a big responsibility in encouraging private enterprises to move
                           cohesively towards the strategic transformations that are needed for
                           the Syrian textile and clothing industry to upgrade and modernize.
                           This role, however, cannot be played unless the business associations
                           themselves are institutionally capable to play that important role and
                           are spread all over the country. The objective of this strategic
                           intervention is thus to enhance the abilities of business associations.

                           Extending the functions of business associations in the
                           textile/clothing industry. Coping with the considerations made
                           above, business associations (either trade associations, entrepreneurs
                           associations or exporters associations) may play a crucial role for the
                           success of the Syrian textile and clothing industry, performing
                           several functions:

                           - Political influence. One function they can carry out is to give
                             SMEs a political voice and potential power, both in regard to
                             national and local government, and in regard to other interest
                             groups, including large state-owned firms. This bias towards large
                             state-owned firms might partly reflect policy-makers’ perceptions
                             that policies aimed at state-owned firms will provide greater
                             returns for an industry seeking to encourage development; but it
                             can also reflect the legacy from the past. Consequently, SMEs
                             might need to promote their interests by combining in business
                             associations and presenting a powerful front.

                           - Decentralization. A second function provided by business
                             associations can be that of acting as vehicles for decentralizing
                             initiatives, allowing a much more efficient tailoring of resources
                             and policies to the needs of small entrepreneurs than is
                             traditionally carried out by public administrators. Small-firms
                             promotion schemes, whether by external or internal agencies,
                             need to be demand based, democratic and responsive to local
                             conditions and cultures, rather than run on top-down principles.
                             Business associations serving to promote the textile and clothing
                             industry must be receptive to expressed needs. This means that
                             they should act both as a voice for the entrepreneurs, putting
                             forward their points of view, anda vehicle for collectively
                             organizing discussion of entrepreneurs’ interests and preferred
                             economic strategies.

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               78
                           - Communication and the provision of services. Another function
                             that can be carried out by business associations is to act as a
                             conduit of information and a provider of collective services.
                             Small-firm associations can be important means of
                             communicating with large numbers of small firms, especially
                             when they are spread all-over the country. This is important for
                             intermediate institutions trying to spread information on
                             technology, finance and training opportunities, and for those
                             trying to mobilize collaborative networking programs.

                           - The creation of a social consensus. There is a fourth function that
                             business associations can perform to strengthen the Syrian textile
                             and clothing industry. They can participate, along with the other
                             social partners, in the creation of a social consensus, engage in the
                             collective settlement of wages and conditions of work, and
                             become involved through various networking activities in a range
                             of broad economic and social development issues. By dealing
                             with legitimate spokesmen for large numbers of entrepreneurs,
                             various government and other institutions can take initiatives in
                             the knowledge of support from a significant section of the
                             community, thereby facilitating and important capacity for
                             adaptation and change.

                           Enriching the range of services provided to textile/clothing firms.
                           Current and prospect business associations operating in the Syrian
                           textile and clothing industry should go beyond the simple
                           representation of interests and increasingly cope with other two main
                           activities: the provision of services and the promotion of economic
                           policies.

                           - The representation of interests. It is the core activity of any
                             entrepreneurial business association and the reason of its creation.
                             This function is expressed by a lot of activities, though it is
                             possible to identify three basic dimensions of it. First, the
                             identification of interests that is the distinctive feature of business
                             associations. It is a political process, which leads to define
                             association domain on the one side, and competitors and potential
                             supporters on the other. The identity represents the main resource
                             of the association, but needs to be continuously reinforced with
                             associative interests, socially recognized and legitimated. Second,
                             the search for legitimization that is the other side of the
                             representation of interests. It develops through various
                             opportunities and activities and does not have to be considered
                             obviousobvious, just because of its continuous change. In fact, if
                             it is true that a precise and well-positioned identity makes the
                             legitimization easier, as a consequence a legitimated association
                             can reinforce its identity, increase its applications and gain more
                             resources. Third, the obtainment of favorable conditions, i.e. once
                             the interests have been defined and the legitimization to act has


IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                 79
                              been obtained, the associations try to gain from the social
                              interlocutors the best conditions and benefits for their members.

                           - The provision of services. Business associations may be involved
                             in a series of service-oriented activities, such as the consultancy
                             on fiscal issues, human resource management, accounting, etc.
                             which might be classified as provision of administrative services.
                             In general, it is possible to distinguish among: union services
                             (connected with the agency ,area, are offered directly by the
                             association and comprehend retirement ,dossiers, the lay-off
                             requests, and so onon); basic business services (such as
                             accounting, administration of fiscal files, fulfillments connected
                             with wages and salaries and custom duties procedures);
                             managerial services (some associations may offer managerial
                             services too, such as the selection and training of the personnel,
                             marketing projects, the support in the access to credit, corporate
                             consulting, etc.). Such services may reinforce the link between
                             members and the association, attract new associates and generate
                             important financial resources. Some services may be offered
                             atpolitical prices since they are financed by resources owned by
                             the association; others may be offered by the association at
                             market prices.

                           - The promotion of economic policies. The provision of a web
                             portal for business-to-business interactions, the realization of
                             inter-associative agreements and consortia among members, the
                             promotion of exporting activities and the establishment of
                             exporters unions, the support in the choice of the best
                             internationalization form (shipping company, trading company,
                             piggy-back forms, direct agents, foreign buyers, etc.), the
                             organization of industry fairs or the attraction of FDIs in a
                             specific geographical area are all examples of activities, which go
                             beyond the representation of interests or the provision of simple
                             services (as they do not provide specific rewards payment, neither
                             are directed to members as such but constitute in general public
                             goods). Other important services could be: the development of
                             services which support the management of environmental
                             problems, the supply of iveinformative resources for the
                             enterprise, the start of studies on national and international market
                             dynamics of specific categories of enterprises, the support of links
                             with foreign enterprises, etc. The supply of services and the
                             promotion of economic policies may take the form of offering
                             internal services or creating proper service structures (service
                             centers, consortia, shared facilities, common utility plants, etc.).
                             Policies sustained at the local level by business associations must
                             overcome, in this wayway, a range of hindrances of the Syrian
                             textile and clothing industry, including: financial fragility
                             amongst small companies which typically rely on self-financing
                             and short-term bank loans; weak connections between small firms
                             and the world of research and development; inadequately trained
                             staff, especially in respect of higher technical and managerial

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               80
                                  skills; a lack of support            organizations   for   assisting
                                  internationalization processes.

            Actions

                            To promote the consolidation and the diffusion of these associative
                             forms throughout the country, especially in all those areas, industrial
                             zones or prospect clusters where the textile/clothing industry may
                             agglomerate. This should be done even along the industry value chain
                             promoting aggregation of firms performing similar production phases,
                             hence facing similar challenges, as well as of firms dealing with
                             similar products or fibers.
                            To enhance existing business associations and support the creation of
                             new ones. Business associations do have a positive effect on industry
                             competitiveness whether pervasively and extensively distributed
                             across the country and along the entire textile/clothing business value
                             chain.
                            To conceive business associations more as centers with high value
                             added services, allowing especially small firms to do business that
                             otherwise would not be able to do.
                            To benchmark with other textile business associations all over the
                             world to grasp best practices and organizational models that fit best
                             the growth of the textile/clothing industry.
                            To combine a renovated representation of interests (lobbying, tutelage
                             and promotion) not with the provision of innovative services but also
                             with the active promotion of economic policies.

            Actors           Here the main responsibility is of the ISB who should relate with all
                             existing associations, with the Chambers and with nascent interest
                             groups along the textile filiére.

            Risks            The risk of not investing on business associations is that the social
                             glue that the textile/clothing industry deserves may become weaker
                             and weaker, halting as a ‘domino effect’ several other strategic
                             interventions that require coordination and cohesiveness in the
                             industry.

            Time span        Short term.


6.6. Micro-level strategies

Strategies proposed at the micro-level are directed towards suggesting paths for the
strengthening of the competitiveness of textile/clothing companies, both private and state-
owned. Micro-level interventions are aimed at generating added value through restructuring the
manufacturing base of the Syrian textile industry, repositioning both in terms of geographical
markets and segments, focusing on specific products and niches and engaging in corporate
transformations to raise efficiency, modernization and competitiveness.
The priority needs of Syrian companies are:

-   improving productivity and efficiency;

    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               81
-   promoting growth and management development;
-   cost control;
-   waste reduction;
-   upgrading technical, administrative and marketing skills;
-   setting up effective production systems, storage and accounting systems;
-   banking system and corporate finance development;
-   continuous product and process innovation;
-   Environmental issues and product certification.

    6.6.1. Strategy 12       Restructuring textile/clothing private and state-owned firms

            Goal             Reorganizing both private and state-owned firms operating in the
                             textile/clothing industry to become more competitive, efficient and
                             updated in order to better match the economic competitive reality of
                             the recent timestimes.

            Scenario         The Syrian textile/clothing industry is increasingly exposed to
                             international competitors and gradually open to foreign products. OOn
                             the medium or long term, the WTO and other trade agreement would
                             increase competition on local market. Imports of garments are allowed
                             now and are already affecting the sales of many small manufacturers.
                             Syrian clothing manufacturers are also affected by the competition
                             from low-cost foreign manufacturers. The price of production factors
                             in Syria, which were kept quite low for many years by government
                             policy, have recently been strongly increased, escauses a sudden
                             reduction of thethe companies gross margins which cannot be
                             transferred to their prices, because of the open market. Despite this,
                             the Syrian industry can still leverage important competitive factors
                             including the availability of good raw material (cotton), the proximity
                             with high-value markets and the flexibility given by its small scale.
                             These strengths should represent the basis for restructuring the
                             manufacturing base so to raise the industry competitiveness.

            Challenges       As a matter of factfact, the international competitiveness of the Syrian
                             textile and clothing industry is grounded on the capacity of large state-
                             owned companies and private entrepreneurs, mainly SMEs, to adapt
                             their products to foreign market requirements and to meet increasing
                             domestic demand for quality and diversity. This poses several
                             challenges.

                             Firms A comprehensive program for cooperation between private and
                             public. The concurrent presence of the state in parallel with market
                             forces calls for a clear definition of the responsibilities and
                             interrelation between the private sector and the public sector that
                             should engage in a comprehensive program for cooperation. On one
                             hand, the private sector should be well aware of its role by having a
                             clear and long-term vision that inspires trust to investors and
                             underlines the fact that the private sector should assume the main
                             responsibility in the development and strengthening of the industry
                             competitiveness on local and global markets. On the other hand, the
                             public sector should focus on establishing production plants of vital

    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               82
                         importance for the economy, which the private sector cannot handle
                         due to big investment volumes or long capital recovery periods. This
                         is, for instance, the case of the production of high quality cotton yarns.
                         The main aspect of the interrelation between the two sectors should be
                         ‘integration’. This calls for a close cooperation in many production
                         and service project along the value chain.

                         Fortify private companies. Private textile and clothing companies in
                         Syria are believed to be about 24.000, even if there are no official and
                         shared data. As a matter of factfact, details of the number of
                         companies, their installed capacities, the technology levels, the actual
                         production, employment levels, export and domestic market sales, etc.
                         are not documented. Most private sector companies are very small-
                         sized and owner managed with a prevalence of family firms. In some
                         cases, the concurrent presence of these characteristics configures
                         craftsmanship companies, dominated by the entrepreneurial spirit of
                         their owners, but without defined strategies and proper resources that
                         would allow each companyto grow successfully in serving local and
                         export markets. Moreover, most of the companies are relatively young
                         and they usually focus on a single phase in the textile chain and
                         depend on other companies further up the supply chain for their raw
                         materials and down the chain for their markets. There is no universal
                         strategy applicable to every company, but due to the presence of
                         similar features in all Syrian private textile companies and the
                         common external environment, some strategic recommendations are
                         suitable to the vast majority of them. Specifically, in order to
                         restructure the manufacturing base of the Syrian textile industry to
                         become the engine to drive the national economy, remaining dynamic
                         and flexible as only micro- small-sized family firms can be, but
                         stronger and more prepared in dealing with global competitors, some
                         strategic interventions aresuggested.

                         Organizational and strategic renewal of state-owned companies. For
                         the textile/clothing public companies the strategy should be different
                         from the private ones. First of all, state-owned textile companies are
                         just 27 as opposed to private ones. The state-owned mills –
                         coordinated by GOTI – have beenmodernized in part only and
                         continue to operate under strict management control by the
                         Government. In addition, the GOTI mills have made very limited
                         modernization investments in recent years of machines of the most
                         appropriate technologies. Technical management skills, especially in
                         dyeing, printing and finishing, are weak so that even whereas
                         machines are new and updated they do not work properly.
                         Many GOTI mills cannot compete effectively in the challenging
                         export markets as their production costs are too high and their product
                         quality is too low. The business culture of these companies has hardly
                         changed since mills were expected to produce commodity products
                         forcentrally planned yeconomy countries. This culture does not match
                         the needs of current dynamic and challenging export markets. The
                         number of employees is too high, so that labor productivity is partly
                         low and conversion costs are too high. The cause of low productivity

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                83
                         is partly the decline in orders but particularly due to managements’
                         limited capabilities and excess stock levelslevels. This is certainly one
                         of the most sensitive issues to address within the scope of
                         restructuring state-owned firms. That means that to be as productive
                         and competitive as private sector firms (in terms of personnel costs),
                         state-owned companies must, on average, reduce their employment.
                         Maintaining such a huge surplus within the state-owned firms would
                         be a major weakness that would almost certainly prevent a genuine
                         competitive reform. Moreover, wages are set by the Government
                         without due regard to the ability of the industry to pay the increases.
                         The mills do not have a good reputation in the markets for honoring
                         delivery schedules and quality. The GOTI mills are extremely weak in
                         marketing, consequently they do not have the skills to find alternative
                         markets and products if one or more market or customer is lost.
                         GOTI mills have fallen so far behind in terms of restructuring that it is
                         now almost impossible to catch up with the world’s industry. Hence,
                         the evaluation of the 27 GOTI mills should be started together with an
                         evaluation of GOTI itself. In the meanwhile, GOTI mills need re-
                         centering of activities and resizing around the basic specializations.
                         They should specialize in products and markets in which they have
                         specific expertise. It requires tough measures, including giving up
                         certain assets connected with marginal or unfavorable activities, the
                         abandoning of some units unnecessary for the functioning of the
                         enterprise, or the possible closure of unprofitable subsidiary branches,
                         workshops or production units. Moreover, GOTI mills are
                         morefactories or even production units rather than real companies.
                         The present unit managers (named company managers) are in fact
                         closer to production managers. The units are too small to afford
                         strategic and operational competenciescompetencies. Several units
                         that manufacture similar products and serve similar markets are
                         operating independently. Their coordination and synergies can be
                         managed through GOTI but this requires major restructuring to regain
                         cyefficiency.
                         Finally, the management of the 27 GOTI mills is constrained and not
                         free to decide about procurements of raw material, spare parts,
                         technology, participation to fairs and workshops and so on. Key
                         decisions are often made by the government. They often take a long
                         time because of bureaucracy and may not reflect the real needs of the
                         companies. Government policy to manage the companies centrally
                         does not allow the companies to be efficiently run and to be cost
                         effective. Moreover, senior management teams are Government
                         appointees who may not have the needed textile or business
                         experience required. Such management structures that do not have the
                         authority or responsibility to respond quickly enough to enable them
                         to operate efficiently in the export markets.

        Actions (for private firms)




IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               84
                                  To promote firms’ growth24, in order better face the challenges offered
                                   by the new competitive landscape and to comply with the
                                   opportunities offered by international markets.
                                  To couple firms’ growth (in quantitative terms) with firms’
                                   development (in qualitative terms), i.e. the development of managerial
                                   expertise and tools that in most private textile firms are still missing.
                                   The availability of resources – finance first – and competencies –
                                   managerial practices – are urgently needed to implement upgrading
                                   plans intended for growth. This implies interventions on two levels:

                                         o Micro- and small-sized firms should be trained and receive
                                           consultancy on the opportunities of and on the mechanisms for
                                           growth;
                                         o Firms’ growth requires concrete financial support both in terms
                                           of access to credit and equity injections.

                                  To start a comprehensive family firms assistance program both in
                                   terms of consultancy and training, in order to deal with those strategic
                                   issues related to the overlapping of family ownership, governance and
                                   management and to facilitate family succession plans.
                                  To encourage rather than discourage competition25 within the industry,
                                   in order to promote continuous benchmarking and upgrading amongst
                                   private firms.

                 Actions (for state-owned firms)

                                  To engage in a comprehensive assessment of viability of and future
                                   options for textile/clothing state-owned firms, in line with the
                                   industrial strategy developed and adopted by the government.
                                  To assist textile/clothing state-owned firms in the process of
                                   corporatization, that should also consolidate state-owned firms among
                                   them.
                                  To deal with over-staffing and inefficiency in order to increase
                                   profitability and viability.
                                  To rethink the management and the managerial procedures of state-
                                   owned textile firms.
                                  To develop and implement policy options for addressing labor and
                                   social issues related corporatization, reorganization and reduction of
                                   inefficiency.

                 Actors            The restructuring of private firms should be properly supported by
                                   meso-level institutions, such as banks, private equity funds, real
                                   services and consultancy providers as well as by training institutions,

24
    Syrian textile companies are largely micro sized, despite guaranteeing flexibility and craftsmanship production, s the
attraction of significant foreign partners, FDIs and clients. What is recommended is that the manufacturing base of the
Syrian textile industry shifts from being composed by micro- and small-sized firms to small- and medium-sized firms,
maintaining the advantages related to small scale, but at the same time capturing the opportunities offered by global
markets. Ideally the growth of these companies should be in conjunction with foreign investors that will bring market,
product and technical know-how as well as finance, to enable the businesses to grow most quickly.
25
    The Syrian textile and clothing industry, which has been extensively characterized by protectionism and dominated
by state-owned firms would benefit much from a fair firm rivalry.

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                              85
                         under the supervision of the ISB, the expert support of UMU, the
                         Chamber of Industry and the consultative role of MoI.
                         The responsibility for the strategic actions suggested for state-owned
                         firms pertains to the MoI, together with GOTI and with the external
                         support and consultancy of the ISB.
                         UNIDO and EU can support both renewal processes during
                         assessments and interventions with iescompetencies, consultants and
                         models.

        Risks            Not complying with the restructuring here suggested would leave
                         private sector firms in a weak and fragile position against foreign
                         competitors and prevent the attraction of FDIs. Likewise, the risk of
                         not going along the drastic organizational and strategic renewal of
                         state-owned textile mills may let them fall even arfar behind global
                         industry standards, negatively affecting the national economy and
                         damaging the main comparative advantage of the Syrian textile and
                         clothing industry, i.e. the availability of high quality cotton.

        Time span        id termMid .


6.6.2. Strategy 13: Prioritizing geographical textile/clothing markets to target

        Goal             To identify and invest in attractive and sustainable foreign markets for
                         the Syrian textile/clothing industry productions.

        Scenario         Since the early 1960’s, the Syrian economic policies focused on the
                         local market, or on the so-called ‘import substitute’. This was handled
                         behind high protectionist walls for consumer goods rather than for
                         intermediate and capital goods, which did not lead tobalance and
                         sustainable economic growth. This has prevented from massive
                         exports andkept Syria out of the global competition for a while.
                         During this period, the Asian Tigers (new and older ones) have
                         realized good achievements,achievementsachievementin terms of high
                         growth rates and balanced and sustainable development, by adopting
                         export-oriented policies and gradual trade liberalization. Export is
                         now urgent for the Syrian textile and clothing industry and its
                         promotion is crucial for the Syrian economy. Thanks to the activity of
                         the STGEA, some Syrian productions are already distributed abroad
                         and there are some excellent examples of firms, which master
                         international markets. The largest export market for Syria is the Arab
                         region that represents over 50% of total export (AFTI, 2008).

        Challenges
                         Identify and conquer target markets. Despite the recent export
                         orientation of the Syrian textile/clothing firms, thepresence on
                         international markets is scanty and most of all limited to export. A
                         crucial decision is where to internationalize,, which markets to target.
                         Syria must leverage its legacy from the past and its worthy cotton
                         resources to maintain its key role in the Syrian economy,
                         strengthening its performance both on local markets – which are still

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              86
                         underdeveloped compared to other countries and deserve major
                         changes now that the industry is open to foreign competitors – and
                         ternational markets – where Syria export is still in its infancy. Priority
                         market should be the near Arab region, Turkey, Russia and the EU-27.

                         -    The near Arab region is a priority target, first because free trade
                              agreements are already operating (e.g. GAFTA) and second
                              because Syria may benefit fromcultural and geographical
                              proximities as well as from the role played by the Arab
                              Federation of Textile Industries, that tights together
                              manufacturers and buyers.
                         -    Turkey is another important target first because of the gradual
                              liberalization of trade(accordingaccording to the recent bi-lateral
                              agreement) and second because of theeflourishing economy of
                              that country.
                         -    Another priority market should be Russia, both for historical
                              connections andfor the fact that is one of the few growing markets
                              for textile and clothing even in times of crisis in the world.
                         -    Finally, Syrian textile and clothing manufacturers should also
                              address the markets of EU-27, where newly added countries are
                              growing and they are easier markets to address compared to the
                              historical members of EU. Nevertheless, targeting European
                              markets requires a major upgrading of firms that have to comply
                              with more sophisticated key success factors, such as high quality
                              standards, certifications, quick response, very short time-to-
                              market, reputation and proven expertise.

                         In conclusion, firms should realize an efficient internal/external
                         balance by continuingsatisfying the local market needs and promoting
                         exports to priority foreign markets.

        Actions

                        To engage into in-depth market studies of priority targets (Arab
                         Region, Turkey, Russia, EU-27), highlighting:

                              o   Market structure
                              o   Market trends
                              o   Key success factors
                              o   Value chain dynamics
                              o   Competitive forces
                              o   Market entry strategies

                        To leverage cultural and geographical proximity as well as free trade
                         agreements in order to export to the Arab Region. It is within the
                         scope of the Arab Federation of Textile Industries to provide
                         information on these markets and ease the way for exportations among
                         the countries of that area.
                        To take advantage of the proximity of Turkey and the existent bi-
                         lateral agreement to address it as a destination market. This is much
                         importantsince so far the Syrian market has been radically “invaded”

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                87
                         by Turkish textile/clothing products whilst Syria sells to Turkey
                         almost exclusively raw materials, with poor added value.
                        To exploit historical linkages with Russia in order to transform it in a
                         destination market for textile/clothing products. Russia has always
                         been a crucialpartner for the Syrian economy and it is one of the
                         fewest countries with a growing textile/clothing market despite the
                         global crisis and the maturity of the industry.
                        To explore EU-27 countries, with a specific focus on newly added
                         members, that havetextile/clothing markets in expansion, easier
                         market needs and less saturation. This can be achievedleveraging the
                         experience of those pioneer Syrian firms that already have market
                         connections with Europe and can benefit from transferring their
                         experience to SEUs and STGEA in order to reinforce the bargaining
                         power.

        Actors           This strategy can be performed by textile/clothing firms with the
                         support and coordination of STGEA and the newly created SEUs.
                         Crucial is also the support of EDPC and EDF, the Chambers of
                         Commerce and Industry and UMU, under the supervision of the ISB.
                         The MoET and the MoI can have a consultative role, guiding micro-
                         level strategies with macro-level interventions.

        Risks            Not complying with this strategic intervention would leave firms
                         wasteresources and time on blurred market targetswithout a cohesive
                         and coordinated penetration on a few selected target markets.

        Time span        Short term.


6.6.3. Strategy 14: Focusing on key strategic textile/clothing products

        Goal             In order to deal with global competition and penetrate both the home
                         market and foreign target markets, there is need to focus resources on
                         key strategic products, which can become the flagships of the Syrian
                         textile/clothing industry in the world.

        Scenario         The textile and clothing industry comprises two main segments:
                         cotton textile and clothing and synthetic textiles and garments.

                         -    As far as the synthetic fiber industry is concerned Syria currently
                              imports around 120,000 tons of blended yarn, including polyester
                              and viscose rayon. There are good prospects of expanding local
                              production, but the industry is very capital-intensive and has large
                              minimum efficient scales. Competitors in the region and Asia are
                              investing massively in synthetic fiber facilities, and careful
                              feasibility studies are needed before large resources are
                              committed to new plants. It may be possible to attract private
                              (local and foreign) investors if raw materials are available at
                              world market prices. Nevertheless this cannot be considered as a
                              strategic priority for the Syrian textile and clothing industry.
                         -    Cotton should have strategic priority in this sector due to its

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               88
                              comparative privileges, both in the form oftextiles and garments.
                              Several SMEs are involved in intermediate phases of the value
                              chain, such as dyeing, finishing, weaving, knitting, flat-knitting,
                              circular knitting, etc. Some others are specialized in garment
                              production. As far as final cotton-based garments are concerned,
                              Syrian manufacturers are active on several different product
                              segments, such as curtains, upholstery, terry towels, denim and
                              jeans, children clothing, menswear, pajamas, underwear and
                              seamless underwear, lingerie, sportswear, casual wear, t-shirts,
                              socks, sweaters, uniforms, shirts, jackets, etc.

        Challenges       The wide variety of textile and garment productions that the Syrian
                         textile/clothing industry can offer is an extraordinary expression of the
                         entrepreneurial vitality of the industry, but it may even de-focus the
                         Syrian image on local and global markets. WhatSyrian textile/clothing
                         industry is known for? Which are the flagship products of its industry?
                         Which will begin the next future? Hereafter, there is a proposal for
                         investing on a few specific industries that for several reasons may play
                         the role of flagships on global markets. There is no doubt that industry
                         segments like uniforms production have a market and an interesting
                         potential for instance inJordan, Lebanon, Morocco, etc. or that men-
                         shirts productions have a strong local market and tradition.
                         Nevertheless, they have also a strong rivalry from other Arab
                         countries (as shown in Appendix 1). This does not mean to dismantle
                         or defocus from all these textile/clothing productions butto suggest a
                         few priorities to focus on in the 11th FYP.

                         Identifying breakthrough products where the Syrian textile/clothing
                         industry can have a significant role in global markets. Priorities
                         should be set in order to affirm the Syrian ‘brand’, in association with
                         specific products that could become internationally-recognized
                         Excellencies Eon the middle-long term. Hereafter the choice made
                         suggests three main segments: lingerie and underwear, home textile,
                         technical textile.

                         -    First of all, the segment of lingerie and underwear is a promising
                              one for Syria, since many companies are involved in the
                              production of this kind of products (shirts, shorts, underwear and
                              seamless underwear, sophisticated lingerie, socks, pajamas, etc.)
                              and they are performing well on national and even international
                              markets. On the Arab scene, Syria does not have strong
                              competitors in this industry segment and can construct its
                              specialization. In some specific cases the quality of finishing of
                              some Syrian lingerie matches the one of top market players from
                              France or Italy and can have a role in boutique and selective
                              distribution. Of course, many others produce simple and basic
                              underwear products that are more suitable for mass-market
                              distribution and global retailing brands.
                         -    Another important segment of the Syrian textile and clothing
                              industry is home textile (curtains, upholstery, terry towels,
                              bedclothes, sheets, tablecloth, napkins, furniture covers, etc.),

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               89
                                      which originates from an ancient Syrian tradition. This is the
                                      essence of the Syrian textile manufacturing and its main flagship
                                      product internationally. Unfortunately in many cases image and
                                      reputation do not match with reality, since despite the national
                                      stereotype still the home textile segment is very artisan-based and
                                      would deserve major upgrading to reconcile with its global image.
                                      Moreover, this segment is suffering much from the global crisis in
                                      the industry and only top segment markets survive. Nevertheless,
                                      this segment should be considered as a main asset of the Syrian
                                      textile and clothing industry.
                                 -    Finally, another priority segment firms should invest onon is the
                                      one of the so-called technical textiles. Besides the garment sector
                                      and following the trend of most of the industrialized countries
                                      also Syria needs to develop technical textile. This product
                                      segment includes a large variety of products addressed to
                                      different fields of application as the medical and sanitary products
                                      (prosthesis, special bandage, filters, absorption bands and
                                      textiles), mechanical (machine parts), packaging (food container),
                                      agriculture (crop protection nets and soil covers), building
                                      (isolation materials or noise protection barriers), and transport
                                      composites as substitution of iron-made parts. On the worldwide
                                      scale, technical textile represents the 30% of the fibers
                                      consumption versus the 70% used for the garments production.
                                      Since the technical textile products are selected and adopted for
                                      their performances they need to be qualified accurately by testing
                                      their technical characteristics and parameters. In this view the
                                      establishment of a high-qualified textile testing laboratory and the
                                      activation of an industry-wide innovation policy may represent
                                      useful investments for the further and diversified development of
                                      this strategic segment. Of course firms cannot wait until local
                                      R&D will start and spread innovations all over the industry. There
                                      is the urgent needthat

                                 Leveraging the comparative advantage in cotton fibers, yarns and
                                 textile production. Cotton fibers, yarns and textiles are a key priority
                                 in the industry26. Up till 2001, Syria used to produce one million tons
                                 per year. However, this has been reduced to 618,000 tons for many
                                 reasons (high water consumption, international prices decline etc.).
                                 This gives about 212,000 tons of ginning cotton production (cotton
                                 fibers), of which 167,000 tons are for local GOTI mills with about
                                 45,000 tons being exported27. The level of coordination at the level of
                                 cotton production and ginning is very high (given the government
                                 policy to plan cotton production according to the needs of ginning and
                                 yarning plants). However, such coordination is lacking in the further
                                 stages of textile production where great added value is made.
                                 Strategically speaking, priority should be granted to cotton textile
                                 industry which requires strivingto complete the entire value chain,

26
   Data presented in this section have been collected by UMU in 2009 basing on GOTI and MoI sources.
27
   Data taken from “The current situation of the Arab Textile Industry”, prepared by the Arab Federation of Textile
Industries (2009).

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                        90
                         since the cost of raw cotton increases from 100 to 160 for spinned
                         cotton and 600 for weaved cotton and 900 to cotton garment and
                         finally to 1300 for the high quality and complicated garments. Lack of
                         coordination along the value chain is also due to the fact that
                         production plants cannot absorb allcotton yarns produced locally.
                         Cotton ginning and yarning industries in Syria have always been a
                         government monopoly. The private sector was permitted few years
                         ago to produce cotton yarns in integrated spinning-weaving-
                         processing plants or for export purposes only. This produced about
                         35.000 tons, according to available data, but due to poor industry
                         intelligence systems and the wide diffusion of tax evasion this figure
                         can even be the double. Private enterprises were permitted to sell their
                         production in the local market in September 2008. Syrian spinning
                         facilities produce about 111,000 tons including the production of the
                         integrated units within textile factories, even if the theoretical installed
                         capacity of the public sector is about 160,000 tons. Local private and
                         public plants consume only one third of this quantity, which means
                         that the rest must be exported and that private firms prefer to buy
                         ginned cotton from agents, intermediaries and other private sector
                         actors instead of relying onpublic sector mills. This occurs mainly
                         because of the difficulties connected with buying cotton from GOTI
                         mills, such as the submission of applications to the Ministry, the long
                         process of checking available production, the need to pay cotton in
                         advance, the high taxes to be paid and so on. These difficulties
                         discourage many private sector firms that are unable to deal with this
                         level of bureaucracy or do not have sufficient financial resources or
                         guarantees and prefer to by-pass the process using agents and
                         intermediaries. On the other side GOTI mills that are unable to sell
                         their productions may face real stock problems.
                         The best solution in this regard is to avoid exporting ginned cotton and
                         cotton yarns with minimum local added value, and to proceed on the
                         manufacturing cycle (spinning, weaving, cutting, sewing etc.)so as to
                         create the highest added value for the national economy, as is the case
                         in Turkey.
                         A related industry, which dramatically conditions the quality and the
                         quantity of cotton yarn production, is the production of raw cotton by
                         farmers.

        Actions

                        To pay attention and priorityty efforts tothe quality and the
                         consistency of the lingerie/underwear segment so that it can be
                         strengthened and promoted on national and international markets.
                        To start entering international markets for underwear and lingerie as
                         subcontractors of foreign manufacturers orretailers, in order to learn
                         and evolve towards strategic partners first and autonomous Syrian
                         brands later.
                        Toput priority efforts in the home textile segment, in order to upgrade,
                         modernize and reposition firms on high-quality high-pricess segments
                         where the Syrian origin should be the major competitive advantage,
                         both in terms of raw materials and quality of the finishing.

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                        To support the growth and managerialization of Syrian home textile
                         producers, whose reputation and image is high but still too much
                         artisan-oriented.
                        To expand the production of industrial textile products such as
                         insulation materials, filters and resistant garments.
                        To encourage meso-level institutions, such as clusters, industrial zones
                         or real service providers, to enter international circuits of innovation
                         and favor the diffusion of technical textile productions in the Syrian
                         industry as well.
                        To immediately prepare a diagnostic study of GOTI and its 27 mills,
                         with a special focus on the 7 cotton yarn producers, especially after
                         the private sector was allowed to engage in this activity.
                        To prepare – after the assessment – a comprehensive modernization
                         plan for GOTI mills to address the challenges they face. This should
                         be aimedat providing high quality well-priced cotton yarns with
                         reduced bureaucratic impediments and simplified purchasing
                         procedures.
                        To encourage the private sector to manufacture the available ginned
                         cotton into yarns provided it is offered with good quality, at
                         competitive prices andwith simpler procedures. Each component of
                         the industry value chain should focus on its core competencies and
                         vocations:

                              o Public sector firms may focus on the production of good
                                quality cotton at convenient prices (at least international
                                market prices and not more!);
                              o Private sector companies may engage in all the subsequent
                                phases of production where they are already performing better
                                than state-owned mills and where they can fruitfully
                                complement the public sector for the overall performance of
                                the industry.

                        To continue replacing urgently the old ginning facilities based on
                         economic feasibility studies, with a focus on quality and product
                         consistency.
                        To reduce costs in public factories and improve the yarn quality in
                         order to face new competition.
                        To provide incentives for establishing new enterprises born to utilize
                         all local cotton and cotton yarn production
                        To stop exporting cotton and cotton yarn, because this favor rival
                         countries, weakens the Syrian comparative advantage and impedes the
                         delivery of higher value-added products on foreign markets.
                        To promote the establishment of private weaving and knitting
                         factories using cotton or blended yarn with a special focus on printing,
                         dying and finishing that are still an important weakness in our
                         industry.
                        To support (organizationally or financially) the purchasing of cotton
                         by private firms and/or by cluster-forms of aggregations, unions,
                         consortia or associations. These latter may act as collective actors in
                         dealing with the purchasing process from state-owned mills, helping
                         the simplification of procedures for private firms, especially SMEs
IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              92
                         that will be de-incentivized in buying from agents.
                        To encourage the use of modern irrigation techniques in raw cotton
                         farming. The government can do this through subsidizing the costs.
                        To restrict cotton farming land tocorrespond to the local ginned cotton
                         and cotton yarns and to review this in light of adapting new irrigation
                         techniques.
                        To expand cotton related research (farming and irrigation) and
                         introduce incentives to researchers and research centers, since the
                         quality and innovation in fibers depends also upon the quality and
                         innovation in raw cotton.
                        To collect and transport cotton crops professionally and to assure
                         cotton is kept clean. This should be done to make the ginning process
                         easier and more efficient.
                        To identify fair cotton prices as to be responsive to the farmers actual
                         cost. To this regard, efforts and incentives should be given to foster
                         the production of organic and colored cotton.

        Actors           The main responsibility for focusing on key strategic product
                         segments pertains to firms, even if they deserve support by meso-level
                         institutions infine-tuning their strategies and productions and UMU
                         can play a role in this. The ISB may supervise, guide and coordinate
                         actions.The main responsibility for revising the cotton industry filière
                         pertains to GOTI under the strict supervision of the ISB and the
                         support of the MoI.

        Risks            Not complying with the strategy of prioritizing key products to focus
                         on may imply a blurred positioning of the Syrian textile and clothing
                         industry on national and international markets and the missed
                         opportunity to affirm national stereotypes and flagship productions
                         that may act as a locomotive for the development of the entire
                         industry. Likewise, not complying with the strategy of revising the
                         cotton filière might mean losing competitiveness as a national system,
                         destroy Syriann main comparative advantage and favor the export of
                         the Syrian cottonfor foreign competitors.

        Time span        Mid term


6.6.4. Strategy 15: Upgradingmanagement practices of textile/clothing firms

        Goal             Suggesting several strategic actions, including corporate and business
                         transformations, that firms should implement to upgrade their business
                         models.

        Scenario         The most important effects of the global competition can be
                         summarized in rapid and continuous changes in the markets, high
                         turbulence in technology and fast changes in the customer's needs.
                         The major effect is the shortening of the life cycle of the products and
                         the increased complexityincreasedy to be developed. The new
                         contextrequires therefore to changethe traditional product-market-
                         technology strategic development and to capitalize on firms’ core

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              93
                         competencies. Therefore, successful strategies should be based on
                         investing in the specific excellencies of the companies, to look into the
                         market needs perspectives and to serve the emerging new customers
                         groups supplying innovative products or services.

        Challenges

                         Continuous product upgrading. There is a gap between fashion design
                         level in Syria and international demand. This gap can be reduced by
                         participating to international exhibitions. Developing textile industry
                         should start from developing design and innovation in Syria, since
                         Syria suffers from the lack of fashion designers. The development
                         should start from the existing designers by connecting between
                         fashion designers association and similar associations in Europe as
                         well asdependingon some foreign experiences. For the achievement of
                         these strategic goals, the Syrian textile industry is requested to move
                         from a strategy of cost leadership to a strategy of differentiation. Low
                         labor and production costs are not sufficient to sustain a cost
                         leadership strategy in the current global textile and clothing industry,
                         where Asian firms dominate. Hence, it is preferably to leverage local
                         tradition and competencies and aim at a differentiation strategy.y This
                         should be coupled with continuous product upgrading (product design,
                         quality and marketing mix). This means to shift the business approach
                         from production-oriented to market-oriented. Investments in
                         marketing and product development, such as fashion colors, design,
                         embroidery, etc; diversification of the product mix adding higher
                         value products; offering top quality (in fabric, assembling and
                         finishing) with reduced second grades are required interventions along
                         this line, even if they are all tremendously ambitious and will require
                         coordinated efforts and supports by meso-level institutions. Product
                         innovation and process reengineering will be crucial and firms should
                         rely on an industry-wide innovation policy and cluster-based R&D.
                         Unfortunately firms cannot wait for Greenfield R&D policies to
                         become competitive. Thus, meso-level institutions – clusters and
                         industrial zones in particular – should supplement firms on this side,
                         giving them access to existing technologies and innovations on the
                         market. Upgrading plans should include also tangibles investments,
                         aimed at overcoming some weaknesses of the companies, mostly in
                         the production process, and allowing them to implement the required
                         strategic actions.

                         Control of the value chain. There is the need to favor value chain
                         interrelations and synergies in the form of alliances and integration
                         among private companies, between private and state-owned
                         companies and along the cotton value chain (from farms to final
                         garments distribution). Total potential of added-value comprised in
                         the entire value chain that includes design, weaving, dying, cutting
                         and sewing, finishing, packaging, marketing, communication &
                         advertising, logistics and distribution activities to reach the end
                         consumer should be exploited by Syrian firms. Obviously this
                         potential would never be available to a single operator. It must be

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               94
                         shared among numerous specialized, competent and competitive
                         operators. The development of activities along the value chain should
                         be encouraged and supported. The progressive control of the Syrian
                         textile value chain should be coupled with the establishment of
                         business relations with foreign partners. These relations may include
                         trade partnership, joint ventures, technology transfers, etc.

                         Control of production costs and efficiency. Most private companies
                         have a weak financial accounting system as well as theylack an
                         acceptable management accounting system. The reasons for this
                         situation are inherent to the company information systems in general,
                         and to the accounting function in particular. Further, there is an issue
                         related to the extensive tax evasion that prevents companies from
                         reliable and complete accounting systems. The overall information
                         system within the companies is very weak and therefore the
                         accounting function is not provided with sufficient data to produce
                         useful financial or management reports. The result is that often
                         production costs are not controlled and production efficiency is not
                         measured at all. Hence, firms should develop or improve cost-
                         accounting systems; improve financial accounting; introduce
                         management control procedures and learn pricing techniques. One
                         way to foster such major change in management practices is to start
                         with measuring production costs, since firms are sensitive to this issue
                         and then move to cost accounting and management accounting.

                         A significant upgrading in marketing, promotion and sales. Seldom
                         firms have a documented marketing strategy. The term marketing is
                         usually intended as sales promotion or advertising. This is
                         accompanied by a lack of market knowledge and shortage of qualified
                         staff to carry out market research. In state-owned firms, less than 1%
                         of staff works in marketing or sales. This explains why production in
                         public textile companies is not market-oriented. In general, there is
                         little knowledge about market needs. This leads to the holding of large
                         inventories and raises the costs of maintenance. Firms need huge
                         injections of marketing capabilities. Further, on the international side
                         they need to learn how to design international marketing strategies,
                         organize distribution and/or production in foreign countries or with
                         foreign partners and improve their language and negotiation skills. Of
                         course, single firms will hardly comply with this major upgrading in
                         marketing and communication skills and will need the support of
                         meso-level institutions. In summary, the priority for the enterprises
                         upgrading plan should be put on marketing. The companies’ strategy
                         and market position should be reviewedto identify the strategic
                         objectives and define the suitable marketing mixto achieve them.

                         Introducing efficient and modern production systems. For all
                         companies the production is the most effective functional area. This is
                         due to an inner characteristic of SMEs and in some cases to the
                         availability of good machinery and equipment, often purchased from
                         the best European suppliers. This is coupled with the availability of
                         good raw material (local cotton), and a sufficiently skilled labor force.

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                         However, several weaknesses are detected in most companies. Often
                         there is no production planning and companies work by batches,
                         following orders from clients. The planning system is all based on the
                         professional experience of the production managers. Frequently,
                         companies have no procedure, time measurement methods for
                         monitoring machines and labor efficiency, and thus no information
                         systemis used. In some cases the production facilities were installed
                         according to the company evolution, without prior engineering too
                         optimize the production flow of materials and processes, and to
                         minimize handling, movement and work in progress within the
                         factory. There are few available qualified employees able to utilize
                         new technologies effectively. Hence, productivity remains low even
                         when new equipment is put in place. Maintenance of machinery is
                         poor and irregular. Moreover, the domestic market for spare parts is
                         limited, making maintenance programs even more critical to
                         companies. The development of information systems in the companies
                         is very limited. ICT systems are limited to the accounting and, when
                         used in other departments (sales, warehouse), it is not integratedto the
                         accounting. In the production area, medium-size companies use ICT
                         for product design but not for production management. In general
                         terms the area of production needs major upgrading measures mostly
                         directed to intangibles (competencies, procedures, approaches) rather
                         than tangibles (machineries and equipments).

                         Increasing testing and quality control. Most companies have no
                         quality management systems, nor quality managers. Only few
                         companies have ISO certification despite some certifications (such as
                         ISO 9000, ISO 14000, OEKO-TEX, ECOLABEL, and SA 8000) are
                         highly demanded by international buyers and potential partners not as
                         key success factors but as pre-conditions for long-term partnerships.
                         As the Syrian textile companies are generally of small and medium
                         size, the majority of them do not have the very basic instruments to
                         make any kind of testingtesting. This is related either to the lack of
                         awareness of the importance of tests (since even the use of external
                         laboratories for testing is very poor) and to financial reasons. Labeling
                         is not controlled according to international standards, hampering
                         companies’ ability to export to Western countries. Firms should invest
                         in internal quality control systems and certifications to reach those
                         standards expected by international partners. Likewise, quality
                         standards should be coupled with traceability programs and cotton
                         quality seals,to enhance the international image and reputation of
                         Syrian manufacturers. This could be reached by firms individually or
                         collectively through testing and service centers as well as within
                         clusters and industrial zones.

                         Addressing environmental issues and policies. In order to cope with
                         international competition, Syrian textile and clothing firms should be
                         on the forefront of environmental technologies. This will contribute
                         not only to a correct development of the industry favoring ‘born
                         green’ firms, but also to its global positioning both in terms of market
                         reputation and production certifications. The main concern is the

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               96
                         treatment of waste water, even if there are many other phases touched
                         by environmental issuesissues. Sometimes, basic requirements are not
                         respected. Thus, it may happen that health and safety norms are not
                         observed. Buildings are not equipped with air conditioning, necessary
                         to avoid trash and floating yarns in the work spaces. Finally, special
                         attention should be devoted tofavor energy saving and energy
                         optimization plants, machineries and procedures.

        Actions

                        To overcome the gap in fashion design competencies.
                        To abandon cost based strategies and move towards differentiation
                         strategies.
                        To develop market-oriented, rather than technology-pushed, products.
                        To cluster around local textile/clothing service centers to benefit from
                         continuous innovations.
                        To engage in strategic alliances and networks along the
                         textile/clothing value chain in order to benefit from a total control of
                         the chain in terms of quality and quantity.
                        To introduce modern and reliable accounting systems in order to
                         measure production costs and control pricing.
                        To develop marketing competencies and capabilities that can allow
                         them to refine their marketing mix, understand market needs, segment
                         customers, monitor competition, plan trade and distribution strategies.
                        To exploit the support of meso-level service centers and consultant for
                         designing new international marketing strategies.
                        To introduce production planning systems, methods and softwares.
                        To      assuremaintenance      programs     and    spare      parts   for
                         machineriesmachineries.
                        To make an extensive use of ICT in all the departments of a firm.
                        To rely on service centers for product testing and certifications.
                        To comply with international quality control standards and labels.
                        To secure the required funding and technical expertise needed for
                         removing the environmental impacts of their operations and to
                         rationalize water and energy consumption and that of chemicals.
                        To avorfavor clustering of dyeing companies in an industrial area
                         supported with treatment units, offering them all advantages and
                         facilities for these companies to enable them to apply conditions
                         ofenvironment laws.

        Actors           Firms may move along this strategic line with the support of the ISB,
                         UMU the MoI, the Chambers of Commerce and Industry, business
                         associations, real service centers and consultants and training
                         institutions. Most of upgrading interventions would benefit much from
                         the external support of cluster-like forms of agglomeration and
                         networking.

        Risks            Not complying with a proper upgrading in management practices and
                         a re-focus on business strategies may seriously hamper the capability
                         of firms to remain competitive on local and international markets and

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                               97
                                to catch market opportunities.




7. Conclusions

This document has suggested an industrial strategy for the Syrian textile and clothing industry in the
light of the 11th FYP. This has been a challenging task, considering the complexity and interrelation
of issues and stakeholders involved as well as the need to contextualize policy suggestions at
several levels of analysis.

   7.1. Intended purposes

        The purpose was not to provide a detailed ‘blueprint for action’ but rather to provide a
        starting point for discussion, further analyses and implementation among all the actors
        involved in the competitiveness of the textile-clothing industry. In other words, this
        document was aimed at clarifying the strategic positioning of the Syrian textile and
        clothing industry in the next few years.
        To provide a ‘blueprint for action’ will be one of the first responsibilities of the future ISB,
        in association with those national and international experts and consultants that it will
        needneed. Programs and actions will follow with ease once strategic directions have been
        digested, discussed, shared and integrated in the policy frameworks of the Government.
        Moreover, detailed action plans call for the definition and re-definition of responsibilities,
        budgets, time-plans and resources to be mobilized. All these are beyond the scope of this
        document and it would be pointless to detail strategic interventions that will require further
        specific analyses, discussions and definition of roles. Further, strategy dimensions,
        transformed into programs and subsequently into actions, will then deserve a suitable
        monitoring, which may bring to further revisions of the strategy itself. Hence, for each one
        of the strategic directions suggested above this document indicated the main expected
        interventions (detailing the strategy direction into sub-issues), main responsibilities and the
        risk of not complying with each specific issue. All these elements are summarized in the
        strategy implementation matrix reported in the Appendix 2. Every strategic direction may
        then require ad hoc studies and analyses before its final translation into programs and
        action-plans.

   7.2. Strategy architecture and time-plan

        In the document, strategic directions are organized on three inter-twined levels of policy
        intervention: the macro level, which refers to the conditions for the overall business
        environment, the meso level, which refers to support institutions and intermediate industry
        bodies, and the micro level, which refers to specific strategic interventions for industry
        operators, both private and state-owned. This tri-partition is also meant as a sequence of
        logical interventions, if not as a time plan. First, strategic interventions at the macro-level
        should set the ground (i.e. prepare the business environment) for effective subsequent
        strategic interventions at a more specific level. Then, interventions at the meso level are
        meant as pre-conditions for supporting firms (public and private) in addressing micro-level
        strategies, since they provide those institutional supports that firms deserve with regard to
        training, consulting, exporting, aggregation, etc. Nevertheless, even with this time scanning
        in mind, the current scenario suggests that every strategic intervention is urgent and the
        three levels should be carried out in parallel. The reason – as discussed above – is that the

       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              98
        time is now for restructuring the Syrian textile and clothing industry, taking advantage of
        the current global slowdown in the industry and the market.
        Ideally the positioning of the Syrian textile and clothing industry against the new strategic
        vision can unfold on these three macro periods:

a. Short-term: in 1/2 years time (during the general global recession)
            - finalize industrial strategy and get consensus
            - set up and train a ISB as an industry meta-manager
            - start interventions at the macro, meso and micro level
            - get ready to enterglobal market and bear the costs of liberalization
b. MidMid-term: in 3/4 years time (reprise on global markets)
            - two-fold positioning of the industry:
                    o compete successfully in specific international niches (selective strategy for a
                        few)
                    o organize locally as a strategic partner to FDIs (massive strategy for the filière)
            - completion of strategic interventions at the macro, meso and micro level
c. Long-term: in 5 or more years time (beyond the 11th FYP)
            - self-reinforcing mechanisms are at the maximum (virtuous circuit of development
                activated)
                    o consolidation of selected players on international niche markets
                    o absorption of resources and competencies from international partners
                    o recombination of new resources and competencies with old ones for
                        entrepreneurship and innovation
                    o consolidation of the local platform for FDIs
                    o increased presence in specific international niches (massive strategy)
            - Monitoring and revision of strategic interventions at the macro, meso and micro
                level.
        Time is needed to align public and private sectors expectations and gradual restructuring.




   7.3. Public-private commitment

        Successful businesses require a public sector that can ensure the highest level of efficiency
        and effectiveness. Similarly, the public needs a private sector that is well-positioned, well-
        focused, and comprised of self-conscious learners capable of generating new work
        environments that encourage and support self-development and institutional innovation. In
        order for the public sector to move developmentally in sync with the economic sphere, it
        must understand the environment in which businesses compete. It must have firsthand and
        independent knowledge of the external context to guide public institutions towards the
        development of programs and practices that set standards and enhance their capabilities.
        The public sector needs to understand the external environment in order to better shape and
        promote policies that lead to programs designed to encourage continuous upgrading.
        Second, not all elements of the economic sphere can search, acquire, internalize and act
        upon the high level of information needed to be competitive in the world today. This is
        particularly true in a small-firms system in which the scarcest resources are human in kind.
        By being informed about industries, the public sector – in conjunction with the ISB – can
        create institutional contexts to help acquire, digest, and distribute this type of information
        and also use it for its own planning purposes to revitalize and animate institutional

       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                              99
        functions. Further, when strategizing at the industry level, time is needed to build and
        consolidate consensus among the major stakeholders (private and state-owned companies,
        ministries and governmental institutions, support agencies and bodies, national and
        international institutions, industry representatives at large) and this will be the main concern
        of the nascent ISB.
        In conclusion, the Syrian textile and clothing industry is a promising strategic sector
        anchored on ancient traditions and on valuable cotton industry, but it needs away forward to
        regain competitiveness.




Data sources

   -   Industrial Public Sector Reforms: Key Issue and Options (A. Mreiden, 2003);
   -   Manufacturing Industry in Syria Industrial Development Strategy (K. Abdulnur, 2004);
   -   Industrial Modernization National Programme in Syria (H. El-Laithy, 2004);
   -   Industrial Assessment and Policy Recommendations (S. Lall and M. Albaladejo, 2005);
   -   Workshop on pillars of Syrian Industrial Development Strategy (K. Abdulnur, 2005);
   -   Value Chain Analysis and Strategy Outline for Textile and Garment Industry (Gherzi team,
       2005);
   -   Industrial Policy in Syria. Main Pillars and Components (K. Abdulnur, 2006);
   -   Euro-Mediterranean Charter for Enterprises. Syria Country Report (Syrian Ministry of
       Industry, 2006);
   -   Industrial Policy of Syria: Learned Lessons from Previous Studies (Z. Ayoub-Arbache,
       2006);
   -   Industrial Modernization and Upgrading Program in Syria (I’MUP Syria). Executive
       Programme (2007);

       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                             100
-   The First National Competitiveness Report of the Syrian Economy 2007 (N. Dimashkiyyah,
    M. I. Zaza; T. Sbeih, 2007);
-   Industrial Modernization and Upgrading Programme. I’M UP Syria. Inception Report
    (2007);
-   Annual Report of the year 2008 (Euratex, 2008);
-   China loses its competitive edge in clothing (Textile Intelligence, 2008);
-   Report on the implementation of the Euro-Mediterranean Charter of Enterprise. 2008
    enterprise policy assessment. Syria (European Commission, OECD, ETF, Euromed, 2008);
-   Industrial Modernization and Upgrading Programme. Overall Upgrading Plan (D. Mazzanti,
    2008);
-   Doing Business 2009. Country Profile for Syria (The World Bank, 2008);
-   The Report. Emerging Syria 2008 (Oxford Business Group, 2008);
-   The current situation of the Arab Textile industry (Arab Federation of Textile Industries,
    2009);
-   Summary of Foreign Trades for the years 2001-2007 (CBS, 2009);
-   Statistical Series for the years 2004-2008 (CBS, 2009);
-   The Syrian textile & garment industry: strategies, action plans, implementation time frames
    and vision 2010 & 2015 (Gherzi team, 2009);
-   SIRIA – Guida Pratica per Operatori Economici (Italian Embassy in Damascus, 2009);
-   Arab Federation for Textile Industries. Executive Summaries of National Case Studies:
    Egypt, Jordan, Syria, Tunisia. Syria Case Study (F. Al Laham, 2009);
-   The EU-27 Textile & Clothing Industry in the year 2008 (Euratex, 2009);
-   Textile 2009: some late bottoming out, but no miracles (Textile World, 2009);
-   World Textile and Apparel Trade and Production Trends: USA and EU (Mindbranch, 2009);
-   Report of Chinese Apparel Industry under International Financial Crisis 2009 (China
    Research and Intelligence, 2009);
-   Trade and trade policy: five key emerging apparel import markets. Report summary
    (Textiles Intelligence, 2009);
-   Industrial Modernization and Upgrading Program. Support Services in Syrian Textile and
    Clothing Industries. Syrian Textile Technical Centre. Project Implementation (J. Ayoub, E.
    Ottolini, S. Rouman, F. Achi, 2009).




    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                       101
Appendix 1. Global textile industries profiles


       The European textile and clothing industry

       The textile and clothing industry in the EU-27 has a 2008 turnover of nearly 201 billion
       Euro and investments of more than 5.6 billion Euros. Estimates of the added value indicate
       that the industry reached 60 billion euro (-5%). The sector lost more than 11.000 companies,
       which represent a decrease of -7, 4% as compared to 2007 and employs more than 2.3
       million employees with a decrease of 7% compared to 2007.
       The textile sector faced a growth in production prices (+1, 3%) reflecting the increase of
       energy cost and raw material productions. As far as clothing products are concerned,
       industrial prices increased at a slower pace in 2008 (+0, 9), due to strong competition.
       After two years of positive growth rates, turnover went down significantly in particular in
       the textile industry. Consequently, the decline of the EU textile and clothing employment
       has again markedly amplified with a further drop of the workforce in 2008.
       Among the textile sub-sectors, the spinning market registered the worst performances, with
       a production drop of -18% over 2007. The weaving and finishing sectors as well as the
       manufacture of knitted and crocheted fabrics were also greatly affected during 2008. The
       situation looks somewhat better in the other textile markets such as the manufacture of
       made-up articles, technical and industrial textiles (-6% on average).
       On the clothing side, the underwear industry faced serious difficulties during the period
       under review (-11%).
       As far as the commercial balance is concerned, trade in 2008 was less dynamic than in 2007
       with imports registering a -3% slump in volumes, and stagnation in value terms. China
       continued to register the highest growth both in volumes (+9%) and in value (+13%) terms
       once more at the expenses of nearly all EU suppliers in particular the Latin American, the
       Mediterranean, the Autonomous countries, and the rest of Asia, with the exception of
       Bangladesh and Sri Lanka. The performance on the export side was not dynamic either, with
       a decrease both in value (-0, 6%) and in volume (-2, 5%). This evolution was mainly due to
       a significant drop of EU exports to 3 of its main customers, the US, Turkey and Hong Kong.
       As a consequence of these evolutions, the EU trade deficit slightly increased exceeding now
       -44 billion Euros. This massive deficit is mostly due to the performance of China with
       whom the EU-27 has a deficit of almost -30 billion Euros.
       The ssluggish world demand, the limitation of credit for trade, as well as the very strong
       Euro/US$ resulted in a stagnation of the textile and clothing EU trade in value and a decline
       of trade flows in volume terms. Globally, the Asian and industrialized markets recorded the
       eworse performances for European exports while the autonomous countries registered the
       highest growth tank to Russia that confirmed its position as the most attractive market of EU
       exports. As a result, Russia became anEuropean first customer despite the various
       difficulties for EU exporters to enter that market.
       Eurostat figures for the first quarter of 2009 indicates that production dropped by -23% in
       the textile industry and by -14% in the clothing sector, as compared with the same period of
       the previous year.
       Retail sales in the textile and clothing industry deteriorated for the first time since the
       nineties (in annual terms). Indeed, the EU-27 retail turnover slightly decreased both in value
       and volume (-0, 4% and -0, 1%).
       The first indications for 2009 show that, despite a recovery in January, retail sales’ evolution
       turned negative again with a -2,6% drop in February (and -0,7% in volume) as compared to
       the same month of the previous year.
       Globally, the new member states are the ones which recorded the strongest evolutions while

       IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                            102
in the ‘old’ EU-15 member states, only Belgium, Finland, France and Germany rperformer
positively with growth rates between 0, 4% and 4%.
Similarly, the evolution of new orders turned negative both for textile and clothing products.
Indeed, last yearindustry had to face a relatively strong contraction of incoming orders in the
textile sector (-10, 6%) and a moderate reduction of total new orders in the clothing sector (-
1, 6%) during 2008. As a consequence, the textile and clothing production recorded a
significant set back in 2008. With no surprisesurprise, the second semester registered the
most dramatic drop following breakdown in demand. This trend resulted in a sharp decrease
for the textile industry (-9, 5% as compared with 2007) and in a gradual deterioration for the
clothing sector (-2, 8%). The constant de-coupling between production and orders in the
clothing industry proves once more the ongoing delocalization process of this industry,
while – on the textile side – the slight de-coupling noticed two years ago become less
obvious in 2008.
Beginning of 2009 textile and clothing companies had to face even lower orders. Exports,
turnover as well as production registered a further decline, which even intensified as
compared to the already bad results of the last quarter of 2008. This overall panorama could
imply new severe decreases in activity and employment in the sector, which will accelerate
the strategic change process being developed by companies. Companies focusing on less
sensitive market niches (‘new application’ fast deliveries, high quality garments) and on
intangible assets will have better preconditions to manage the hard situation in 2009.
Furthermore, the introduction of the various National plans developed end of 2008 should
gradually improve the economic climate and bring positive changes at least for part of the
textile sector by end of the yearyear.
The EU member states are more and more looking for partners outside the EU (and even
outside the Euromed area) and, in particular, in the cheap Asian countries. This reflects the
globalization of the economy and the delocalization process outside Europe. However, the
effects of the current crisis could slow-down the re location process outside the EU (due to
the lack of capitals) and foster are direction of trade to nearby countries to take profit from
different ssetsassets such as service, flexibility and fast deliveries.
Today, extra-EU imports of textile and clothing represent already 47% of the total EU
imports in value. China continues to be the main supplier of textile and clothing products to
the EU (more than 1/3 of textile and clothing products are imported from China).

The US textile and clothing industry

2008 has been another disappointing year for the hard-pressed textile and apparel industries
in the US. Most of the anguish, however, can be traced back to a sagging economy, rather
than to further market inroads by China and other cheap overseas competitors. US clothing
demand contracted in 2008 for the first time since the late 1940s. Sales via clothing and
clothing accessory stores, and department stores were down although sales via warehouse
clubs and superstores were dynamic.
Clothing imports fell by 2.7% in volume terms, and the fall was evident in garments made
from all of the major fiber types – cotton, wool, man-made fibers, and silk blends and non-
cotton vegetable fibers. Textile imports were down by 7.2%, reflecting declines in yarns,
fabrics and made-up textiles. China remained the US’s largest textile and clothing supplier
in 2008 with a 41% share of the market. Other major suppliers included Pakistan, India,
Mexico and Vietnam. US production of textiles and clothing fell sharply, reflecting the
weakening market as well as the continuing migration of production to lower-cost foreign
locations. The fall in output also had a detrimental effect on employment. However, exports
rose – by 1.1% in textiles and by 2.6% in clothing.
Clothing sales are expected to decline further in 2009 as consumers cut back on their

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                           103
spending, and devote a larger share of their disposable income to savings. Assuming a few
more negative quarters followed by slow economic recovery toward year-end, combined
domestic textile and apparel activity for 2009 should decline about 5 to 6 percent, somewhat
under the 8- to 9-percent drop-off of the past year.
This basic pattern of somewhat smaller declines should apply to most key industry
segments. Shipments of basic mill products, such as yarns and fabrics, are projected to fall
about 4 to 5 percent to $29 billion to $30 billion.
The outlook for more highly fabricated mill products, such as carpets and home furnishings,
could be a bit more bearish, primarily because the housing meltdown will cut sharply into
carpet purchases. Estimated shipments of just under $28 billion, off about 6 percent from
2008 levels.
For carpets alone, the downtrend could be even steeper, with 2009 shipments not expected
to raise much above $10.3 billion - a big 8-percent decline from 2008 and a far cry from the
$14.3 billion peak hit in 2005.
Meantime, one upbeat sign about the overall fabricated mill product category: The sector
has dropped only about 15.5 percent over the extended 2002-2008 period. That's less than
half the 36-percent drop in basic mill items over the same period.
Finally, US domestic clothing shipments for 2009 are expected tofall another 6 percent or so
to near $26.9 billion.
2010-2011 projections for basic mill products and fabricated mill products call for average
annual declines of only 3 percent and 3.5 percent, respectively - a far slower shrinkage rate
than noted over the past few years.
The US textile and clothing industry shows its continuing ability to hold costs down. Indeed,
over the past year, aggregate costs, after adjusting for reduced volume, actually showed little
significant change.
The latest numbers suggest much the same for the New Year. Analysts put overall textile
and apparel material outlays – again adjusted for volume – fairly close to 2008 levels.
Behind these estimates: a combination of more than ample supplies and still sluggish
demand.
Looking at cotton, prices have dropped from a high of 60 cents per pound over the past year
to only around 40 cents per pound at last report. And there's little to suggest any change. The
US Department of Agriculture (USDA) sees a 3-percent drop in global use for the year
ending July 2009. Combined with fairly robust 2008 harvests, this translates into a more-
than-needed supply. Indeed, according to USDA officials, the consumption/availability ratio
will jump by the end of the 2008-09 marketing season both domestically and globally - a
scenario that would seem to rule out any new price run-up. And a similar picture seems to be
shaping up for man-made fibers, which over 2008 had shown a sizeable price advance that
was quickly reversed in the same year. This downtrend should continue on a combination of
slow demand, excess capacity and sharply lower petrochemical feedstock costs. At this
stage, man-made fibers for 2009 could even show a modest decline, especially if petroleum
costs remain depressed.
Labor also seems to be pretty much under control. Falling general inflation and high
unemployment should preclude anything more than another 3-percent pay hike. And, an
increase of this size should easily be offset by continuing worker productivity gains, which,
according to the National Council of Textile Organizations (NCTO), has over the last 10
years increased 50 percent – the equivalent of a 4% annual gain. Nor is this productivity
factor likely to diminish any time soon, primarily because of continuing investments in new,
more efficient mills and equipment.
Also, despite the current market downturn, the industry's prices haven't been weakening all
that much. At last report, producer tags on basic and more highly fabricated textile mill
products were running fractionally above year-ago levels. Latest prices for raw goods,

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finished fabrics, industrial textiles and apparel managed small gains of 0.9%, 0.9 %, 0.8%
and 0.6%, respectively – all in sharp contrast to quotes in other consumer-oriented lines.
One exception to the overall price trend is carpets. With housing down, prices of these
products are entering into negative territory in 2009.
Despite today’s strongly negative business climate, mills and apparel makers have managed
to remain profitable. Much of the credit has to go to industry executives who have been able
to keep costs down and prices on a relatively even keel.
On a less rosy note, the number of textile/apparel workers continues to tumble. Over the past
year, overall mill employment dropped to only 303,000 workers, less than half the total
reported in 1998. While some of the continuing decline can clearly be traced to reduced
demand, another big part reflects the fact that each worker is now turning out a lot more
product than his or her counterpart a few years back.
Perhaps the biggest uncertainty of the New Year, aside from the economy, is how imports
will fare. The answer depends on a lot of variables, many of which are under Chinese and
Asian control.

The Chinese textile and clothing industry

Since the 1990s, China’s exports to America and European Union had kept going up without
great fluctuation. But the exports to some other countries fluctuated greatly, especially India
and Pakistan, etc.
European, American and Japanese market, accounting for 60% import volumes of the textile
clothing in the world, had formedcertain dependency on Chinese textile clothing, which
could not be easily changed because of the present financial crisis.
In 2008, the accumulated export revenues of Chinese apparel industry were 119.790 billion
US$, up by 4.10% compared with 2007, the export growth speed dropping sharply.
In fact, in recent years, the export advantages of Chinese textile industry had cut down
because of the cost enhancement in work force and the increased price in the raw material
etc.
The international financial crisis further weakened the export competitiveness of Chinese
textile industry,ingfacing huge development challenges. The international financial crisis did
not change the people’s demands for the daily necessities, but obliged to the change of
consumption structures and habits. The change of the consumption habits made the medium
and high quality clothing industry lose a lot. The consumption structure shifted to the
medium and low quality products, making the suppliers of the low-priced clothing obtain
more opportunities and accounting for more market share.
In many ways, China has become a victim of its own success. Rising wages have been a
direct consequence of the economic boom in the country, especially in coastal regions where
it is easier to export goods to the world's major markets. China’s drop in competitiveness
stems from mounting costs on several fronts. Apart from higher costs of energy and raw
materials – which manufacturers face all over the world – Chinese textile mills face greater
costs in having to comply with growing environmental legislation. At the same time,
Chinese apparel factories haveto cope with new regulations on working conditions.
Furthermore, firms wishing to invest are finding it harder to obtain finance as the Chinese
authorities have tightened credit in a bid to limit inflation. On top, Chinese exporters have
been hit by lower export tax rebates.
Labor costs have become a particularly serious issue for Chinese firms. At least seven major
exporting countries in Asia can now offer lower labor costs than China. Apparel exporters in
Vietnam and Pakistan are able to benefit from labor costs as low as US$0.38 and US$0.37
an hour, respectively, whereas China’s labor costs can reach US$1.08 an hour in certain
areas of the country's coastal provinces. In Cambodia, labor costs are only US$0.33 an hour,

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                           105
and in Bangladesh they are as low as US$0.22 an hour.
The boom has also led to upward pressure on China’s currency, the renminbi (RMB).
Although the Chinese authorities have not taken the risk of allowing the currency to float
freely, they have accepted that it is not possible to keep a lid on it. On July 21, 2005, they
un-pegged the RMB from the US dollar and since then its value has been allowed to
increase by about one fifth. As a result, the US market has become less lucrative for Chinese
suppliers.
Since August, 2008, Chinese government had cut down or cancelled the export duty of
partial export commodities and increased the export tax rebate rate of the textile products for
several times. The exchange rate of RMB against US$ devalueddevalued, providing certain
space for the reduction in the export price of Chinese Textile products.
On 4th February, 2009,Chinese government approvedAdjustment and Revitalization Plan of
Textile Industry with the purposes of expanding the exports, increasing employment,
increasing farmers’ income and promoting the development of urbanization.Chinese
governments pointed out that the enterprises should speed up the replacement of backward
yield capacity and support the mergers and acquisitions so as to speed up the textile industry
revitalization. It is predicted that the concentration of Chinese apparel industry will be
enhanced. The outstanding enterprises will develop fast depending on its advantages of
capital, customers and risk resistance ability.
As a matter of fact, China is losing its competitive edge in textiles and clothing. It is
predicted that the export price of Chinese textile products will decrease. The ddeclining
overseas demands will form huge pressure for the export price. Since 2008, the pressure had
led most Chinese clothing enterprises to maintain the costs and slight profits and many
enterprises dhad been in the dilemma.
In 2009, the declining demand is expected to persist, forming great pressure for the export
price of Chinese textile products. However, the reduction in the price of basic energy and
raw materials will provide certain space for the price declining of Chinese export
commodities.
For 2009 it is expected that the export volumes of Chinese textile clothing industry will cut
down by 10% compared to 2008. Additionally, domestic output is expected to grow by a
smaller margin than in the past and textile imports to fall, implying weaker activity in textile
and clothing manufacturing.
The fall in competitiveness of Chinese apparel exporters could not have come at a worse
time.

The Asian textile and clothing industry

In South-East Asia, textile and clothing exports from Indonesia expanded only moderately in
2008 as US imports from the country decelerated and EU imports declined. At the same
time, domestic demand for textiles and clothing within Indonesia surged. In Malaysia textile
and clothing exports declined by 3.2% in 2007 after growing in the previous two years. The
importance of the sector has declined in recent years, but the Malaysian government has
provided a guide for textile and clothing producers which aims to develop the industry
further.
Its objectives include the promotion of investment in the sector and the promotion of exports
in targeted areas. In the Philippines clothing exports were particularly lethargic during
January-September 2008 in the face of fierce competition from China and several other low
cost Asian producers. In Thailand, however, clothing exports grew during the period
following a drop a year earlier. Exports from Vietnam, meanwhile, soared in 2008, meeting
or even surpassing, its US$ 9.500 million target for the whole of 2008.
In South Asia, Bangladesh has performed well in the post-quota era, despite fears that it

IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                            106
         would suffer in the face of competition from China and India. India’s textile exports grew by
         a vigorous 16.7% in 2007/08 but its clothing exports expanded by a slower 6.8%. Pakistan's
         textile and clothing exports declined by 2.3% as a result of significantly weaker demand in
         the EU and the US. Sri Lankan exports, meanwhile, grew by 8.5% in 2007 but by a more
         modest 3.7% in 2008. The industry is being helped by a gradual shift to the manufacture of
         higher added value products.

         The Arab textile and clothing industry28

         The structure and characteristics of the textile industry in the Arab world differs from
         country to country, however there are similarities in some of the characteristics in a number
         of different Arab countries. The Arab textile/clothing industry has several strengths.

     -   Low investments and production costs. In general the construction and production costs are
         very favorable when comparing to neighboring countries such as Turkey. Production costs,
         wages and power costs in Egypt and Syria are very competitive in comparison with Jordan,
         Tunisia, Morocco andGCC.
     -   National textile/clothing experience. Egypt, Syria, Tunisia and Morocco have cumulated
         over a long period of time or imported textile/clothing-specific knowledge. This knowledge
         can play an important role in supporting the clothing and textile industries in the Arab
         world.
     -   Arab and international agreements. Intra Arab agreements such as GAFTA and Arab –
         foreign trade agreements such as the EU partnership agreements, the Agadir agreement, and
         The QIZ agreements with the USA play an important role in supporting the Arab
         textile/clothing industries by removing tariffs.
     -   The infrastructure of the industrial zones. All Arab countries have implemented rules &
         regulations which facilitate new investment in to the clothing and textile sectors through
         advantages such as reduced taxes, removal of custom tariffs , allowing foreign currency
         transactions , Property rights for the foreign companies, Industrial zone facilities such as
         land, electricity , water, water treatment, banks, insurance companies, lending institutions
         and marketing companies in some Arab countries.
     -   Modernization and development programs. Both Tunisia and Morocco are best performers
         in providing technical and logistical support to the textile and clothing industries, this may
         be due to the large foreign investments into these countries, to improving quality and
         productivity enabling them to compete with similar products coming from China and
         Turkey.
     -   The geographical location. Both Morocco and Tunisia have geographical location
         advantages due to their geographical closeness to the European markets enabling them to
         supply in short and accurate periods of time. This advantage also plays an important role in
         the development of foreign investment and the ability to foresee new markets needs.

         The Arab textile/clothing industry is not free from weaknesses: low productivity; poor
         training in all Arab countries except Tunisia where there has been a lot of development in
         this aspect; weak marketing and human resources in most of the Arab countries; very weak
         design competencies; smuggling (especially in Egypt); custom tariff evasion by reducing the
         invoiced value for imported goods; the incomplete state of the infrastructures of the
         industrial zones (exception from Jordan); the continuous increase in the prices of power.
         Arab textile/clothing exports rose from 4587 million US$ in 1990 to 8157 million US$ in
28
   Data reported in this section are taken from “The current situation of the Arab Textile industry”, prepared by the
Arab Federation of Textile Industries (2009). Courtesy of the General Secretary of the Arab Federation of Textile
Industries.

         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                       107
    2000 and to 20.473,6 million US$ in 2007. The total Arab exports represent 2.15% of total
    textile global exports in 1990. With the ending of the MFA and the liberalization of the
    clothing and textile trade in 2005 total Arab textile and clothing exports increased to 2.6%
    in 2005, 3.3% in 2006 and 3.51% in 2007. The export value of Arab textiles/clothing was
    12.478 million US$ in 2005, it rose to 17.443 million US$ in 2006 and in 2007 reached
    20.473 million US$. In 2007 the exports of readymade garments reached 64% of total
    textile/clothing exports. This was due to the increase of the GCC exports of textile products.

-   Egypt. Egypt has a complete textile production chain, starting with cotton farming through
    the various processes and ending with the finished product ready for the final consumer.
    Even the production and manufacture of synthetic yarns and fabrics vehave increased a lot.
    The textile and clothing industries is the second largest industry in Egypt and is the largest
    employer. Moreover, Egypt is historically renowned as a quality textile producer. According
    to figures given by the Egyptian producers association the number of textile and clothing
    factories is 4535 (both private and public). Most of the foreign companies are clothing
    manufacturers working in the organized industrial zones in addition to some other
    companies working in the industrial free zones. There are also a numberjoint venture
    companies. In 2007 the value of textile and clothing production in Egypt reached 20 bn
    Egyptian pounds (3.7 bn US$), the textile and clothing industries represent 27% of total
    production value in Egypt, 3% of GDP and 24% of exports (excluding oil and gas). In
    Egypt, export increased from 698 million US$ in 1990 to 1190 million US$ in 2005 and
    reached 2019 million US$ in 2007. Clothing exports srepresents 65% of total exports for
    2006 and 2007. The EU and the US are the main export markets for Egyptian products t this
    is due to the QIZ agreement signed with the USA in 2004.

-   Tunisia. In Tunisia, the textile-clothing industry is very important, even if there is no cotton
    grown in Tunisia and it imports from abroad about 50% of locally produced products. The
    industry employs 50% of the Tunisian. Tunisia benefited from the fact that the European
    Textile Industry from the early 1970s decided to invest there in order to benefit from its
    geographic location, close to Europe, its favorable investment environment and most of all
    its favorable manufacturing costs. Tunisia is currently in the process of implementing a wide
    range of reforms which will eventuality lead to the liberalization of the textile/clothing
    industry in accordance to the partnership agreement signed with the European Union and its
    membership of the WTO. The Tunisian textile/clothing industry counts 2086 firms. These
    companies are privately owned & export all their products. The value of production output
    in 2007 was 4.2 bn US$ and the added value of the T&C sector represented 31% of the total
    production value, the clothing sector was responsible for more than 90% of total production
    value. The number of foreign investments into the textile and clothing sectors in Tunisia by
    the end of 2007 reached 973 companies. The total amount invested reached 775 million US
    $, most of these investments were in the clothing sector. In Tunisia, exports rose from 1238
    million US$ in 1990 to 4066 million US$ in 2007. Clothing exports represents 85% of total
    textile/clothing exports, export to EU countries represents more than 95% of total Tunisian
    export.

-   Morocco. The situation of Morocco is very similar to theTunisian an one and even in this
    case European investments contributed a lot in making the local textile/clothing industry
    flourish and prosper. In the early 1970s there were only 60 Textile and clothing production
    units in Morocco their production value was about 14 million dollars and they covered 25%
    of total local Moroccan needs. After the implementation of the new laws that encouraged
    investment, production increasedfive-fold and its value reached 130 million US$ and
    covered 50% oflocal needs. The textile/clothing industry now occupies an important place in

    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                            108
    the Moroccan economy due to its contribution to total production output, and the
    employment it provides to a large number of workers especially women. The value of
    production output in 2007 was 4.162 billion US$ and represented 20% of thetotal
    production value, 5.6% of the GDP and 17.2% of total exportsnot including oil revenues. At
    the end of 2007 the textile/clothing industry employed roughly 202.839 workers, i.e. 40% of
    the labor force of Morocco. In Morocco, exports increased from 925 million US$ in 1990 to
    3036 million US$ in 2005 and reached 3934 million US$ in 2007. Clothing export
    represents more than 90% of total textile/clothing exports and exports to the EU Countries
    represent 97% of total textile/clothing exports.

-   Algeria. In Algeria the textile/clothing industry has been singled out for special attention by
    the government who has providing large amounts of investment capital. The Algerian public
    sector is represented by two main clusters that include all public factories and companies
    working in the textile and clothing sector. One cluster is composed by12 firms producinging
    yarns and cotton fabrics, 10 firms working in the wool industry including dying, finishing
    for blended wool fabrics, in addition to 4 otherspinning and blanket manufacturing
    companies (usingusing 100 % acrylic fibers), 3 firmsspecialized in weaving and finishing
    artificial silk fabrics, 3 organizationsspecializing in zingproducing fabrics, jute bags, tents
    and moquette. Another cluster is mainly dedicated toclothing, with a specialization in
    tailoring and clothing. It consists of 15 firms producing readymade garments for men, ladies
    and children, uniforms, military clothing,, home textiles. Private firms are small and
    medium sized and as a result of fierce competitionfrom Arab and foreign products, the
    number of private companies and workshopsdecreased to only 400. The total production
    output of the industry is 721 million US$.

-   Libya. Since ancient times, Libya has had a handcrafts industry that includedd knitting wool,
    goat’s hair and camel’s hair. There are 51 industrial compounds that produce woolen yarn,
    floor coverings, carpets, fabrics, blankets, tissues, bandages and readymade garments.
    According to 2007 figures the private and cooperative sector included 931 companies
    working in the textiles/clothing industry. Libya imports most of its production requirements
    such as fibers, yarns and fabrics. At the end of 2007 the textiles/clothing industry employed
    roughly 11.000 people, 85% of them where Libyan nationals. The value of production
    output in 2007 reached 221 million US$. Libya is considered to be a target market for its
    neighboring Arab countries such as Egypt, Tunisia, Algeria, Moroccoand other African
    countries.

-   Jordan. As far as Jordan is concerned, in 2007 the number of companies working in the
    textile and clothing industry was 115, most of them operatingting in the clothing sector. The
    total amount of foreign and joint local foreign investments in 2007 reached 690 million
    US$, 504 million US$ of which was foreignand 186 million US$ was joint local foreign
    investments. All this investment was into the clothing industry which is located in organized
    industrial zonesbenefiting from the QIZ agreement. The value of production output in 2007
    reached 1.296 billion US$ while it was 1.337 billion US$ in 2006 and the added value of the
    textile/clothing sector in 2007 reached 167 million US$. At the end of 2007 the textile and
    clothing industry employed 56.000 people (17.000 Jordanian and the restfrom China,
    Bangladesh, Sri Lanka, India and Pakistan). Nearly half of them work in small workshops
    with a maximum of 25 workers each. In Jordan, exports increased from 11 million US$ in
    1990 to 1061 million US$ in 2005, 1257 million US$ in 2006 and 1218 in 2007. The FTA,
    QIZ and the Agadir agreement all have played an important role in these achievements.
    According to those agreements Jordan can export their products duty free to Europe and the


    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                           109
    USA which is considered to be the main market for Jordanian products. 98% of Jordanian
    exported products in 2006 and 2007 were to the US market.

-   GCC Countries. The Cooperation Council for the Arab States of the Gulf (GCC)consists of
    Saudi Arabia, United Arab Emirates, Bahrain, Qatar, Kuwait, and Oman. According to the
    data published by the Gulf Organization for industrial consultancy the number of firms in
    the textile and clothing industry is 505, with a capital investment value of 1.637 billion US$
    and the employment of 86.000 workers. For GCC countries, in 2003 the value of local
    origin exported products reached 813.77 million US$, in 2005 it reached 744 million US$
    and in 2007 it reached 699 million US$. The GCC is considered to be the largest Arab
    Market for textile/clothing products. This is due to re-exporting: in 2005 the total value of
    re-export products reached 2, 15 billion US$. In 2005 products of local origin represented
    25% of total textile/clothing exported products and in 2007 it representss 10% of total
    textile/clothing exported products, in 2007 the totaltextile/clothing exported products value
    was 7 billion US$. The main markets for the GCC are the US, EU, Australia and Canada in
    addition to Intra Arab trade between the GCC countries.

-   Iraq. Even in Iraq, the textile/clothing industry is one of the oldest. Over the last century it
    has developed and expanded to form the base of the Iraqi conversion industry. In the early
    70s many private factories were nationalized and many other new public factories were
    established. During the last 25 years the public sector suffered from the difficult situation in
    Iraq, the recent government is trying now to rehabilitate these sectors for which it needs
    more than 2 billion US$. According to the figures shown in 2008 the public sector employed
    35.000 workers in the following companies, while there are no official figures for theprivate
    sector.

-   Yemen. Since ancient times Yemen has had a handy crafts industry that included knitting.
    Three types of cottonlong, medium and short staple have been grown in the Yemen. The
    total cotton output is between 20.000-25.000 tons per year. Most of the Yemeni companies
    are small workshops except for the public sector which includes ginning, spinning and
    weaving factories,included the oldest spinning and weaving factory in the Arab peninsula
    that is located in Sana. The Yemeni government is working to pass new regulations that aim
    reconstruct and develop the textile/clothing sector. In 2007 there were 3500 textile/clothing
    public and private companies, 710 companies owned textile factories,, the rest were small
    clothing and fur dying workshops. These 3500 companies represent 12% of the total Yemeni
    conversion industry. According to 2007 figures the manpower employed reached 38.507
    workers, 1531 workers of them were employed in the public sector and the rest were
    employedin the private sector. The value of production output in 2007 for both sectors
    reached 51.9 billion Yemeni Riyals (about 282.8 million US$).

-   Sudan. Even Sudan, since ancient times used to have a textile/clothing industry. The
    Sudanese used to weave their cloth with imported materialsto produce the ALFRAD,
    traditional Sudanese clothing. The total output of raw cotton, for the season of 2006-2007,
    was 244.000 tons, the amount of ginned cotton produced reached 80.000 tons, more than
    90% was exported due to low Sudanese spinning capacity. In 2007 the amount of exported
    Cotton reached 60.9 thousand tons worth 68,5 million US$ in 2006 cotton exports reached
    109.5 thousand tons worth 82.2 million US$, in 2005 the amount of exported Cotton
    reached 103.6, thousand tons worth 107,2 million US$.




    IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                            110
For further details on the Arab textile/clothing industry and the comparisonof Syria with
Arab competitors along several industry dimensions pleaseconsult the report “The current
situation of the Arab Textile industry”, prepared by the Arab Federation of Textile Industries
(2009).




IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                          111
        Appendix 2. Strategy implementation matrix

        Strategy 1: Trade liberalization of the Syrian textile/clothing market.
        Goal

        Driving gradual trade liberalization of the market with a focus on certificates of origin, customs controls and proper supports.

        Actions                                                  Time frame        Actors involved                    Outcomes                             Risks

1.1.1                                                    1.1.2                     Government:                            -    Gradual and controlled          -   Uncontrolled invasion
         To contrast manipulation, by-passing and               Long term            - MoET (main                             liberalization of market            of the Syrian market by
          laundering of certificates of origin.                                           responsible)                         and trade                           foreign products
         To issue as soon as possible the needed 1.1.3                               - MoI                               -    Introduction of proper          -   Confusion in
          regulations and legislations to reinforce custom                            - MoF                                    and effective custom                customers perceptions
          controls and the traceability of products,                                                                           controls                        -   Loss of competitive
          stopping fake manufacturing and the entry of                            Other actors:                           -    Increased importance                positions
          products that may hamper customers’ health (as                              - Chambers of                            of certificates of origin       -   Loss of Syrian identity
          it was the case of some Chinese products in the                                  Commerce                                                                in textile/clothing
          EU markets).                                                                - Chambers of Industry                                                       products on the market
         To balance trade liberalization with the                                    - STGEA
          concurrent reinforcement of the competitiveness                             - GDoC
          of Syrian firms – as it is clearly illustrated in                           - SIA
          other parts of this document – otherwise free                               - ISB (supervisor and
          trade becomes synonymous of substitution of                                      coordinator)
          Syrian textile products with foreign ones.
         To start an Arab Observatory for textile
          industries whose role will be to follow up on
          developments in the industry onArab and
          international markets andprovide data on the
          different aspects of trade to members and
          related agencies.
         To create new investment opportunities in the
          textile industries,iesfavoring coordination in
          investment flows and the free circulation of
          capital among Arab countries.
         To create and e-commerce website for the
          textile industries to promote trade between Arab
          countries and other countries as well.


                  IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                      112
        Strategy 2: Upgrading of textile/clothing-specific infrastructures.
        Goal

        Investing in the modernization and upgrading of physical, technological and utilities infrastructures.

        Actions                                                 Time frame         Actors involved               Outcomes                        Risks

1.1.4                                                   1.1.5                      Government:                      -   Modern and efficient         -   Inadequate or obsolete
         To engage in a comprehensive mapping of all           Mid term              - MoET (main                      infrastructures                  infrastructures
          the transportation infrastructures in Syria                                     responsible)              -   Fluent transportations       -   ThreatT for the
          impacting on the industrial localization of 1.1.6                           - MoI                             to leverage Syria’s              efficiency and
          textile and clothing firms,,to identifidentify                              - MoT                             geographical position            competitiveness of
          critical points and bottlenecksnot just vis-à-vis                           - MoE                         -   Favorable industrial             Syrian firms
          the present industry configuration but also the                             - MoLA                            environment for the          -   Loss of attractive
          expected one in the future, and to prioritize                               - MoTel                           attraction of FDIs               power against FDIs
          interventions and suggest solutions to the                                                                                                     and new firms start-ups
          Government and the institutions involved.                               Other actors:
         To arrange shared high level infrastructures                                - Chambers of Industry
          (such as energy plants, utilities,                                          - Business Associations
          telecommunication networks, laboratories,                                   - Industrial zones and
          hospitality structures, waste-management                                         cluster Authorities
          centers, etc.) for SMEs operating within                                    - ISB (sponsor and
          industrial zones and clusters, in order to get                                   coordinator)
          positive externalities and economies of scale.




                  IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                            113
        Strategy 3: A new industrial mindset for the textile/clothing industry.
        Goal

        Fostering the formation of an entrepreneurial mindset and strengthen the industrial mindset at large (for private and state-owned companies) throughout the entire
        textile/clothing industry.

        Actions                                                  Time frame       Actors involved                   Outcomes                           Risks

1.1.7                                                  1.1.8                      Government:                           -    Enhanced                       -   Individualistic and
         To foster entrepreneurship at all levels in the        Long term           - MoED (supporting                      entrepreneurial                    poorly entrepreneurial
          Syrian textile and clothing industry, since this                               role)                               orientation in the                 culture spread all over
          industry has been long dominated by large 1.1.9
                                                        state-                       - MoF                                   industry                           the industry
          owned firms and constrained by protectionism                               - MoLS                             -    Social cohesion and            -   Competitive behaviors
          and closure that have hampered the formation of                                                                    mutual trust                       prevail over
          a widespread entrepreneurial mindset.                                   Other actors:                         -    Affirmation of a shared            cooperative ones
         To strengthen the social capital of the Syrian                              - ISB (main                            industrial wisdom              -   Unshared ways of
          textile and clothing industry, fostering a wider                                 responsible)                                                         thinking may bring to
          sharing of values and beliefs oriented towards                              - Chambers of Industry                                                    schizophrenic
          cooperation. These could be reached through                                 - Business Associations                                                   interventions in the
          ‘collective encounters’, i.e. situations where                              - Training institutions                                                   industry
          individuals (entrepreneurs, managers,                                            (at all levels)
          consultants, civil servants) may have the                                   - Consulting
          opportunity to discuss issues that are of concern                                Associations
          to the industry, communicate problems, explore
          possible outcomes of action,s, test and debate
          solutions and interventions. These do not have
          to be formal forum, but events, arenas or
          projects where shared feelings, visions or
          strategies are collectively experienced by the
          group.




                  IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                   114
Strategy 4: Marketing of the entire textile/clothing industry.
Goal

Developing marketing and promotion at the industry level to support export and build up industry attractiveness for FDI.

Actions (for FDI attraction)                           Time frame        Actors involved                   Outcomes                           Risks

 To prepare the industry investment map, in1.1.10                       Government:                           -    Requalification of the        -   Weak and
  coordination with SIA and all the relevant           Long term            - MoET (main                            image of the Syrian               uncoordinated efforts
  bodies, especially mapping potential                                          responsible)                        textile/clothing                  of SMEs
  investments in the two zones indicated by 1.1.11                          - MoF                                   industry worldwide                addressingaddressingfo
  Decree no. 8, 2007.                                                                                          -    Effective attraction of           reign markets with
 To provide the basics of desired investment                            Other actors:                              FDIs                              export
  climate to attract Arab, European and Asian                                - SIA (sub-responsible            -    Penetration on key            -   Damageamageto the
  producers to establish export-oriented plants in                                for FDI attraction)               foreign markets                   Syrian textile/clothing
  Syria. In particular, Syria could prepare its                              - EDPC (sub-                      -    Concrete support to               industry image
  industrial environment to attend the opportunity                                responsible for export            firms willing to export       -   Inability to attract
  to become a hub for Turkish productions,                                        promotion)                        or expand on                      FDIs, and thus missed
  especially directed towards Far East.                                      - EDF                                  international markets             opportunied
 To attract the most important buyers known as                              - SEUs                                                                   opportunity for
  ‘one-package suppliers’ to deal with the Syrian                            - STGEA                                                                  absorbing new
  manufacturers on order basis.                                              - Chambers of                                                            knowledge
 To simplify regulations and revise procedures.                                  Commerce                                                        -   Progressive
 To provide consultation, information and data to                           - Chambers of Industry                                                   obsolescence of the
  the investors, through SIA and OSS.                                        - EPB                                                                    industry and lack of
                                                                             - GOE                                                                    international
Actions (for export promotion)                                               - UNIDO, UNDP and                                                        competitiveness
                                                                                  EU(external support)
 To support export associations, unions and                                 - Arab Federation of
  consortia in preparing export promotion                                         Textile Industries
  strategies for specific products, offering                                 - ISB (coordinator and
  guidance on which specific products to focus on                                 bridge between SIA
  and to whichmarket.                                                             and EDPC on one
 To favor the development of Syrian exports in                                   side and
  terms of technology and added value focusing                                    textile/clothing firms
  on the segments illustrated in the mission                                      on the other)
  statement.
 To allow the Syrian exporters to get all local as

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                   115
    well as imported production inputs (raw
    materials and capitalist and semi-finished
    goods) at the international prices, reducing
    customs clearance costs by rationalizing and
    simplifying itits procedures and alleviating
    transport and insurance complexities and costs,
    even through indirect subsidizing;
   To favor the establishment and multiplication of
    export associations, unions, consortia and
    export-oriented trading houses, which are
    expected to specialize in exporting certain
    items, to help many Syrian SMEs get involved
    in export activities.
   To strengthen the role of commercial
    representation.
   To facilitate export financing, which is a key
    component of any program for export
    promotion, conveying resourcesfrom the newly
    established EDF.
   To encourage the creation of companies
    specialized in supporting Syrian enterprise
    involvement in international textile and garment
    fairs as well as organizing an annual exhibition
    for textile products and equipment/machinery.
   To review the work presently undertaken by the
    two institutions and to propose changes too
    satisfy the industry’s needs.
   To favor the dissemination of competencies on
    the forms suitable forinternationalization of
    companies.




         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)   116
         Strategy 5: Innovation and research for the textile/clothing industry.
         Goal

         Setting up a comprehensive innovation policy for the support of research and development, technology enhancement and knowledge acquisition, development and diffusion.

         Actions                                                   Time frame     Actors involved                  Outcomes                         Risks

1.1.12                                                    1.1.13                  Government:                         -   Investment in industry-       -   Obsolescent
          To conduct a comprehensive survey of                    Long term         - MoI                                wide R&D                          technologies and
           technological activity and capabilities in the                            - MoEd                           -   Renovation of industry            competencies
           textile and clothing industry, mapping what is 1.1.14                     - MoF                                competencies and              -   Exclusion from
           available and what is not and what needs                                                                       technologies                      international circuits of
           intervention and/or what needs coordination.                           Other actors:                       -   Triple helix effect at            innovation
          To design an effective and efficient incentive                             - Training institutions             the maximum                   -   Missed opportunity to
           system.                                                                         (University system in                                            push the entire industry
          To set up a technology finance system to favor                                  particular)                                                      forward on the frontier
           the triple helix to start and function properly.                           - Business Associations                                               of innovations
          To set up a technology import information                                  - Service centers
           service or database to collect data on foreign                             - HCSR
           sources of technologyand benchmark against                                 - ISB (main
           foreign competitors.                                                            responsible)
          To establish a triple helix regime in the
           textile/clothing industry, with the active, mutual
           interrelations between the industry on one side,
           the universities, technical institutes and research
           laboratories on the other and the government on
           the third.
          To establish specialized technology centers
           devoted to research and development in the
           textile/clothing industry.
          To start-up of some incubators and techno-parks
           able to serve the needs of the textile/clothing
           industry.
                                           To initiate a
                                               radical revision
                                               of the resources
                                               allocation
                                               policy should

                   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                               117
                          be made in
                          coherence with
                          developing the
                          national
                          technological
                          platform, since
                          so far resources
                          for innovation,
                          technology
                          upgrading and
                          R&D have been
                          scanty.




IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)   118
         Strategy 6: A textile/clothing-specific intelligence system.
         Goal

         Constructing an efficient and reliable industry and competitive intelligence system.

         Actions                                                 Time frame        Actors involved          Outcomes                       Risks

1.1.15                                                  1.1.16                     Government:                 -   Reliable information        -   Lack of industry
          To set-up of an intelligence unit within the CBS,     Mid term             - MoI                        on industry structure           information
           specifically dedicated to textile and clothing, in                         - MoET                       and performance             -   Lack of knowledge
           conjunction with international experts and 1.1.17                                                   -   Updated information             about firms real
           consultants.                                                            Other actors:                   on competitors                  performances
          To study in-depth the current state of industry                             - CBS (main                                             -   Misleading industry
           information and congestion spots in information                                  responsible)                                           information
           flow.                                                                       - ISB (supervisor)
          To benchmark with the experiences of other
           countries, in order to pave the way
           forredesigning the industry database according
           to the best practices.
          To define of what pieces of information are
           needed, which are the possible sourcesand
           which are the priorities.
          To set up a permanent access to global sources
           of industry-specific information to complement
           local one.




                   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                      119
         Strategy 7: Textile/clothing-specific financial system.
         Goal

         Modernizing the credit and capital system, setting up policies and initiatives to foster the increasing use of external capitals and funds among small and medium textile/clothing
         firms.

         Actions                                                  Time frame       Actors involved                    Outcomes                            Risks

1.1.18                                                   1.1.19                    Government:                            -    Access to credit               -    Lack of resources for
          To realize a country-wide campaign on media            Mid term            - MoET (main                        -    Availability of                     the growth and
           and through local business associations and                                    responsible)                         significant credit line             development of firms
           chambers of industry and commerceto increase  1.1.20                       - MoI                               -    Access to long-term            -    Lack of resources for
           the orientation of firms towards third-parties’                            - MoF                                    debt                                the modernization of
           capitals, either in the form of debts or risk                                                                  -    Availability of private             the industry as a whole
           equity, since most of them have been used to                            Other actors:                               equity funds                   -    Risky self-financing
           rely only on their own funds and there is the                               - UNIDO and UNDP                   -    Presence of merchant                only scenario
           need to teach them what business finance is.                                     (external support)                 banks and institutional
          To train, consult and transfer business models to                           - Syrian banking                        investors
           commercial banks in order to support them to                                     system                        -    Full activation of the
           operate closer to needs of textile/clothing firms.                          - ISB (supervisor)                      DSE
          To set up an open-ended fund for the
           modernization and upgrading of the textile and
           clothing industry. The fund may be either
           locally generated or based on foreign funds or
           both. Private commercial banks could supply
           the funds at specific interest rates for capital
           investments in the textile and clothing industry
           for projects aimed at growth, export, upgrading,
           modernization and restructuring.
          To boost the capital market, both through the
           acceleration of the launch of the Damascus
           Stock Exchange and the attraction of investment
           banks and equity funds that so far have been
           totally absent from the Syrian industrial
           landscape.




                   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                      120
Strategy 8: Clusters and industrial zones for the textile/clothing industry.
Goal

Fostering the creation of cluster-like forms of industry networking and agglomeration and enhance the experience of the industrial zones in the entire Syrian textile and
clothing industry.

Actions                                                  Time frame       Actors involved                    Outcomes                           Risks

 To assess the experience of current industrial1.1.21                    Government:                            -    Aggregation of firms           -   Inability of individual
  zones and industrial cities in the textile-clothing    Mid term            - MoI                                    both spatially and                 Syrian SMEs to access
  industry to improve current operations.                                    - MoLA                                   functionally                       critical services
 To favor the extension of industrial zones to 1.1.22                       - MoF                               -    Promotion of                       (testing, R&D, export
  other textile areas of Syria, through the                                  - MoE                                    networking,                        promotion, energy
  disposition of additional financial resources and                                                                   cooperation and trust              saving, etc.) for their
  proper infrastructures. This should occur only                          Other actors:                          -    Setting up of common               competitiveness and
  where socio-economic conditions allow it and                                - Chambers of Industry                  and shared                         survival
  local business associations are able to                                     - Business Associations                 infrastructures for            -   Lack of information,
  orchestrate the project and involve companies                               - Industrial zones                      cluster firms                      resources and
  prior to governmental investments.                                               Authorities                   -    Enhancement of                     knowledge sharing
 To map potential industrial clusters throughout                             - ISB (main                             industrial zones
  the textile and clothing industry in Syria.                                      responsible)
 To select some small textile/clothing companies
  and support them financially and
  organizationally to connect them together as
  pilot micro-clusters. This is expected to create
  productivity lines o enhance the productivity
  and the competitiveness of single firms.
 To start supporting pilot projects of textile firms
  clustering. Projects can start from
  mappingtextile firms havinging similar
  productive or technological needs. For instance,
  this is the case of firms specialized in dyeing
  fabrics and fibers or textile printers, which have
  strong environmental duties and would benefit
  much from clustering around common facilities.




          IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                    121
Strategy 9: Training for the textile/clothing industry.
Goal

Revising training institutions at all levels, with a focus on the link between the education system and the industry.

Actions                                                    Time frame       Actors involved                    Outcomes                              Risks

1.1.23                                            1.1.24                    Government:                            -    Major revision of                -   No new injections of
 To encourage in-house training by                        Mid term            - MoED (main                             industry-specific                    updated competencies
    textile/clothing firms, supporting groups or                                   responsible)                         curricula at all levels of           in the industry
                                                  1.1.25
    associations of firms to dialogue with training                            - MoI                                    education                        -   Obsolescent curricula
    institutions in order to design tailor-made                                - MoHE                              -    Access to international          -   Lack of connection
    programs.                                                                                                           programs for students                between training
 To promote on-the-job training in                                         Other actors:                               and professors                       institutions and
    textile/clothing firms, even through fiscal                                - University system                      exchange                             industry needs
    incentives and ad-hoc consultancy (for instance,                                (public and private)           -    Reinforcement of                 -   Serious weakening of
    using UMU experts).                                                        - HCSR                                   business schools                     the future survival of
 To activate and develop the current textile                                  - Professional training             -    Strengthening and                    the industry
    vocational centers (technical institutes,                                       institutions                        modernization of
    industrial secondary schools and training                                  - Vocational training                    technical schools
    centers), by radically revising their curricula                                 centers
    towards modern pedagogic methods and                                       - Chambers of
    programs that link practice to theory.                                          Commerce
 To set a nation-wide coordination of curricula,                              - Chambers of Industry
    programs and resources for textile-clothing                                - Arab Federation of
    vocational training.                                                            Textile Industries
 To modernize equipments and machineries of                                   - ISB (coordinator)
    textile training centers, so that they can respond
    to real market requirements.
 To design textile/clothing-specific curricula for
    universities, technical institutes and vocational
    schools for short-, medium- and long-term
    courses.
 To further develop at the university level textile
    faculties and departments, linking them more to
    firms needs both on the technical-technological
    side as well as on the fashion-style side.
 To increase the number of students in the

          IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                        122
    textile/clothing industry, specialized in SMEs
    management, family business management and
    entrepreneurship.
   To ensure scholarships at the best European and
    American universities specialized in
    textile/clothing business management and
    technology, to send the most brilliant Syrian
    graduates, thus favoring the entry of the Syrian
    university system into international exchange
    programs.
   To attract international visiting professors to
    refresh local curricula, research streams and
    pedagogical approaches for the textile/clothing
    industry.
   To develop textile/clothing specific libraries,
    laboratories and technical facilities in the Syrian
    universities.
   To modernize junior colleges, as a first step
    toward satisfying the needs of the textile and
    clothing industry.
   To establish a higher institute for advanced
    studies in the textile and clothing industry,
    following the benchmark of several European
    and Asian countries that did so.
   To cooperate with other countries specialized on
    the textile/clothing industry, to share experience
    of training schemes, governance of higher
    education institutions and curricula definition.
   To set up an Arab Textile Industries Institute,
    under the mandate of the Arab Federation of
    Textile Industries, to train and develop workers
    for textile sectors (university level and long and
    short term training courses).




         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)   123
Strategy 10: Services and consulting for the textile/clothing industry.
Goal

Promoting the creation of real service centers and consulting specialized in the textile and clothing business, thus favoring the dissemination of global state-of-the-art practices
in the industry.

Actions                                                 Time frame          Actors involved                    Outcomes                             Risks

 To have a comprehensive program for          1.1.26                       Government:                            -    Availability of real            -   Inability of individual
  cooperation between public and private sectors        Short term             - MoI (consultative                      service providers in                firms (both private and
  in modernizing and upgrading textile-specific                                    role)                                industrial zones and                state-owned) to cope
  service centers and consultants.             1.1.27                                                                   clusters                            with the upgrading of
 To establish the new textile technical center –                           Other actors:                          -    International                       their business formula
  designed by UNIDO - as soon as possible.                                      - UMU (main                             accreditation of service            and management
 To facilitate the establishment of an efficient                                    responsible)                       centers                             practices
  network of business support institutions                                      - UNIDO and UNDP                   -    Widespread                      -   Lack of product
  providing all those real services that the Syrian                                  (external support)                 enhancement of                      certification and testing
  textile and clothing industry needs for                                       - CTDC Aleppo and                       testing, certification          -   No new R&D spread
  sustaining its competitiveness.                                                    Damascus                           and conformation to                 all over the industry
 To support programs and initiatives like I’MUP                                - SEBC                                  industry standards
  Syria aimed at building a high quality network                                - Other real services              -    Strengthening and
  of national experts.                                                               and consultancy                    modernization of the
 To regulate the profession of consulting through                                   providers                          consulting industry
  existing associations to enable them for ongoing                              - ISB (coordinator)                     (specific for textile and
  self-development.                                                                                                     clothing)
 To provide governmental or international grants
  and funds to companies willing to buy
  consultancy from national and international
  institutions.
 To favor real services providers in assisting
  firms to become truly self-conscious and
  therefore capable of acting autonomously and
  continuously in response to an ever-changing
  environment.
 To start nation-wide communication campaigns
  to incentivateate textile firmsuse real service
  centers and consultants in their operational and
  strategic activities.

          IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                         124
         Strategy 11: Textile/clothing-specific business associations
         Goal

         Supporting the development of business associations at various levels, to complement the role of the chambers of commerce and industry.

         Actions                                                  Time frame      Actors involved                 Outcomes                           Risks

1.1.28                                                   1.1.29                   Government:                          -   Enhancement in                -   Lack of social glue in
          To promote the consolidation and the diffusion         Short term         - MoI (consultative                   industry cohesion                 the industry
           of associative formso throughout the country,                                 role)                         -   Widespread                    -   Weaker and weaker
                                                         1.1.30
           especially in all those areas, industrial zones or                                                              representation of                 relational structure,
           prospect clusters where the textile/clothing                           Other actors:                            interests                         coordination and
           industry may agglomerate. This should be done                              - Business Associations          -   Provision of both basic           cohesiveness
           even along the industry value chain promoting                                   (STGEA and SYEA                 and advanced business         -   Lack of business
           aggregation of firmsperforming similar                                          in particular)                  services                          services
           production phases, hence facinging similar                                 - Chambers of Industry                                             -   Lack of proper
           challenges, as well as of firms dealing with                               - Chambers of                                                          representation of
           similar products or fibers.                                                     Commerce                                                          interests
          To enhance existing business associations and                              - ISB (main
           support the creation of new ones. Business                                      responsible)
           associations do have a positive effect on
           industry competitiveness whether pervasively
           and extensively distributed across the country
           and along the entire textile/clothing business
           value chain.
          To conceive business associations more as
           centers with high value added services, allowing
           especially small firms to do business that
           otherwise would not be able to do.
          To benchmark with other textile business
           associations all over the world to grasp best
           practices and organizational models that fit best
           the growth of the textile/clothing industry.
          To combine a renovated representation of
           interests (lobbying, tutelage and promotion) not
           with the provision of innovative services but
           also with the active promotion of economic
           policies.


                   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                               125
IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)   126
Strategy 12: Restructuring textile/clothing private and state-owned firms
Goal

Reorganizing both private and state-owned firms operating in the textile/clothing industry to become more competitive, efficient and updated in order to better match the
economic competitive reality of the recent times.

Actions (for private firms)                              Time frame      Actors involved                    Outcomes                           Risks

 To promote firms’ growth, in order better face1.1.31                                                          -    Stronger private firms        -    Weak and fragile
  the challenges offered by the new competitive          Mid term        Government:                                 (in terms of structure             private firms, unable to
  landscape and to comply with the opportunities                            - MoI (main                              and competencies)                  face global competitors
  offered by international markets.             1.1.32                          responsible for the             -    Efficient and reliable             and to attract FDIs
 To couple firms’ growth (in quantitative terms)                               public sector and                    state-owned firms             -    Inefficient and
  with firms’ development (in qualitative terms),                               consultative role for                                                   unreliable state-owned
  i.e. the development of managerial expertise and                              private sector)                                                         firms far from
  tools that in most private textile firms are still                                                                                                    international industry
  missing.                                                               Other actors:                                                                  standards
 To start a comprehensive family firms                                      - UMU                                                                 -    Negative influence on
  assistance program both in terms of consultancy                            - GOTI                                                                     the national economy
  and training, in order to deal with those strategic                        - Meso-level                                                          -    Damage to the main
  issues related to the overlapping of family                                     institutions in general                                               comparative advantage
  ownership, governance and management and to                                     (banks, private equity                                                of Syria, i.e. cotton
  facilitate family succession plans.                                             funds, real services,
 To encourage rather than discourage                                             consultancy
  competition within the industry, in order to                                    providers, training
  promote continuous benchmarking and                                             institutions)
  upgrading amongst private firms.                                           - Private Firms (main
                                                                                  responsible for the
Actions (for state-owned firms)                                                   private sector)
                                                                             - UNIDO (support)
 To engage in a comprehensive assessment of                                 - EU (support)
  viability of and future options for                                        - ISB (supervisor)
  textile/clothing state-owned firms, in line with
  the industrial strategy developed and adopted by
  the government.
 To assist textile/clothing state-owned firms in
  the process of corporatization, that should also
  consolidate state-owned firms among them.

         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                     127
 To deal with over-staffing and inefficiency in
  order to increase profitability and viability.
 To rethink the management and the managerial
  procedures of state-owned textile firms.
 To develop and implement policy options for
  addressing labor and social issues related
  corporatization, reorganization and reduction of
  inefficiency.




        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)   128
         Strategy 13: Prioritizing geographical textile/clothing markets to target
         Goal

         To identify and invest in attractive and sustainable foreign markets for the Syrian textile/clothing industry productions.

         Actions                                                 Time frame          Government:                        Outcomes                            Risks
                                                                                        - MoI (consultative
1.1.33                                                 1.1.34                               role)                           -    Clear vision on foreign        -   Waste of resources and
          To engage into in-depth market studies of             Short term             - MoET (consultative                     geographical markets               time on blurred market
           priority targets (Arab Region, Turkey, Russia,                                   role)                                to target in addition to           targets without a
           and EU-27).                                 1.1.35                                                                    the domestic one                   cohesive and
          To leverage cultural and geographical proximity                          Other actors:                           -    Availability of                    coordinated penetration
           as well as free trade agreements in order to                                 - STGEA (main                            information on priority            on a few selected target
           export to the Arab Region.                                                        responsible)                        geographical markets               markets
          To take advantage of the proximity of Turkey                                 - SEUs (main                        -    Affirmation of Syrian          -   Room for new
           and the existent bi-lateral agreement to address                                  responsible)                        firms on priority                  competitors to enter
           it as a destination market.                                                  - EDPC (support)                         geographical markets               priority markets before
          To exploit historical linkages with Russia in                                - EDF (support)                                                             Syrian firms
           order to transform it in a destination market for                            - Private Firms
           textile/clothing products.                                                   - Chambers of
          To explore EU-27 countries, with a specific                                       Commerce
           focus on newly added members, that have                                      - Chambers of Industry
           textile/clothing markets in expansion, easier                                - UMU
           market needs and less saturation.                                            - ISB (supervisor)




                   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                      129
         Strategy 14: Focusing on key strategic textile/clothing products
         Goal

         In order to deal with global competition and penetrate both the home market and foreign target markets, there isneed to focus resources on key strategic products, which can
         become the flagships of the Syrian textile/clothing industry in the world.

         Actions                                                  Time frame      Actors involved                   Outcomes                            Risks

1.1.36                                                   1.1.37                   Government:                            -   Definition of priority         -    Blurred positioning of
          To pay attention and priority efforts to the           Mid term           - MoI (consultative                     product segment to                  the Syrian textile and
           quality and the consistency of the                                            role)                               invest on                           clothing industry on
           lingerie/underwear segment so that it can be  1.1.38                      - MoET                              -   Specific meso-level                 national and
           strengthened and promoted on national and                                 - MoIR                                  support on priority                 international markets
           international markets.                                                    - MoA                                   production                     -    Missed opportunity to
          To start entering international markets for                                                                   -   Affirmation of national             affirm national
           underwear and lingerie as subcontractors of                            Other actors:                              flagship products                   stereotypes and
           foreign manufacturers or retailers, in order to                            - Private Firms (main              -   Leveraging core                     flagship productions
           learn and evolve towards strategic partners first                               responsible)                      competencies of public              that may act as a
           and autonomous Syrian brands later.                                        - UMU (support)                        and private sector firms            locomotive for the
          To put priority efforts in the home textile                                - Textile Technical                -   Total employment of                 development of the
           segment, in order to upgrade, modernize and                                     Center                            local cotton production             entire industry
           reposition firms on high-quality high-prices                               - CTDC                                 in high value products         -    Loss of
           segments where the Syrian origin should be the                             - GOE                              -   Increase quality and                competitiveness as a
           major competitive advantage, both in terms of                              - GOTI (support)                       decrease cost of local              national system
           raw materials and quality of the finishing.                                - ISB (supervisor and                  cotton productions             -    Destruction of the
          To support the growth and managerialization of                                  coordinator)                                                          Syrian main
           Syrian home textile producers, whose reputation                                                                                                       comparative advantage
           and image is high but still too much artisan-                                                                                                    -    Favoring the export of
           oriented.                                                                                                                                             Syrian cotton for
          To expand the production of industrial textile                                                                                                        foreign competitors
           products such as insulation materials, filters and
           resistant garments.
          To encourage meso-level institutions, such as
           clusters, industrial zones or real service
           providers, to enter international circuits of
           innovation and favor the diffusion of technical
           textile productions in the Syrian industry as
           well.

                   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                     130
 To immediately prepare a diagnostic study of
  GOTI and its 27 mills, with a special focus on
  the 7 cotton yarn producers, especially after the
  private sector was allowed to engage in this
  activity.
 To prepare – after the assessment – a
  comprehensive modernization plan for GOTI
  mills to address the challenges they face.
 To encourage the private sector to manufacture
  the available ginned cotton into yarns provided
  it is offered with good quality, at competitive
  prices and with simpler procedures.
 To continue replacing urgently the old ginning
  facilities based on economic feasibility studies,
  with a focus on quality and product consistency.
 To reduce costs in public factories and improve
  the yarn quality in order to face new
  competition.
 To provide incentives for establishing new
  enterprises born to utilize all local cotton and
  cotton yarn production
 To stop exporting cotton and cotton yarn,
  because this favor rival countries, weakens the
  Syrian comparative advantage and embeds the
  delivery of higher value-added products on
  foreign markets.
 To promote the establishment of private
  weaving and knitting factories using cotton or
  blended yarn with a special focus on printing,
  dying and finishing that are still an important
  weakness in our industry.
 To support (organizationally or financially) the
  purchasing of cotton by private firms and/or by
  cluster-forms of aggregations, unions, consortia
  or associations.
 To encourage the use of modern irrigation
  techniques in raw cotton farming. The
  government can do this through subsidizing the
  costs.
 To restrict cotton farming land to correspond to

        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)   131
  the local ginned cotton and cotton yarns and to
  review this in light of adapting new irrigation
  techniques.
 To expand cotton related research (farming and
  irrigation) and introduce incentives to
  researchers and research centers, since the
  quality and innovation in fibers depends also
  upon the quality and innovation in raw cotton.
 To collect and transport cotton crops
  professionally and to assure cotton is kept clean.
  This should be done to make the ginning
  process easier and more efficient.
 To identify fair cotton prices as to be responsive
  to the farmers actual cost. To this regard, efforts
  and incentives should be given to foster the
  production of organic and colored cotton.




         IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)   132
         Strategy 15: Upgrading management practices of textile/clothing firms.
         Goal

         Suggesting several strategic actions, including corporate and business transformations, that firms should implement to upgrade their business models.

         Actions                                                 Time frame       Actors involved                   Outcomes                            Risks

1.1.39                                                  1.1.40                    Government:                            -   Refocused business             -    Threat to the capability
          To overcome the gap in fashion design                 Mid term            - MoI (main                             ideas and competitive               of firmsto remain
           competencies.                                                                 responsible for public              advantages                          competitive on local
          To abandon cost based strategies and move1.1.41                               sector and                      -   Upgrading and                       and international
           towards differentiation strategies.                                           consultative role for               updating in                         markets
          To develop market-oriented, rather than                                       private sector)                     management practices           -    Inability to catch new
           technology-pushed, products.                                              - MoLA                                  and tools                           business opportunities
          To cluster around local textile/clothing service                          - MoE                               -   Improved marketing             -    Outdated management
           centers to benefit from continuous innovations.                                                                   competencies                        practices and tools
          To engage in strategic alliances and networks                          Other actors:                          -   Introduction of reliable       -    Blurred business ideas
           along the textile/clothing value chain in order to                         - Private Firms (main                  accounting techniques
           benefit from a total control of the chain in terms                              responsible for               -   Modernization of
           of quality and quantity.                                                        private sector)                   production processes
          To introduce modern and reliable accounting                                - UMU                              -   Attention to
           systems in order to measure production costs                               - Chambers of                          environmental issues
           and control pricing.                                                            Commerce
          To develop marketing competencies and                                      - Chambers of Industry
           capabilities that can allow them to refine their                           - Business Associations
           marketing mix, understand market needs,                                    - Real service and
           segment customers, monitor competition,, plan                                   consultancy providers
           trade and distribution strategies.                                         - Training institutions
          To exploit the support of meso-level service                               - CTDC
           centers and consultant for designing new                                   - Textile Technical
           international marketing strategies.                                             Center
          To introduce production planning systems,                                  - ISB (supervisor and
           methods and softwares.                                                          coordinator)
          To assure maintenance programs and spare parts
           for machineriesmachineries.
          To make an extensive use of ICT in all the
           departments of a firm.
          To rely on service centers for product testing

                   IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)                                                                                                    133
  and certifications.
 To comply with international quality control
  standards and labels.
 To secure the required funding and technical
  expertise needed for removing the
  environmental impacts of their operations and to
  rationalize water and energy consumption and
  that of chemicals.
 To favor clustering of dyeing companies in an
  industrial area supported with treatment units,
  offering them all advantages and facilities for
  these companies to enable them to
  applyconditions of environment laws.




        IMUP-Syria Strategy of Textile/Clothing Industry in Syria (2009)   134

				
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