CODE 18-77
SS 8/78
Reference
mmented that the quality sector had been estimated at 10-15% of the total HK garment industry: he asked to what extent this move up-market had been achieved by increasing production quality without using more expensive fabric, and how much had been achieved by using better quality fabric. Mr Sousa replied that although the initial move up-market had simply been in the field of production quality, the whole of quality sector was now also using better quality fabrics. Mr Nightingale remarked that for the "commodity" fabrics, which constituted the bulk of the HK market, price was clearly the key factor, and on price the UK was at an inherent disadvantage. Outward processing relief of course offset this disadvantage, although it was not clear to what extent; and in any event the requirements which had to be satisfied to obtain relief were so onerous that it was rarely applied for. Mr Sousa agreed that it would be a help if the outward processing relief regulations could be simplified, but he added that Japanese manufacturers' main advantage over the UK was the attention with which they cultivated the HK market. Mr Nightingale asked whether fabric manufacturers should devote their attention to the HK manufacturers or the ultimate purchasers of the garments concerned. Mr Sousa said that approaches to both would be needed. Mr Parkinson said that he would certainly investigate the possibility of simplifying the outward processing relief regulations. He had also heard that Chartered Bank were considering instituting a scheme to make finance available at preferential terms to HK purchasers of UK fabric; it would be worth pursuing this idea further with Chartered to see precisely what they had in mind.
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Mr Regan commented that it appeared that in order to influence HK manufacturers' purchasing decisions it would be necessary to institute triangular discussions between suppliers, manufacturers and ultimate customers. Mr Corrigan remarked that in the USA American Celanese was already attempting to set up negotiations with American importers of HK-made garments. Mr Wilson asked whether the HK market could be best developed by a local agent or by frequent visits from the UK principal. Mr March said that the Trade Commission had conducted a questionnaire of the ten most successful British companies in HK to determine the reasons for their success. The reasons had included: an established presence
in HK (six of the ten companies had wholly or partly owned subsidiaries in the colony); training in the UK for local staff; regular visits by UK-based staff; a readiness to carry stocks of items in demand; a concentration on specialist traders (other than the, perhaps larger, general traders) wliere specialised goods where concerned; good support and back-up services; and a readiness to vary product ranges to accommodate local requirements. Although the companies involved in the survey had mostly been engineering companies Mr March suspected that similar considerations applied in different sectors. Mr Regan said that it was important to establish the size of the market at which UK textile companies could aim; 80% or so of the market was for commodity fabrics, where the UK could not hope to compete for reasons of price. The question was how British companies could obtain a substantial share of the remaining 20%. Mr Sousa commented that price was not the only factor in the commodity fabric market; for instance, the UK could supply some fabrics which were beyond the capability of SE Asian producers. Mr Wilson aksed whether origin labelling of cloth would encourage greater use of British fabric. Mr Corrigan pointed out that the largest market for HK-made garments was the USA. He suggested that HMG should provide financial incentives to exporters to enable them to break into the HK commodity textile market. Mr Parkinson observed that schemes of that sort were unlikely to appeal to HMG; other considera- tions aside, it was difficult to justify subsidising exports without subsidising goods produced for domestic consumption and elleged to replace imports. It was worthy of note that the Irish scheme allowing "tax holidays" for exporters was being phased out as a result of Ireland's membership of the EC. Mr March commented that outward processing relief ought to encourage British exporters; he knew of criticisms that the scheme was cumbersome, but it had been used in the case of fabric originating in the FRG made up in HK in to garments bound for the UK, and he saw no reason why this route should not be reversed.
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