Local manufacturers are unable to compete with cheap Chinese exports that are flooding the markets all over the world, including the US and Europe, which are the main importers of readymade garments. Many factories, which are mainly run by people from the Indian subcontinent shut down their businesses and return to their home countries to take advantage of the cheaper manpower and operating cost.

In fact, cheaper Chinese exports affect the global garment and textile industry, including the AGCC states, other Arab countries, West European countries and the US. The immediate effect, according to economists, will be worsening unemployment in the Arab and European countries. Earlier this year, the European markets were invaded by cheap Chinese readymade garments forcing the European Union to threaten China with imposing sanctions on Chinese-made garments and textiles unless Chinese exporters curb their exports.

According to industry estimates, 30 to 40 per cent of garment manufacturers in the UAE have shifted their business out of the country in the past two years and more are expected to do so. Among the ones being shifted are some of the leading manufacturers in Sharjah and Ajman, but the companies preferred to remain unidentified for the time being. Manufacturers from other Gulf countries are also said to be relocating their businesses.

Increase in operating expenses have been cited among the reasons for the exodus, which saw some 50 UAE companies moving to new locations last year. The increase in operating expenses is due to the higher labour cost and charges such as rent, electricity and others in the UAE, industry sources said.

The sources also said while the higher labour cost and increase in charges such as rent, electricity and others in the UAE have raised the operational expenses, countries such as Jordan, Egypt, Kenya, Uganda and Madagascar or the Indian subcontinent states turn out to be cheaper operationally.

Garment industry sources say the stoppage of issuing new visas to the garment factories employing workers from the Indian subcontinent has dealt a major blow to the sector. In general, the garment manufacturing business is going through a very bad phase with only 10-15 per cent making money, while the rest is losing. Some smaller players are said to be on the verge of folding up and leaving.

During the late 80s and the early 90s, the UAE readymade garments industry witnessed tremendous growth as manufacturers shifted their facilities from Asian countries to the Gulf states, with a view to benefiting from the AGCC export quotas.

Garment manufacturers say they expect more sympathetic approach from the government considering that the industry has made significant contributions to the economy of UAE, particularly the northern emirates of Ajman and Sharjah where a majority of the manufacturers are located.