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The Quiet Manufacturing Hub Revolution- Happening Here

Ten years ago Fiji had a thriving business in clothing and foot ware manufacturing but in almost everything else the majority of manufacturing was taking place overseas. Today the clothing
01 Dec 2018 10:22
The Quiet Manufacturing Hub Revolution- Happening Here
One of the few garment factories in Fiji.

Ten years ago Fiji had a thriving business in clothing and foot ware manufacturing but in almost everything else the majority of manufacturing was taking place overseas.

Today the clothing industry is doing alright in spite of a number of challenges over the years from countries with either lower basic labour costs or significantly advanced technology.

The tariff advantages that the local industry enjoyed for many years from Australia and New Zealand (and to some extent from the United States) were slowly stripped away.

But the industry found ways to remain competitive so the status quo was maintained.

They did this in spite of the doom and gloom experts throughout the country who seemed to think that the local business people could only survive if they were supported by an uneven playing field or government intervention.

But over the last 10 years there has been a very slow shift in the manufacturing industries that are successfully expanding in Fiji and are servicing the whole of the South Pacific, and in a number of cases, markets in well developed countries.

One of the main drivers for this growth has been the changing political environment in the region.

 

Breaking barriers

Under the current government the influence Fiji has in the main international political arenas has grown substantially, making it possible for Fiji to broker much better trade deals between the countries of the South Pacific and the very large markets that were in the past difficult for Fijian industries to penetrate.

Probably one of the most useful is the Melanesian Spearhead Agreements.

This encourages inter-country trading through the offer of better tariff rates, lower than those offered non Melanesian trading Partners in the same commodity classes and simpler compliance conditions.

Because of these opportunities there has been a significant move by offshore manufacturing operations to investigate the possibility of shifting to Fiji, either totally or as part of the processing being bought into the country.

For years, manufacturers saw the business advantages of doing work in Fiji, thereby having a significant advantage because of the tariffs they avoided by being inside the customs barrier.

 

Examples:

Already there are examples of this in a number of industries.

For example, a large oral health company brings in toothpaste in large volume containers and uses the imported paste to fill the small retail tubes, utilising local machinery and local workers ready for the market.

In this way the high volume manufacturing work is done where the economies of volume are available and the more time consuming parts of the process are done locally.

A significant amount of the manufacturing part of the production is carried out inside the tariff barriers, making the product competitive locally and providing a boost to the economy by creating jobs and paying taxes locally.

Because the product has sufficient local manufacturing content it also gains from the MSG incentives, which allow the company to access the benefits available to Melanesian producers. This further increasing profitability and of entry that they would not enjoy as offshore manufacturers.

Another industry that has found it beneficial to do a lot of the work inside the barriers is the manufacturers of formed steel sheeting.

This covers such products as roofing iron produced in a number of different forms as well as rain guttering and down pipes.

These companies import rolls of flat galvanised steel sheet, then pre-paint it and mould it into the requires forms in their own local plant.

The tariff on flat rolled steel is significantly lower than for formed and painted product imported as finished sheets and by painting locally transit damage and scratches are eliminated, delivering significant savings on the typical wastage from damage.

Other companies have found that there are good advantages in the components for small whitegoods items and carrying out the assembly locally.

The work one locally is a significant part of the overall finished production cost and allows the companies to access the benefits available to Fiji made goods.

Because of the smaller production runs on the assembly of these goods in Fiji, manufacturers have also been able to place different brands to client specifications on the items and to offer brands that are exclusive to a particular retail chain in large international markets.

This is a service the large retailers find attractive for two reasons.

The unique branding encourages the retailer to invest in building the brand name and it is difficult for the consumer to compare prices at other retailers.

The same principle applies in Fiji for a range of food items, where the produce is imported in bulk and packed locally into retail sizes.

This happens with chicken portion packs, lots of different vegetable products including olives, chillies, spices and herbs, cheese and mayonnaise, fish fillets and prawns, to name a few.

There are many advantages for the consumer in this concept.

The cost to the buyer is generally lower because in many cases the Tariffs can be quite high even up to 35 per cent and shipping costs and insurance is lower.

With food products manufactured in large volumes overseas it is often not possible to import them.

This is because the size of the manufacturing plant will not allow small quantities to be produced with a different label.

Fiji food label laws often require specific information to be included that is not required anywhere else and local packing makes the Label application easy. This allows the local market to enjoy products the label issue would otherwise stop.

As the local markets in the Pacific markets develop and become more sophisticated the incidence of products with a degree of local work inclusion will increase and a wider choice will become available.

The increase in affluence that is being experienced, mainly in Fiji, will also increase demand.

Feedback:  maraia.vula@fijisun.com.fj

 

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