Egyptian apparel sector struggles on during the crisis

By Paul Cochrane for just-style.com

Egypt's garment export industry, worth US$2bn a year, has been struggling to cope with the political crisis in its home country, with ports closed and plants working shorter hours, if at all. But factories are still producing clothing and textiles and international clients have yet to cancel orders.

The protests against the regime of President Hosni Mubarak, which started on 25 January and have since escalated, started affecting the textile and garment industry when the government imposed a daily 17-hour curfew: employees were not able to get to work, and the ports were closed.

"Factories are trying to work from 9am-2pm when there is no curfew, since the curfew starts at 3pm. It is not business as usual but it is running," Bassem Sultan, CEO of Alexandria-based Dyetex, and honorary treasurer of the International Textile Manufacturers Federation (ITMF), told just-style. "I think by Saturday, if the curfew is over, we will try and compensate for lost time."

"Factories are producing, but not shipping," he adds. "The last day that shipping happened was last Friday (28 January), but the situation can only last so long because of its effects on the economy, so the sector should be exporting by next week, although it is impossible to know."

Sultan stresses that retailers and clients in Europe and the US have not, so far, cancelled any orders.

Dr Christian Schindler, director general of the ITMF in Zürich, told just-style that the sector has not been as badly affected as would be thought.

"Business has not been dramatically affected, although companies are not working to a large extent and foreign employees might also have left the country in the mean time for security reasons.

"I imagine the impact on the sector would change if developments show a peaceful transformation is not in sight. Everyone is waiting and looking, and taking some precautions, but I think it doesn't really affect the industry to a major extent," he says.

EU and QIZ exports

The current crisis, which could result in a regime change, puts into question trade agreements recently signed by the Egyptian government with the European Union.

Uncertainty also hangs over the operation of Qualifying Industrial Zones (QIZ), which were set up in 2005 to allow textiles and garments made at Egyptian facilities with 11.7% input made in Israel to enter the United States duty-free.

Currently, overall exports are split 60% towards Europe and 40% for the US market.

Even if there is a change in government that may not be overly pro-Western or pro-Israel, Dr Schindler believes the ongoing crisis will not affect exports to the EU or from the QIZs.

"In my opinion there will not be an effect on business relations or political relations with the EU as long as it is a peaceful transformation and doesn't get radical," he said. He also believes the QIZs will not be affected since this would not be in the long term interests of Egyptian manufacturers.

In the first nine months of 2009, the latest statistics available, textile and textile garment exports from the QIZs were US$199m, down from US$205m during the same period in 2008, according to QIZ documentation.

Cotton situation

Interestingly, the ongoing crisis has not had an impact on international cotton prices or the garment industry due to only 130,000 tonnes of Egyptian cotton being produced a year. Global production is around 24m tonnes, according to the ITMF.

"Egyptian cotton is high quality, as everyone knows, but production quantities are very low so [the crisis] is not affecting the international markets or the futures markets," said Dr Schindler.

"Only the small market for extra long staple cotton will be. The crisis might affect the market psychologically but not really the market itself as cotton has not been destroyed or damaged, so the cotton that is there and planted will be there, and will be sold, that is for sure."

Indian struggle

High cotton prices, rupee appreciation and increasing global competition have hit India’s knitting industry hard this year. But can faster turnaround times, increasing synthetic fibre use and installation of more modern technology help drag it out of the doldrums? Paul Cochrane reports from India for Knitting International

Knitwear manufacturers in Tirupur, the southern Tamil Nadu state city that accounts for 60% of India’s knitwear exports, have struggled to retain sales due to high cotton prices, forcing manufacturers to look to synthetics as an alternative.

In 2009, the city’s total exports of garments and knitwear rose to $2.55bn, after dipping 10% in 2007-2008, but the rise in cotton prices has led to a 15-20% drop in production and job losses of 25,000.

As a result, the target set by the Tirupur Exporters’ Association (TEA) to double annual exports from the city’s industry by 2012 to $5.5bn will not be met, Padma Shri A Sakthivel, TEA president and chairman of local company Poppys Knitwear Ltd told Knitting International.

“We set the target for 2012 after achieving Indian rupees 11,000 crores ($2.42bn) in 2006-07, but we have been facing various issues, one by one, like appreciation of the rupee against the US dollar, the global recession and price increases for petrochemical products and other input costs, mainly cotton yarn. We will not reach the target we set.”

In mid-November, Tirupur manufacturers took part in a nationwide strike to petition the Indian government to come to their aid and ban cotton exports because of spiraling cotton prices.

“We have been requesting the government to take measures to get cotton yarn available at the right price for knitwear exporters, a pre- shipment packing credit rate at 7%, an increase in duty drawback rate and a continuance of 2% interest subvention. All this would help to respond to competition from countries like China and Bangladesh,” said Mr Sakthivel. “We have also asked the government to address infrastructure issues and for bank interest rates to be reduced to be on par with competing countries.”

Exporting units

Tirupur has 800 knitwear exporting units, but is dominated by 20 major players, for instance Deecee Export and the Natural Clothing Company, with exports exceeding $22m in each case, catering for, among others, major brands such as Ralph Lauren, Hanes, Wal-Mart, C&A, Reebok and Disney.

About 30% of exports are bound for the US and 60%, the European Union, according to TEA. Many companies are medium-sized: 500 companies have exports of less than $2m a year each.

“No company is free from problems after the increase in cotton prices, but the most affected group are the smaller exporters,” said Mr Sakthivel.

Indeed, several factories contacted by Knitting International said they had ceased operations until cotton prices fell while other companies had seen a major contraction. “We received many inquiries for 2010 compared to last year, but we were unable to book new orders because of the high yarn price,” said G Balaji, manager of Gokul Inc.

Meanwhile, at the Mani and Mani Fabs factory, sales had dropped 15% in 2010, even compared with recessionary 2009, said managing director N Manicka Vasakam.

To tackle the slowdown, TEA has launched the Knitwear Technology Mission (KTM) to help exporters produce synthetic based garments, particularly sportswear and swimwear, instead of cotton.

“Synthetic garments have a global market round the year whereas currently, out of cotton garment exports, we are able to supply only one fourth of the year,” said Mr Sakthivel.

“The KTM will play a major role in introducing the latest technology, such as seamless knitting machinery, as well as design consultancy. We hope that after two years the share of synthetic garment exports from Tirupur will be comparatively higher,” he added. Meanwhile, the TEA has also launched a Knitwear Fashion Institute.

Tirupur exporters have also adopted fast fashion, able to turn around an order within an average of 60 days and no more than 75 days, but a figure still far behind the likes of Turkey as regards the European market. Until the shift to synthetic fibres takes place and with cotton prices high, the immediate outlook for Tirupur’s knitwear exporters is downbeat.

“In the year 2010-11, our exports will come down due to increases in yarn prices. Once the situation improves, we will certainly increase our exports,” said Mr Sakthivel.

The Middle East: On the edge of the abyss?

By Paul Cochrane, in Beirut for International News Services

Countless times I've read analysis and the blurb on the back of books that the Middle East is ‘on the brink’, a ‘tinderbox’ ready to explode due to the nepotistic nature of governments and the dire economic conditions of much of the region. Now more than ever, these predictions look like they may be coming true - a dictatorial regime has fallen in Tunisia and another is tottering in Egypt.

Some of these analyses have predicted the imminent fall of the Middle East's regimes and monarchies for the past four decades. A Middle East ‘spring’ was just around the corner, the people would rise up and the region's overwhelmingly authoritarian regimes would no longer have their days in the sun. Democracy would prevail.

There have certainly been many coups, the overthrow of kings and dictators, and - of course - wars since the region was cookie-cut into separate countries through the fall of the Ottoman Empire, before and after World War One. But that tinder box never exploded. It didn't happen after the 1967 or 1973 wars between Arab states and Israel; it didn't happen after the 1979 Islamic revolution in Iran; it didn't happen following the 1990-91 Second Gulf war or the 2003 US-led invasion of Iraq; and it didn't happen after the July 2006 war between Israel and Lebanon's Hezbollah. The sparks that could have ignited the tinderbox were diffused, snuffed out by the internal security forces and outside meddling, and the malaise continued.

But it would seem that these analyses forecasting the Middle East's imminent explosion were premature. It has taken until now for the people to stand up en masse and say ‘kifaya’, ‘enough’ in Arabic - enough of high unemployment, corruption, cronyism, repression, phony elections, lousy education and low standards of living.

Tunisia provided that spark. Following the successful ouster of Tunisia's dictator Zine al-Abidine Ben Ali on January 17 after a month of nationwide protests, demonstrations have erupted in Algeria, Yemen and on a major level in Egypt. There have even been unprecedented protests in the Saudi coastal city of Jeddah over the government's mishandling of the recent flooding there. Protests have also happen in Jordan, while in Lebanon – although not due to the ‘Tunisia effect’ - the government fell over ongoing political wrangling about the Special Tribunal for Lebanon that is investigating the assassination of former Prime Minister Rafik Hariri in 2005.

These are tense and unpredictable times in the Middle East. The question that is on everyone's lips is whether the protests will escalate throughout the region, and whether the ongoing protests will retain steam. In Egypt it is clear that even if President Hosni Mubarak survives this onslaught against his 30 year rule, it is over for his dynasty. His son has allegedly left Egypt and there is no way Gamal Mubarak will succeed his father. All Middle Eastern governments will have to make concessions to appease their people unless they want to go the way of Ben Ali.

Indeed, oil-rich Kuwait distributed US$4 billion and free food for 14 months to its citizens to mark ‘national occasions’, although the unstated reason was clearly to shore up support for the monarchy.Meanwhile, the regional situation is causing havoc with regional stock markets and economic forecasts. Lebanon is not likely to have as successful a summer as last year, with 2.2 million visiting the country in 2010, due to the current instability. The same can be said of Egypt and Tunisia.

Tourism aside, stocks markets have plummeted in Tunisia and Egypt, as elsewhere in the region, including the Gulf. Sovereign bond risk has also heightened and international investors are understandably hesitant to enter Middle Eastern markets. British investors are holding onto the seat of their pants, with British investment in Egypt the country's largest foreign investor at some US$20 billion.

This year has certainly started out with a bang in the Middle East, and we could all be in for a very interesting 2011. How it will all play out will be up to the people and the reaction of the region's rulers, external forces like the United States included.

The Tunisian Intifada

The poster says "Servant (the Saudi king) of the two thieves (Ben Ali and his wife Leila Trabelsi)"

Commentary for Executive, 13 January (being re-written following Ben Ali's departure from Tunis)

The demonstrations in Tunisia over the past several weeks is the biggest news to have come out of the North African country in a long time. “All is well in Tunisia” is the usual officially parroted mantra. But what is happening there could be the first of many such intifadas (uprisings) in the Middle East and North Africa (MENA) unless political-economic concerns are addressed and high unemployment is tackled in a region where over 50 percent of the population is under 30 years old.

The protests in Tunisia were triggered by unemployed university graduate Mohammed Bouazizi in the central town of Sidi Bouzid on 19 December 2010. Bouazizi had resorted to selling fruit on the street to make ends meet, but after police seized his produce he poured gas over himself in front of the town hall and set himself alight. Bouazizi's actions were literally the spark that prompted nationwide protests over unemployment, rampant corruption and the repressive leadership of President Zine Ben Ali .

Unemployment in Tunisia is officially 13 percent but presumed to be higher than 25 percent. While the country has had economic growth over the past decade, it has not been reflected across society or provided enough jobs for graduates. It is the same story throughout the MENA, which has the one of the highest unemployment rates in the world, according to an International Labor Organization report.

This year protests have taken place in Algeria, again over unemployment and dissatisfaction with government policies. Strikes were scheduled in Lebanon over high fuel prices - seemingly dropped due to the dissolution of parliament – and Egypt is on tender hooks due to the upcoming presidential elections. The region's more authoritarian regimes are no doubt keeping a close eye on Tunis to see the outcome, for if it can happen there it can happen anywhere, despite Tunisia being a police state.

In power since 1987, Ben Ali won the 2009 presidential elections with 89.62 percent of votes cast. In The Economist's 2010 Democracy Index, Tunisia ranked 144 out of 167 countries and was classified “an authoritarian regime.” In press freedoms, Tunisia ranked 164 out of 178 countries in the Reporters Without Borders Press Freedom Index 2010, lower than neighboring Libya.

Interestingly, a Wikileaks cable on Tunisia, written by United States Ambassador Robert Godec in 2009, almost predicts the current uprising: “Corruption in the inner circle is growing. Even average Tunisians are now keenly aware of it, and the chorus of complaints is rising. Tunisians intensely dislike, even hate, first lady Leila Trabelsi and her family...Meanwhile, anger is growing at Tunisia's high unemployment and regional inequities. As a consequence, the risks to the regime's long-term stability are increasing.”

Ben Ali however has gone about appeasing the protests in the typical manner of the archetype dictator. The largely peaceful protests were put down by force, over 50 have been killed as of going to press, and scores of demonstrators were arrested – most later released - on spurious charges. And rather than make the necessary sweeping economic and political changes the country needs and then gracefully stand down from office, like Ben Ali made his predecessor do - declaring President Bourguiba unfit to lead - Ben Ali has opted for the scape goat option: blaming the protests on the always convenient “outside forces” and “radical elements.” Yet considering the nationwide scale of the demonstrations and three public suicides by unemployed men, such excuses are laughable.

Ben Ali did make some concessions by firing four ministers, allocating part of the budget for job creation, and ordering the creation of a special committee to investigate corruption and the actions of some officials. But it is Ben Ali's wife and his immediate family that are, by all accounts, the biggest kleptocrats in Tunisia. It is time they went.

Even if Ben Ali survives this debacle, his support base will only be with the military apparatus and not the populace itself. Some are calling the demonstrations an intifada, and if it keeps on going, it might end up being called the Tunisian Revolution. It may even before the first of many in the MENA region in the years ahead. Indeed, Secretary of State Hillary Clinton, addressing the Forum for the Future conference in Doha in mid January, made an unusually stark warning to Arab leaders that they will face unrest, extremism and even revolt unless economic and political reforms are enacted.

PAUL COCHRANE is the Middle East correspondent for International News Services

Vanquish visas and they will come

European tourists visiting the Umayyad mosque in Damascus

Commentary - Executive magazine

Over the past decade the Middle East has shaken off its 'danger zone' reputation of being a place where only the fool hardiest of holiday makers would plan a holiday. Since 2000, the number of tourists visiting the region (excluding Turkey and Israel) has more than doubled, from 24.9 million to over 53 million. And while 2009 saw a slump in international tourist arrivals, down 5 percent, the region was only behind North-East Asia globally in the rise in tourists in 2010, up 16.1 percent, according to the United Nations World Tourism Organization.

Perceived heightened stability, investment, infrastructure development and marketing campaigns have all contributed to the rise of tourism in places other than long-term favorites Egypt, Turkey and the Holy Land.

The rise has partly been fueled by wary Westerners warming to the Middle East as an attractive vacation destination, after being swayed by the flurry of advertising campaigns and travel articles extolling old Damascus' charms, Dubai's palatial hotels and Beirut's infamous “phoenix rising from the ashes” reputation. However, inter-regional tourism has been a key driver for the sector and has corresponded with the emergence of low cost air carriers and the aggressive expansion of Middle Eastern airlines in general.

The rise in tourism has also dove tailed with a resurgent middle class with the desire and enough money to take a trip within the region, but not quite enough cash to splurge on a family holiday to Europe or America. Syria has become a regional poster child in this regard, with its tourism sector exploding since the economy was opened up at the beginning of this century, with visitor numbers surging from two million in 2004 to a record 8.5 million in 2010. What is notable is that the majority of tourists are from the Gulf, with 2.9 million Arabs visiting in 2010, compared to 1.35 million tourists from other, primarily European, countries.

It has been the increased openness of countries that has really encouraged the inter-regional tourism boom, with Damascus scrapping visas for Iranians and Turks, and Turkey last year (2010) abolishing visas for Syrians and Lebanese. Once the regulations changed, there was a 117 percent rise in Iranian visitors to Syria, while the Turkish-Syrian agreement encouraged 482,000 Syrian holiday makers to stream into Turkey, a 113 percent increase, and a 170 percent rise in Turks heading to its southern neighbor. This sensible bi-lateral move resulted in the highest rise in visitors between two countries in the world in 2010.

Meanwhile, Ankara's decision led to 73 percent more Lebanese visiting Turkey than in 2009, and easier visas and marketing campaigns led to 74 percent more tourists from the UAE, a 60 percent rise from Iran and a 47 percent increase from Saudi Arabia. What is curious is that while Arab and Iranian tourist number surged, Ankara's strained relations with Tel Aviv resulted in a 41 percent drop in Israeli tourists, to 80,000 visitors.

That's not much of a surprise though, as politics and outbreaks of violence frequently cause the region's tourism figures to yo-yo from one year to the next. But with all the development and infrastructure investment underway – from airport expansion in the Levant to the colossal aviation hubs in the UAE and Qatar, to the resorts and hotels being built – the region is on track to being a top global travel and tourism destination. Indeed, according to the World Travel and Tourism Council, the Middle East's tourist and travel economy is forecast to rise 40 percent by 2020 from the current $173 billion to $430 billion.

What should be under debate is the scale and feasibility of tourism projects and development – mass tourism versus more sustainable tourism that is not primarily seasonal, has negative social ramifications or ravages the environment. Now is the time for the public and private sectors to plan ahead.

The easing up of borders and visa formalities should expand further to bolster regional travel for Middle Eastern citizens and foreigners; as Turkey and Syria have demonstrated, scrapping visas makes visitor figures jump. After all, tourists that have to go through the whole rigmarole of applying for a visa and then coughing up $50 may be discouraged from visiting, but if you let them in for free, tourists will spend, spend, spend. In Syria's case, $2 billion more in tourism revenues in 2010 than the year before.

PAUL COCHRANE is the Middle East correspondent for International News Services

Hey, big spenders - The Gulf's personal care market

Paul Cochrane reports from Beirut - Soap, Perfumery and Cosmetics magazine

The multi-billion dollar cosmetics and fragrance industry in the Middle East’s six Gulf Cooperation Council (GCC) countries has had a mixed few years in the wake of the global financial crisis, made more unpredictable by demographic change and purchasing behaviour shifts.

In the years leading up to 2008’s downturn, the personal care industry in the region – Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE) – had one of the highest growth rates in the world at some 12% per annum over three years. This was driven by strong growth in the Gulf economies, high oil prices and a surge in affluent expatriates living and working in the region, particularly the UAE.

In 2009, regional sales contracted around 4%, according to global cosmetics giant Beiersdorf, as purchasing power and consumer confidence plummeted. The decline was in line with changes at a macro level with the combined nominal GDP of the GCC countries hitting an all time high of US$1.054 trillion in 2008 but dropping to US$841bn in 2009, according to a 2010 report by the Saudi American Bank Group. But following government stimuli, market consolidation and renewed consumer confidence, the sector appears to be re- bounding in 2010, with the International Monetary Fund (IMF) predicting 4.8% economic growth in the GCC this year.

“Fragrance and cosmetics sales have remained stable in the GCC, but we are seeing a recovery and this should be more significant towards the end of the year,” says Salah al Sagha, general manager of beauty retail at the UAE-based Chalhoub Group, which sells commercial, luxury and Arabic- oriented brands. According to Euromonitor, fragrance accounts for a 31% share of the C&T market in Saudi Arabia and 21% in the UAE, while premium cosmetics command shares of 38% and 26% respectively.

“In beauty, we have budgeted our sales to grow by 6% in 2010, which is an improvement from last year,” continues al Sagha. “Sales by market segments in 2010 have remained almost the same compared to 2009, with fragrance leading followed by make-up, skin care and body care. Fragrance sales have increased (up 2%) whereas cosmetics have suffered versus last year.”

The value of the cosmetics and personal care sector in the GCC was estimated at some $2.1bn in 2008 by a paper released by German trade fair organiser Epoc Messe Frankfurt. Meanwhile, while a recent report by the International Journal of Business Strategy (IJBS) estimates fragrance sales in the region at $3bn a year in 2009, approximately 20% of the global market. The luxury cosmetics and fragrance sector is estimated to be worth $1bn, according to al Sagha.

The biggest indicator of change in the market has been in consumer purchasing behaviour for the perfume sector, with consumers buying a product on average once a month before the recession compared to once every two months today. As a result, the average transaction has dropped from $136 to $81, according to the IJBS report. “The spending power decline within our core target segment has undoubtedly affected the movement and volume of sales,” says Abdulla Ajmal, deputy general manager of Ajmal Perfumes in the UAE, one of the region’s leading oriental perfume manufacturers and retailers. “Where before a customer would pick up five or six big ticket items, they now prefer to buy one or two and come back to replenish. I don’t think our core customers have lost their spending power. I think it has more to do with taking a cautious approach and evaluating every purchase decision with much more scrutiny than before.” The Chalhoub Group has noted similar trends. “All customers in the Middle East are now looking for value. It doesn’t mean they are looking for more affordable items, but items that feel durable and feel like they are offered at the right price, whether these are basic or luxury items,” says al Sagha. “People are also looking for choice rather than price so we aim to optimise what we offer in substance.”

RETAIL SCENE

The retail environment in the Gulf, which has matured in recent years, has also been affected by the slow-down, with less successful malls and outlets closing down while segment differentiation has become more apparent due to the recession. “The past few years saw incredible growth in retail outlets, fuelled by incredible demand and also due to the willingness of consumers to try new products,” says Ajmal. “As the demand slowed down, the more established players in the market have managed to hold their positions, resulting in consolidation, while small retailers have suffered the most. But the divide between the different segments is clearer now. Luxury retailers continue to stock luxury products and value- based propositions are now offering added value to entice consumers into making purchases.”

Companies have adapted business strategies as a result by offering a greater array of products to suit certain economic demographics, opting for strategic partnerships instead of tactical agreements and investing in service, marketing and brand promotion.

CLIENT BASE

In such a multi-demographic market as the UAE - catering to locals, GCC citizens, expatriates and tourists - the sector has been affected in different ways from other Gulf countries. This was reflected in the biggest change in Chalhoub’s UAE clientele being a drop in tourists from eastern Europe. “We used to have 20% of our customers coming from Russia and eastern Europe, but since 2009 they represent 3%,” says al Sagha. Emirati and GCC citizen clientele has in contrast increased by a few percentage points, rising above 20% each of overall customers, offsetting the decline in tourists. Benefiting both local and visiting shoppers, the UAE imposes no VAT and has low import tariffs on its cosmetics and fragrances so prices are around 25% cheaper than in western Europe.

A turnaround in sales to UAE bound tourists has occurred this year however in the second biggest cosmetics and fragrance market in the GCC after Saudi Arabia, indicated by duty free sales at Abu Dhabi airports, up 19% in the first half of 2010 on the previous year, and at Dubai Duty Free, up 16%. Perfumes, which account for 14% of total sales at Dubai Duty Free, had sales of $84m in the first half of 2010, representing an 18% increase over the same period last year, while cosmetics sales rose by 26%.

Despite the slow-down since 2008, the Gulf still has one of the highest per capita spending on perfume in the world at $326 annually, according to IJBS. While sales to expatriates and tourists in the UAE have dropped, it is Emirati citizens who are keeping cosmetics and fragrance sales buoyant, with disposable incomes staying high due to secure public sector jobs and government endorsed employment programmes.

It is a similar story in other Gulf countries, which were not as exposed to the international markets and have fewer affluent expatriate workers and less developed tourism sectors.

“Perfume sales in the Gulf continue to grow, albeit at a much slower rate than before,” says Ajmal. “There are a few countries within the Gulf that are primary drivers of this growth – for us it has been Saudi Arabia which was up by 27% for the first quarter compared to last year.”

In cosmetics, Saudi Arabia has also remained strong, with sales reaching $2.4bn in 2009, while analysts predict the cosmetics market will grow by 11% this year, according to figures published by the Financial Times.

FRAGRANCE DOMINATES

A recent survey focused on affluent female customers, carried out by Chalhoub in conjunction with research firm Nielsen in the group’s key three markets of Saudi Arabia, the UAE and Kuwait, highlighted the continued high spending on cosmetics and fragrances in the Gulf.

“For beauty items, the Saudi shopper spends $650 on average every three months, but is far behind the Kuwaiti customer with an average monthly spending of $800. Across all territories, fragrance is the most important item (a minimum of 40% of the beauty budget) followed by make-up (35%) and skin care (20% to 25%, depending on the country). It is interesting to note that skin care is still mainly bought in supermarkets in the Gulf,” says al Sagha.

With fragrance so important to the sector, particularly among Gulf citizens, a wide variety of French, American and oriental perfumes are on sale in the region. This has particular impact on the oriental sector, which brings out new perfumes every year to meet consumer demand.

“We have over 100 perfumes within our stores today,” says Ajmal. “Some of these products are classics, like Dahn Al Oudh Moattaq, which have been on the shelves for more than ten years, and other products which are newer introductions. Typically we create up to ten products within a calendar year. This is a lot if you look at the industry standard, but this is primarily because of the way the local market operates. Our consumers are always in search of something new.”

The region’s burgeoning young population has also helped to retain sales and provides for a positive long-term outlook for the cosmetics and fragrance sector. “The youth market is significant in the Middle East, where over 50% of the population is younger than 30, and we constantly adapt our offer to answer these needs,” says al Sagha. “In beauty, we are very much helped in this regard by the major brands in the industry, with their strategic launches in 2010 targeting the young generation, so that helps us to reach out to these customers. For example, this June we launched exclusively at our Faces stores the latest fragrance by Lancôme, Trésor In Love. This fragrance is a ‘younger’ version of Trésor, aimed at the 15-25 year-old women, so it was very strategic for us but also very successful.”

Copyright SPC

Egypt's clothing industry starting to bloom

By: Paul Cochrane for just-style.com | 17 December 2010

Over the past five years Egypt has cemented its position as a fashion hub for European and American high street brands, with average annual garment exports earning the country US$2bn. Yet domestic labels are generally not exported and high-end clothing manufacturing is still very niche.

"Fashion manufacturing is still rather new to Egypt, as this requires high skills and a fast turnaround time, but the sector has developed a lot in garment manufacturing since 2005," explains Dr Hala Hashem, chief executive officer of Al Arafa for Investment in Garments Manufacturing.

The company, headquartered in Nasr City, Cairo, exports to Zara, JC Penny, Macy's, Banana Republic and Gap, while in men's formal wear sells to Debenhams, House of Fraser, Massimo Dutti, Ben Sherman, Racing Green and the Valentino Fashion Group.

"We are not driven as a society by fashion, unlike say Lebanon, and we don't have a heritage of strong local brands," she adds.

Egypt is the European Union's (EU) sixteenth largest supplier of clothing and is becoming a more important export market for Egyptian manufacturers due to the downturn in orders from the United States, a long-time trade partner due to preferential trade agreements.

Exports are currently split 60% towards Europe and 40% for the US market, down from a 50:50 split before the financial crisis, according to Bassem Sultan, CEO of Alexandria-based Dyetex, and treasurer of the International Textile Manufacturers Federation (ITMF). Exports are predominantly low to medium-priced garments, with few companies manufacturing high-end fashion items.

However, Sultan believes the sector has potential over the next few years to manufacture high-end garments. "Already some manufacturers have started producing high-quality fabric shirts for Italian and Swiss companies, and I think the Egyptian market for export is growing," he says.

Rising orders fuel optimism

Egypt has gained orders recently due to rising domestic demand from the Far East, which has reduced capacities for export to Europe.

Combine this with the benefit of low labour costs and geographic proximity to the European market, and optimism for growth is strong.

Another sign is the launch of a boat carrying product between Egypt and Venice. "We have not yet fully utilised its benefits, but it has reduced the logistics time, especially with Italy, and the sector is now at a similar stage to Romania six years ago," explains Dr Hashem.

Indicative of the sector's potential growth strength is the news that retailers Zara and Tesco will open sourcing offices in the country next year. "It gives Egypt positive vibes that they are coming here," says Dr Hashem.

Egypt's domestic clothing manufacturing sector, estimated to be worth US$1.6bn according to Sultan, is not however involved in the production of clothes sold by foreign retailers in the country.

"We manufacture for Nautica, Dolce & Gabbana, and Calvin Klein, but it is only for export," says Sultan, adding that Egypt does not produce a wide enough selection of items to cover a brand's full range.

Retail market opening up

Since 2005, international retailers such as Zara, Paul & Shark, Lacoste and Benetton have entered the market as malls opened in the capital Cairo, while next year Marks & Spencer will open two stores.

With Egypt having a low GDP (gross domestic product) per capita of US$5,700 a year, only around 5-7% of the population can afford higher cost clothing, explains Sultan.

Retailers are nonetheless faring fairly well though, selling to affluent Egyptians and tourists from the Gulf.

"The retailers are still testing the Egyptian market but they underestimated it," says Dr Hashem. "They are not offering the same amount of items as I see in Europe, which I think is a mistake.

"I think in due time the big retailers will understand how things work in Egypt. It also depends on the model, as the most successful has been Benetton, as the clothes are manufactured and imported from Syria, and they understand the Egyptian market," she notes.

One of the few local brands with export potential is Al Arafa's label 'Concrete', which it bought ten years ago.

In the Egyptian market for 20 years as a mid-to-high end clothing store for men, with Italian style fabrics and designs similar to American label Gant, Concrete has 45 outlets in Egypt.

Dr Hashem says her company plans to export Concrete to the Gulf, Turkey and Europe. "This is not a common practice in Egypt as it is not easy to go with your own brand to where competition is, but Concrete is one of the best known names in the country."

Naoshima Art Island Part 1 - Benesse Art Museum

One of two giant pumpkins by Kusama Yayoi on Naoshima, this one by the ferry port

Part One of a two part series on Naoshima “art island” in Japan's Inland Sea, around one hour from Okayama by train and ferry.

By Paul Cochrane in Naoshima for Aishti magazine

Viewing art is more often than not an urban activity. Galleries and museums don't tend to be tucked away in forests or on small islands only accessible by ferry. But a remote location showcasing artistic masterpieces has the air of a pilgrimage about it as well as providing a more relaxed setting to ponder and appreciate the art you have traveled so far to see.

There was certainly a feeling of anticipation in the air as visitors boarded the ferry for the 15 minute ride from the mainland, around five hours by train from Tokyo, to the island of Naoshima in Japan's Inland Sea.

This is not a place that is on most visitors' to-do list when visiting Japan, like including an afternoon to tour the Louvre when in Paris. Naoshima attracts the artistically inclined, whether architecture students staying at youth hostels near the port or well-heeled art aficionados checked in at one of the four hotels run by the Benesse Corporation.

Naoshima is an island that had a dwindling population as the youth left for the high-tech cities before new life was breathed into it 20 years ago by Benesse, which had a growing collection of modern art in need of show casing.

Established in the early 1990s, the Benesse Art Site Naoshima has evolved from one art museum, the Benesse House Museum, to house a second museum, Chichu (see part two), and the Art House Project, where artists transform spaces into artworks while restoring old buildings.

In fitting with its “art island” moniker, works of outdoor art are dotted around the coast, including the giant pumpkin sculptures by Kusama Yayoi that have become symbols of Naoshima. Yayoi's bright red pumpkin at the fishing port signals the island's artistic bent, while the yellow pumpkin near the Benesse museum stands in colorful contrast to the rugged coastline and maritime backdrop.

Even the island's sento – public bath – is a fully functional, if somewhat surreal, art installation designed by Shinro Ohtake called "I ♥ Yu" – a word play on you and yu, which means hot water in Japanese. On top of the wall separating the men and women's bathing sections is a stuffed Indian elephant.

The Benesse House Museum designed by award-winning architect Ando Tadao merges two different functions – museum and hotel – in one building, with the art collection open to the public during the day and accessible at any time to hotel guests.

As much a piece of art as the works on display, the museum is set over three floors that utilizes natural lighting, minimalism and curves to highlight 38 paintings and art works. Set into the side of a hill with a panoramic view of the sea, art work is visible from inside and outside the museum while Tadao's design fuses nature and architecture to encourage what it means to benesse, Latin for 'live well'.

Displaying some of Japan's best contemporary art, the museums also houses work by Jasper Johns, David Hockney, Jackson Pollock, Andy Warhol, and Yukinori Yanagi.

In an almost cavalier attitude for a museum, the painting on the wall of its restaurant is by Jean Michel Basquiat. Yet when on an art island, if you can visit a museum in the middle of the night and bathe among art, why not eat among art?

Photographs by Paul Cochrane

Naoshima Art Island Part 2: Chichu Art Museum

Walter De Maria's spheres on display outside Benesse Art Museum

By Paul Cochrane in Naoshima for Aishti Magazine

A remote island in Japan's Inland Sea is not where you would expect to find a gallery devoted to Claude Monet's “Water Lily” series. Nor to be the location of what can only be described as a sublime museum experience.

Located five hours by train from Tokyo, the Benesse Art Site Naoshima has been delivering the unexpected to visitors since it was established in the early 1990s, with a modern art museum featuring works by the likes of Jasper Johns and David Hockney, outdoor art and art house installations (see part one).

To make the journey that more enticing, Benesse Corporation, the brains behind the “art island” concept, embarked on a second project in 2004, the Chichu Art Museum.

Created to “consider the relationship between nature and human beings,” Chichu holds the work of the Impressionist Claude Monet (1840-1926) and American artists Walter De Maria (born 1935) and James Turrell (b. 1943).

In displaying just three artists, Benesse found the right balance that evades so many museums: not enough to experience or too much art to process – often a problem at those large metropolitan museums.

Making this experience possible was architect Tado Ando's stubborn refusal to have an exterior design rising out of the ground like some kind of monument. Instead the architecture is limited to an underground structure of concrete, steel, glass and wood that uses natural light to light up passageways and galleries.

Ando's minimalist style lets the viewer interact with the sky as the light changes and the clouds move, a theme running throughout the galleries. In the Monet gallery, the overhead natural light illuminates the five paintings of water lilies and is accentuated by the room being entirely white, as if to push the lilies off the canvas into 3D life.

Turrell's work fuses with Ando's design. “Open Sky” uses LED and Xenon lamps to steer the gaze skywards to consider light as art itself, while “Open Field” takes the eyeballs to the limits of light and spatial awareness.

Using fluorescent and neon tube lighting, Turrell lit up a room that is accessed by several broad marble steps within an underground gallery. After visitors have been advised by an attendant to walk slowly forward once inside the low-ceilinged room, the shoe-less visitor inches along in a white light that makes the mind lose the sensory perception of where the room's walls begin and end. It is an unforgettable example of interactive installation art.

In the spaces between galleries, the subterranean setting makes light increase and decrease in proximity to windows, slits and doorways. Time and the cycle of the day are apparent.

De Maria's “Time/Timeless/No Time” is a space defined by specific measurements so that an oblong-shaped window in the ceiling makes the work constantly change from sunrise to sunset. Dominated by a 2.2 meter diameter sphere and 27 wooden sculptures applied with gold leaf, the sky is reflected on the dark sphere and moves as the viewer walks around the cavernous room.

Outside the museum, as the visitor enters and leaves, a garden planted with flowers, plants and trees cherished by Monet at his garden in Giverny sets the impression for a museum that is at one with its natural surroundings.

For further information go to naoshima-is.co.jp

Architects, product designers, students, art lovers and a Gaijin journalist at the Kowloon hostel in Naoshima - courtesy of Yosuke Shimano

Photographs by Paul Cochrane

“The East Moves West”

Asia’s ascendancy shifts economic clout in the region


Book review - Executive magazine

Labeling this region as the “Middle East” or the lesser used “Near East,” is standard practice in the West, but the region can equally be called “West Asia,” the opposite end of a vast landmass that spreads from Vladivostok and Shanghai all the way to the Bosporus and the Suez Canal. This designation makes sense given the area’s historic ties and the ancient Silk Road trading routes.

Today there is a new Silk Road, with flourishing two-way traffic between the rest of Asia and the continent’s eastern end, particularly Gulf Cooperation Council (GCC) countries and Iran. In Geoffrey Kemp’s book “The East Moves West,” he sets out the case for this burgeoning relationship and where it is likely to go. Kemp, an American foreign-affairs think-tank director, adeptly steers the reader through the ties that bind Asia together, from the geo-strategic importance of Central Asia to the big players: China, India, Pakistan, Japan and South Korea, covering economics, energy, politics, military ties and infrastructure projects.

It is a relationship that is clearly centered on energy supplies, with some 40 percent of China’s oil coming from the GCC, India receiving 45 percent of its oil from the Middle East, and Japan reliant on the region for 90 percent of its oil. Such reliance on the region’s resources has resulted in mutual dependence.

With Eastern economies in ascendancy while the West hobbles along, this relationship is set to flourish, with significant economic and political ramifications. Energy dependence on Iran, for instance, has been crucial in allowing Tehran to survive the economic sanctions imposed by America and Europe to curb its nuclear program.

The big question, as Kemp sees it, is whether Eastern Asia’s role in the region will grow beyond the traditional buyer-seller relationship. Economically, it has started to change over the past five years, with Asian countries inking contracts worth $500 billion for infrastructure projects in the Middle East, while the GCC has invested more than $250 billion in East and South East Asia. Both East and West Asia want more.

Iran and Saudi Arabia have adopted a “look east” approach for market growth, while New Delhi considers the GCC, to quote India’s former commerce minister, “as part and parcel of India’s economic neighborhood.” The statistics only reinforce this. For India, the economic relationship with the GCC is more important than with the European Union, the Association of Southeast Asian Nations and the United States, totaling $86.9 billion (excluding oil) in 2008-2009.

The UAE is India’s jewel in the GCC crown, the country’s second biggest export destination and the Emirates’ largest importer, accounting for a third of its trade in the Middle East. With Indians making up 33 percent of the UAE’s population and 50 percent of its workforce (of which 25 percent are unskilled workers, 50 percent semi-skilled and 25 percent professionals), it’s no wonder the UAE labor minister said in 2007: “God forbid something happens between us and India and they say, ‘Please, we want all our Indians to go home’... our airports would shut down, our streets, construction…”

With the US flailing in Iraq and Afghanistan and its credibility shot in much of Asia, East Asia seems set to be the new player at the table. But so far the Asian nations have largely refrained from the political arena of the region’s western extremity.

As Kemp notes: “How long they can sustain their hands-off approach is questionable if…they get drawn into the messiness of Middle East politics at a time when the US becomes disillusioned by the burdens of hegemony.”

There are a lot of “ifs” in the book, but given all the certainties proclaimed by Washington of late in its future prognosis for the region, Kemp refreshingly gives plenty of room for thought about the potentials of the new Silk Road.

Middle East Confectionery Manufacturers – Expect Local Expansion

Confectionery Production magazine

By Paul Cochrane in Beirut and Damascus

The Middle East's confectionery market (the Gulf, the Levant, Egypt, Iraq, Iran, Turkey and Israel) was valued at USD$113 billion in 2009, while annual chocolate sales exceeded USD$4.2 billion, according to USA-based TNS Media Intelligence. While multinationals such as Cadbury, Masterfoods and Kraft are dominating, local manufacturers are expanding to retain and aiming for increased market share. These low to mid-priced confectioners have a strong national and regional market presence but there is less potential for expansion into the highly competitive and more mature European markets. There is, however, potential for expansion in the super premium chocolate category, which has grown over the past decade, particularly in the affluent Gulf economies.

Lebanon's Patchi produces a variety of high-end and decorated chocolates that are primarily sold in the Middle East through Patchi's deluxe boutiques, followed by the Far East, Azerbaijan and Europe. This year the company opened branches in South Africa, Moscow and two new branches in London in addition to a branch within Harrods. Producing some 4,000 tonnes of chocolate every year distributed through its 140 global outlets, Patchi plans to expand into the European market through franchises, says Nizar Choucair, Patchi’s founder and chairman. This is likely to lead to a further diversification of its offerings due to regional differences in chocolate demand. “Most of the Arab countries prefer milk chocolate while in Lebanon and Europe, it is mostly dark chocolates,” notes Choucair. The company has a very modern production process that includes Swiss technology and it uses no eggs, gelatin, preservatives or artificial ingredients are used, while Patchi has 30 fillings, including almonds, pistachios and hazelnuts to fruit dragees.

Re-attaining global status

Regional competitor Ghraoui, based in Damascus, Syria, has been in the confectionery business since 1931, producing over 120 types of confectionery, including a wide range of chocolates, fawakeh mujaffafa (Arabic for dried fruits), Turkish delights, nougats and marzipan.

“Every year we try to introduce a few new products, and keep the product line young and fresh,” says Mohamed Midani, Vice President of Ghraoui.

Ghraoui won gold medals for its products in 1937 in Paris and in 1939 in New York, but its international presence waned until 1996 when a new, state of the art factory was established. Over the past decade Ghraoui has worked to reposition itself in the Middle East and abroad, winning the prestigious Paris 2005 Salon du Chocolat's “Prix d’Honneur”.

Currently, Ghraoui has 18 stores in Syria and the region, including Jordan, Kuwait and Dubai. “We are in discussions with franchises in the region and looking to Europe, North America and the Far East. We are trying to reattain the global status of the company,” explains Midani. Sales are evenly split between domestic consumption and export, but Ghraoui aims to have exports account for 80 to 90 percent of all business.

With higher purchasing power in the Gulf and Europe, these will be focus markets. “We are exporting to France and Europe, and the European Union partnership agreement will help that as we are paying a high amount of tax,” said Midani. Boxes of chocolates retail for Euro 70-80 per kilogram in France, he adds.

To bolster export competitiveness, Ghraoui is applying for ISO and HACCP accreditation over the next year. “We try to do as much as possible of the A to B supply chain, we make our own chocolate mass as we buy our cocoa from west Africa origin, while other ingredients such as fruits and nuts are bought fresh directly from the farmers and processed in house to prepare the fillings used in our products,” says Midani. “High quality luxury products from Syria is not what people have in mind, so it draws a bit of attention,” he adds.

Chocodate

Money is certainly to be made by quality confectioners in the Gulf. In the United Arab Emirates, the chocolate market was valued at USD$148.7 million in 2008 by AC Nielsen, with strong growth in the premium range to cater to wealthy citizens and expatriate demand. In addition to the multinationals, some 20 confectionery companies are based in the emirates.

The UAE-based La Ronda, owned by Notions Trading, has a production capacity of some 3,000 metric tonnes and has a 5-15 percent market share in its chocolate categories in the Gulf and Levant.

“Our most popular item is Chocodate, a product discovered through trial and error many years ago and that is a combination of almonds, dates and chocolate,” says Razan Al Masri, Marketing and Communications manager at Notions. “Since production started 15 years ago, the owner insisted on not widening the range, so it's like Ferrero Roche in that we have one major product, although we offer collections of that product,” she adds.

Each chocodate weighs 10 grams, coming in 500 gram boxes, a three piece box of 33 grams, 90 grams, 180 grams and 800 grams, which sells for USD$13.60 (50 AED). Chocodates are exported to Europe, the United States, South America and Africa, while their main regional competitor is Masterfoods' Galaxy Jewels Assorted Chocolates box.

With plans to moves to the Dubai Investment Park to establish a new headquarters and purpose built factory by year end, La Ronda is to aggressively expand over the next five years.

“Our plans right now, after the summer, is to have a more constant exporting schedule to Europe, particularly to Britain and Germany,” says Al Masri.

EU offers access

Confectionery manufacturers in the Middle East are not only ideally placed geographically to sell their products to the rich European Union (EU) market, they are assisted by a series of free trade agreements either in place, or in the works.

Turkish confectioners can take advantage of a customs union with the EU which covers processed foods (although some restrictions and tariffs apply for unprocessed ingredients).

An association agreement with Jordan will establish a free trade area between it and the EU by 2014. Under an EU-Lebanon association agreement, many Lebanese confectionery products already enter the EU duty free. The European Commission has proposed the negotiation of trade.

The European Commission has proposed the negotiation of a trade and cooperation agreement with Iraq. There is currently no EU trade deal in place with Saudi Arabia.

Meanwhile, ratifications await new free trade deals between the EU and Egypt, Syria and Israel – all of which would liberalise the trade in confectionery products between the EU and these countries.

Photographs courtesy of Ghraoui

Gold’s glorious 2010

Commentary - Executive magazine

It's been a glittering year for gold globally, with a Troy ounce (31.1 grams) rising $300 to a record $1,424.60 in November, before backing down slightly into the high $1,300s as Executive went to print. And it’s been just as bright a year for the precious metal in the Middle East. The Saudi Arabian Monetary Agency (SAMA) re-checked its accounts to find it had 180 tons more than it originally thought, Lebanon's central bank reserves appreciated by more than $2 billion to close on $13 billion, and gold bugs in the United Arab Emirates were given the novel option to buy 24 karat bars from vending machines.

For individuals and governments alike, gold has been the go-to “alternative monetary asset,” as World Bank President Robert Zoellick put it in November.

Bullion took on a new allure as the United States dollar and the euro continued to weaken amid ongoing concerns about the financial markets, and central banks sought to hedge against inflationary pressure. Driving demand even higher was the inability of institutions and currency hawks to buy Chinese renminbi, as its exchange is restricted, leaving few options to hedge against further drops in the world's two leading currencies. Gold's surge has raised debate about whether the precious metal should have a monetary role four decades after the US ended the gold standard. A return to the gold standard is not likely, or indeed necessarily wanted, but any country that sold off a good chunk of its gold, like Britain did a decade ago, is today regretting not having hard assets tucked away in the vaults.

For dollar-pegged currencies, which includes Lebanon and most of the Gulf Cooperation Council (GCC) countries, holding sizeable gold reserves has been a real boon. Five Middle Eastern and North African (MENA) states are in the top 30 countries in the World Gold Council's (WGC) World Official Gold Holdings rankings. But it is not the usual suspects of the oil-rich Gulf states taking the titles: Lebanon ranked 18th globally — just behind Britain and ahead of Spain — with 286.8 tons, equivalent to 25.2 percent of the central bank’s total reserves. Algeria, ranked 23rd, has 173.6 tons, Libya is right behind with 143.8 tons, and Turkey is in 29th place with 116.1 tons,

Out of the GCC nations, only Saudi Arabia makes it into the top ranking, leaping from 24th to 16th place in March when SAMA announced that, incredibly, due to “a difference in accounting” rather than new gold purchases, the kingdom had 322.9 tons instead of the earlier announced 143 tons. One can only wonder how much unaccounted-for gold there may be still hidden under the tiled floors of the Saudi central bank when such a staggering discrepancy is revealed. Furthermore, such holdings are only the reserves of SAMA, not the private stash of the estimated 7,000 members of the Saudi royal family, nor of Saudi citizens. Then there is the vast amount of gold ore lying under the kingdom's sands, estimated at 20 million tons, according to Australian government statistics. The Saudi Arabian Mining Company (Ma'aden) has five operating gold mines, with proven gold ore deposits of 1.3 million ounces and current exploration suggests deposits of more than 8 million ounces elsewhere on its acreage. This year British and Australian gold mining companies obtained exploration licenses.

With gold production having peaked in 2011 at 2,645 tons, and the output of the four traditional producers — South Africa, the United States, Canada and Australia — on a downward curve, Saudi Arabia, in addition to its gushing black gold, appears to be experiencing a gold rush of the more traditional type.

The big question now is whether gold will continue to rally in 2011. Gold bugs are dreaming of an ounce hitting $2,000, while other pundits suggest the rally may be over and it is better to buy silver.

MENA central banks holding gold appear to have no desire to sell. As Riad Salameh, the governor of Lebanon’s central bank, told Reuters in October: “Lebanon will sit on its gold... In a world where you could see major crises, the payment instrument of last resort is gold — especially for a country like Lebanon that doesn’t have natural resources.” The same could be applied to individuals. Personally, as a gold bug myself, I'm hoping for another glittering year in 2011.


PAUL COCHRANE is the Middle East correspondent for International News Services

The Ongoing Legacy of Bhopal: Injustice and Anti-corporate Resistance

by Paul Cochrane in Bhopal
November 5th, 2010 - dissidentvoice.org

The Sambhavna Trust Clinic (STC) receives over 180 victims of the Union Carbide gas leak everyday. It has to turn away patients as it lacks the resources to treat them all. The STC refuses to take corporate donations, not wanting to play into the PR propaganda machine, and is wary of the motivations of NGOs. “We think there is a need for space free from corporate manipulation,” said Satinath Sarangi, managing trustee of the STC.

The clinic is just 400 meters away from where 40 metric tonnes of lethal Methyl Iso-Cynate (MIC) gas billowed from the Dow Chemical subsidiary Union Carbide factory in 1984, exposing over 500,000 people, instantly killing some 8,000, and causing 25,000 deaths in the past 26 years. Today, some 120,000 to 150,000 people are chronically ill from exposure to MIC, approximately 10% of Bhopal’s population.

The MIC factory is visible from the second floor of the clinic, which was purposely built in the vicinity to treat the worst affected in a highly impoverished area of the city, with 24,000 Bhopalis registered with STC for long-term care.

The list of medical conditions is long, from respiratory problems, nerve disorders, blindness, chronic obstructive pulmonary disorder, brain damage, paralysis and gastric issues, to reproductive problems and stunted growth in children. According to a 2010 paper by the American Journal of Industrial Medicine, titled “Effects of Exposure of Parents to Toxic Gases in Bhopal on the Offspring,” of women pregnant at the time of exposure, 43.86% lost their child.

“Our data are suggestive of delayed growth of the male until puberty and some slowing of growth of the female after attaining puberty,” the report further states.

Gas exposure also weakened immune systems, which has resulted in survivors more prone to die of disease, whether malaria, tuberculosis (TB), typhoid or dengue fever.

“TB is four times higher here than elsewhere in the country as the immune system is weakened, according to studies by London School of Hygiene & Tropical Medicine,” said Sarangi. “The researcher, Dr Neil Andersson, said Bhopal was like chemical aids.”

A woman waits for an appointment at the Sambhavna clinic

A festering wound

The MIC gas leak in Bhopal ranks as one of the world’s worst industrial accidents, and is a glaring case of justice denied. It is a tragedy, and one that has been made far worse than it ever should have been by the criminal negligence of Union Carbide/Dow Chemical (UC/DC) and the Indian authorities. Both parties (the Indian government and Indian stakeholders had a 49.1% stake) have downplayed the number of deaths, the number of victims and withheld information on what happened that fateful night at the factory, as well as locking survivors into decades of legal battles in their quest for compensation. UC/DC absconded from its legal charges in India and the CEO at the time, Warren Anderson, has not been extradited from the US to India to face charges brought against him – an effigy of him is burned every year on the anniversary of the tragedy in Bhopal. On top of all of this, there has not been a thorough clean up of the MIC’s factory, its surroundings and the ponds full of toxic sludge.

A toxic pond in the MIC compound

A boy sifts through rubbish inside the MIC factory compound

When compensation has come, it has been woefully inadequate. UC/DC paid out just $470 million in compensation, which the Indian government then sat on for years earning interest before reluctantly doling out the money in 2004. Survivors got just 25,000 Rupees ($555) each, of which many had already spent significant amounts on doctors, lawyers, transportation and bribery to get their cases to court. Compare that to the amount the US government forced BP earlier this year to stump up for the Gulf oil spill – $20 billion.

“There is clear double standards and racism. Dow Chemical has accepted the charges against Union Carbide in the US, whereas in Bhopal they say they are not liable. And there are many parallels with the BP oil spill. Information was similarly suppressed there,” said Sarangi. “What has happened here in Bhopal is a guidebook for how to escape corporate liability,” he added.

As Sanjay Verma, a baby at the time of the leak who survived due to his sister wrapping him tightly in blankets (the other 8 members of his family died of gas exposure), said: “Wounds heal over time, but in Bhopal the wounds get worse.”

It is also a lingering wound for Dow Chemical’s “brand name” through its refusal to deal honestly with the tragedy. The disaster, which has become synonymous with Bhopal, is forever a black mark against Dow. You can run, but you can’t hide.

Bhopal has become a clarion call for activists and the anti-globalization movement, a poster of the “true face of globalization” and the dark side of the “new world economy” where a multi-billion dollar company can get away with murder in a country where 80% of the population lives on less than $0.50 a day and through connivance with a government ready to pander to foreign companies in the ceaseless desire for capital. It is as crystal clear a case as you can get of profit before people.

Yet while Bhopal shows that while a crime can be committed and go essentially unpunished, it won’t be forgotten. It is a simmering issue with Indians and many around the world. Indeed, Verma, a local fixer, said he assists on average two journalists every month and dozens during the lead up to the anniversary. Bhopal is that rare thing, a continuous, ongoing media story.

“The Bhopal issue is still very potent, that even after so many years Bhopal is still a crack in the system, and lays bare corporations and government lackeys for what they truly are,” said Sarangi.

Slogans on the outside wall of the MIC factory on Union Carbide Road

A blow to US-India relations?

Bhopal is complicating US-India relations. In August, Delhi passed a law that could make nuclear power companies liable for damages in the advent of an accident, which has become a concern for US nuclear players eager to get in on India’s 123 Nuclear Agreement with the US that was signed in 2008 to develop civilian nuclear power.

Indian politicians, including the right wing BJP party, want the Bhopal tragedy to be raised with Barrack Obama when he visits India this coming week. Even if it is not broached, Bhopal will be a cloud over the president’s first visit to India. Four leftist political parties, activists and survivors of the gas leak will descend on the capital to picket Obama, and have called for a “a countrywide day of protest” on Nov. 8, for “justice for the victims of the Bhopal Gas accident” along with withdrawing troops from Afghanistan and ending funding to Israel. “We are going to Delhi to be heard at Obama’s visit,” said Sarangi.

But while issues of terrorism, strengthening bilateral ties and the usual mumbo-jumbo will be on the table when Obama visits, business will of course get a top billing.

“Obama is coming with the largest ever entourage of business representatives to get deals in India, but there has not been a single step to ensure that companies should abide by the law of the land or listen to the courts,” said Sarangi. He added that the United States-India Business Council (USIBC) will do what it can to prevent such laws being applied to US companies and for Anderson to not be extradited. “The USIBC has played a prominent role in the continued injustice of Bhopal,” he said.

A flier in Hindi from a demonstration during George W. Bush's visit to India, on the right is Warren Anderson

Getting Anderson into an Indian dock seems unlikely. He is 89 and retired, and with no Mossad-like agency to track him down like members of the SS guilty of Holocaust atrocities and crimes against humanity, Anderson can continue his pampered existence in the Hamptons. Moreover, it would set a bad precedent if the US handed him over. It would mean that could happen again, opening a Pandora’s Box for corporations and management wanted for breaking laws around the world. Moreover, as the financial pundits say, it would discourage US and foreign investment in India.

“No Hiroshima, No Bhopal, We Want to Live” is carved under a sculpture to the victims of the gas leak outside the UC factory. Let us hope not, but while pressure will continue to be put on the US government and Dow Chemical, the system is still operating to the mantra “business as usual” and India is keen to strengthen its ties with Washington. But the momentum is still there and the Bhopal tragedy refuses to go away.

Although there are very few positives in the aftermath of the Bhopal gas tragedy, lately there have been some developments. In June, a court sentenced seven former Union Carbide employees, all Indian, to two years in prison and fined 100,000 Rps ($2,100) each. The former Indian arm of Union Carbide was convicted of negligence and fined 500,000 Rps ($10,600). Some 26 years later, it is a case of very overdue justice, even if not severe enough, as activists rightly point out.

The authorities also decided to provide further compensation to those that lost a relative in the tragedy – although not to survivors – of 1 million Rps ($22,000). The issue now is whether people will get that amount, and what they are due.

Bring back the dead

Shamshad Begum lives in a one-room house down a small alleyway off Union Carbide Road, which flanks the MIC factory. When the gas escaped from the factory at five past midnight on December 2, 1984, Begum ran with her husband and two daughters, leaving her mother in law and young son behind as they weren’t able to move. “Bodies filled the roads. The gas was a blue colour, my throat felt bitter and we were all choking. I felt like I wasn’t going to survive, I was going to die, and I thought it better to die than breathe. My daughter’s eyes turned red, like a flame,” she said.

Her mother-in-law died that night, her son the next day. In the following years, she lost three children during pregnancy. A second son died in 1988, her eldest, married daughter is sick all the time, and her 15 year old daughter suffers from lung problems – yet she doesn’t want her to know – while her husband died three years ago from gas related side effects. “I’ve lost half of my family due to the disaster,” she said. “My husband got 25,000 Rps for the death of his mother. But in the end, when he was dying, he suffered a lot; what is 25,000 Rps?”

Without a husband or son to earn money, Begum struggles to survive on a widow’s pension of 150 Rps ($3.33) a month and renting out the next door room to migrant labourers for 400 Rps ($8.88) a month. Begum is hopeful that she will be given the 1 million Rps in compensation for her husband’s death and be entitled to a further million for the death of her mother in law so she can move away from Bhopal to live in “a clean and healthy place.” But Indian bureaucracy is not helping matters. “We submitted original death certificates and documents years ago, and now they want the originals again, but they have them, so there’s more paper work to do to get them back. They are delaying everything,” she said.

“I want to give a message, that corporations shouldn’t be allowed to operate that kill people and make them sleep forever,” said Begum. “I would tell them [UC/DC], give us the people back who died from our families, not compensation, give them back to us.”

Low income housing next to one of the toxic ponds, the disintegrating plastic visible in the foreground

A poisoned soil waste dump

For visitors and the press to enter the abandoned Union Carbide factory they need to get permission from the Deputy Collector (Gas Relief) in Bhopal, which typically takes 24 hours. This must be presented to the policemen at the entrance to the factory who then guide visitors around the site. Locals however do not need such paperwork, they can simply walk into the compound from the slums that surround the factory to scavenge for wood, graze their livestock or relax in the shade of the vegetation. The crumbling factory, offices and buildings aside, it is green and lush place, full of trees and tall grass. Chipmunks scurry about and birds twitter in the tree tops. It resembles a park in the middle of a city. But as a stencil on the outside wall of the factory states under a skull and cross bones, this is a “poisoned soil waste dump”.

One of the laboratories is totally open, the windows smashed and no locks on the doors, while bottles of chemicals are stacked up covered in cobwebs. A photojournalist last year moved one of the bottles for a shot of the label; he was later hospitalized for coming into contact with a dangerous chemical.

Cobweb covered bottles of chemicals at an abandoned lab in the MIC complex

The tank from which 40 metric tonnes of MIC gas escaped on that deadly night in December, 1984

The control room at the MIC factory. The sign says: Emergency Message I on Toxic Gas Emission.

Visitors are warned not to touch anything and immediately after the tour wash their clothes and footwear. There is plenty of toxic waste and dust around, and the steel structure of the factory is slowly disintegrating along with the vats and containers that held lethal chemicals.

At one end of the complex is a “serious contaminated zone,” which still reeks of chemicals. Only now is a wall being built to ostensibly keep people out, but there are plenty of gaps for locals to enter. And despite the wall, there are toxic ponds outside of the complex where people take livestock to drink, wash clothes and around which children play. The mud is also dug up to use as flooring for dwellings.

On the sides of the ponds, the black plastic lining used to contain the sludge is visible, UC having used a process of solar evaporation for the waste. In the dry season, the earth is covered in a thick white coating. This waste has entered the ground water and polluted the drinking water. Most water pumps have been turned off, but some remain and the government has been lax about getting piped clean drinking water to residents that live on what is a huge toxic dump.

One building inside the complex houses 350 metric tonnes of chemicals rotting away, locked but not sealed from the elements. What the impact is of storing these chemicals in the compound is not known. But the whole area, the vegetation included, is contaminated, according to research by Greenpeace. The site should be torn down and the waste safely disposed of, and not in the way the authorities did in the past when it transported 40 tonnes of waste to an incinerator in a nearby town without telling the residents. Not designating the area a contaminated zone is akin to the Ukrainian government letting people continue to live right beside the Chernobyl nuclear power plant.

Nearly 26 years after the disaster, there is still no justice and no environmental clean up, while victims continue to die from exposure and children continue to suffer. Bhopal is an issue that won’t go away until justice is finally achieved.

ALL PHOTOGRAPHS BY PAUL COCHRANE