Page 61 - New Cloth Market November 2022 Digital Edition

INTERNATIONAL BUSINESS PAGES

work together to create the appropri- ment implemented actions to attract quantity, and directed its efforts to
ate business environment with the le- foreign investment and enacted spe- that end.
gal, economic, and technical conditions cial laws, among them, the Law on Free
• Integrated clusters strengthen the
to install new companies, increase for- Trade Zones and Fiscal Precincts. The
development of the industry in or-
eign investment and strengthen this new Law of Free Trade Zones was ap-
der to make production more effi-
industry, which is already established proved in 1998.
cient and competitive. Such is the
in the country.
The benefits granted by this law are case of the complete synthetic
the following: cluster, constituted by companies
The textile and apparel industry is ver- that include those that produce ny-
tically integrated, incorporating produc- • Tax exemption on the imports of lon and polyester yarn from plas-
tive chain activities that include fiber machinery, equipment, tools, spare tics; manufacture fabric, and pro-
production; yarn and fabric manufac- parts, accessories, and other equip- duce finished garments.
turing and finishing; garment design, ment to perform the activities au-
cutting and assembling, and logistics thorized by the Free Trade Zone Law. • The importance of having a public
activities. According to data from the • Duty-free import of items such as institution, such as PROESA, pro-
Cámara de la Industria Textil, Confec- raw materials, spare parts, compo- mote foreign-investment attraction
ción y Zonas Francas de El Salvador nents, intermediate products, pack- for the sector on behalf of the Gov-
(Chamber of the Textile, Clothing and aging, labels, samples, lubricants, ernment of El Salvador, including
Free Zones Industry of El Salvador– catalysts, reagents, and fuels re- key messages on where the invest-
CAMTEX in Spanish-2022), there are quired by the investing company. ment opportunities lie in the sec-
91 companies that make up the clus- tor.
• Income-tax exemption for 15 years
ter: 13 accessories companies, 37 ap-
if the company is located in the • Textile and apparel industries pre-
parel companies, 12 textile companies,
metropolitan area of El Salvador, fer to locate in Special Economic
4 spinning companies, 6 logistics com-
and for 20 years if it is located in a Zones that offer incentives (with an
panies, 7 chemical companies, and 12
rural area. Once this period has emphasis on tax benefits) to im-
related-service companies.
expired, there is a 60% exemption prove their competitiveness.
for the following 10 years and a
The four important pillars of this industry • Most Special Economic Zones of-
40% exemption for the ensuing 10
in the country are a fully integrated fer tailor-made construction options
years.
supply chain, innovation and adoption according to industry requirements
of new technologies, quick delivery to • Municipal tax exemption for 15 and this becomes an additional in-
the consumer, and socially responsi- years in the metropolitan area and centive for companies.
ble production. 20 years if it is established outside • The consequences and impact of
the metropolitan area. internal conflicts in the country. In
According to PROESA, the investment the case of El Salvador, the inter-
This regime also exempts certain real
opportunities for this industry in the nal war disrupted industrial devel-
estate transfers from taxation and al-
country are in yarn and fabric manu- opment and Free Trade Zones for a
lows companies to sell goods or ser-
facturing (natural and synthetic); knit- period of time, interrupting the pro-
vices in the domestic market of El
ted fabric garments with accessories cess of development and consoli-
Salvador, but they are subject to taxa-
and embellishments; garments for high- dation.
tion.
performance athletes; sweaters or gar-
Nicaragua
ments with high added value or high The manufacturing industry, mainly the
rotation; garment manufacturing within textile industry, is located in Free Trade Nicaragua's apparel industry employs
the category of “Simple Transformation.” Zones and it is mostly clustered in 80,000 workers out of the total 125,000
three departments: San Salvador, La that operate in FTZs (2021). It is the
Industrial Parks – Free Trade Zones Libertad, and Santa Ana. CAMTEX has main generator of employment, pro-
7 Free Trade Zones among its mem- duction, and exports. According to
The Free Trade Zone concept started bers. Forbes Central America, with data from
in the country in the 1970s with the the Asociación Nicaragüense de la In-
Lessons Learned through El Salva-
San Bartolo Free Trade Zone, where dustria Textil y Confección (Nicaraguan
dor’s Experience
manufacturing companies were estab- Textile Association–ANITEC in Span-
lished to assemble products ranging • Seeking to position the country in ish), 85% of companies in the sector
from textiles to electronics. With the the sector through the 2030 Plan, are of US origin, 90% of exports go to
internal war, investments in Free Trade the country committed to becom- the US, 150 companies in the sector
Zones declined, and it was not until the ing a supplier of value-added prod- operate in the FTZ regime, and 75 ap-
end of the war (1992) that the Govern- ucts, in terms of quality rather than parel firms operate in Nicaragua.

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