THE TEXTILE AND CLOTHING INDUSTRY

1. THE TEXTILE AND CLOTHING INDUSTRY DİLEK YURDAKUL 2002431041 İBRAHİM BAYKUL 2002431005

2. INTRODUCTION • Turkey’s Textile and Clothing industry is regarded as a locomotive industry • The textile and clothing industry is developing day by dayand increasing its exports by the availability of raw materials, relatively low labor costs, closeness to Europe, the custom Union agreement with the European Union. • It has some challenges due to rising labor costs, inefficiencies problems,other low costs suppliers…

3. History of Textile Industry • In the Ottoman Empire period, the development was based on cotton production. • Between 1923-1930 economy can be considered as liberal. Textile was one of the protected sectors of the new republic • Between 1933-1945 the period was called etatism. The first supported sector was textile in this period. • Sümerbank established to support this sector

4. History of Textile Industry • Untill 1950s the government was the major player through Sümerbank, after that the role of private sector increased • The first phase of development was textile oriented exports period at the beginning of 1980s • The second phase was clothing oriented exports period at the second half of 1980s

5. History of Textile Industry • In 2000, a high inflation rate had a negative influence on this sector’s export performance • In 2001, the clothing subsector faced a reduced competitive position by high labor and energy costs, problems with the raw materials supplies… • Today, textile and clothing industry is an outward oriented industry.

6. FIRMS IN THE INDUSTRY • Transition from state-owned enterprises to private owned enterprises • 40.000 medium-sized businesses are currently in operation • Most of the companies are family owned and managed • The lack of educated young people

7. COST STRUCTURE • Turkey is losing its cheap labor cost advantage in the recent years Comparison of the Labor costs ($/hour) in the Textile Industry

8. Comparison of Industrial Electricity Prices ($/kwh)

9. COST STRUCTURE • Governmental support through discounting electricity prices in East and South East Anatolia • Review of cost structure: • 55-65% Raw material cost • 5-20% Labor cost • 5-10% Energy cost

10. PRODUCTION AND CAPACITY UTILIZATION • One of the largest producers of cotton in the world • Textile and clothing industry is basedon cotton. • Also a major producer in all types of yarn, fabric, clothing, household textiles and other ready-made products • Production volume in the clothing industry increases in parallel to the increase in foreign demand

11. PRODUCTION AND CAPACITY UTILIZATION • Among the top ten global producers of wool cloth, carpets, synthetic filament and fibreand polyester • Capacity improvements from 1970’s • Overall capacity utilization ratio(CUR) is 80%.

12. BARRIERS • WTO member since 1995 • In Customs Union with the EU since 1996 • Free trade agreements with the partners of the EU, such as the EFTA countries • Agreements of the EU with competitors of Turkey • USA and Canada’s quotas on textiles and clothing from Turkey

13. CONCENTRATION • Clusters: • Aegean(Izmir and Denizli) • Mediterranean( Adana) • South East(Kahramanmaraş and Gaziantep) • Central Anatolia(Kayseri) • Marmara region (with İstanbul, Bursa and Tekirdağ) is the most significant one. • Istanbul is the most important contributer in terms of the number of establishments and total employment.

14. CONCENTRATION • Tekirdağ(Çorlu) is one of the newest textile clusters • Specialization: • Bursa and Denizli in weaving and home textiles • Gaziantep and Adana in cotton textiles • Kahramanmaraş in yarns and clothing

15. Export • Textile and clothing industry exports increased during the last twenty years from 595 million dollars in 1979 to 12.5 billion dollars in 2002

16. Export • Geographical closness, duty free access to the EU, relatively low wage levels, high quality of goods are main causes of the increases in the exports.

17. Main Five Markets of the Turkish Clothing Industry (2003-10 Months- 1000 US$ ) 1-Germany 2.817,942 2-UK 1,353,996 3-U.S.A. 1,314799 4-France 705,791 5-Netherlands 544,000 Main Five Markets of the Turkish Textile Industry (2001 Annual – 1000 US$) 1- Italy 341,077 2- Germany 234,845 3- USA. 170,086 4- UK 161,792 5- Romania 160,382 Export

18. Import • Turkey is highly dependent on machinery and equipment imports. They are mainly from Italy and Germany. • Turkey also imports raw materials, semi-finished and finished goods mainly from Italy, Germany, US, South Korea and China. • The share of the textile and clothing industry’s imports in the total imports were 5.5% and 6.7% respectively in 2002.

19. Import

20. Main Five Suppliers of the Turkish Clothing Industry (2003-10 months- 1000 US$) 1-Italy 61,543 2-China 47.385 3-Spain 35244 4-U.K. 26.991 5- Germany 22,319 Main Five Suppliers of the Turkish Textiles Industry (2001-10 Months- 1000 US$) 1-Italy 430,856 2-USA 418,840 3-Germany 301,073 4-China 278,803 5-S. Korea 225,486 Import

21. The Sector’s Share In The Economy The sector has great importance in terms of economic development with share of GNP above 10% Industrial production around 40% Manufacturing labor force around 30% Exports around 35%

22. General and Foreign Investment • The huge investments made to renovate machinery • The R&D investments are very low • The Turkish textile and clothing industry make heavy investments in almost all the subsectors • Turkey has foreign partnership, joint ventures, licensing and technology agreement with the global competitors

23. Government Incentives • Incentives are available for projects which reduced inequality among regions, spead capital ownership, create employment, make use of advance technology and increase competitiveness. • Incentives are mainly in the form of investment allowance, exemption from various taxes and credits from newly-created Investment Fund.

24. PRODUCT DIVERSIFICATION Tree most important textiles products (yarns) by production value in 2002

25. Tree most important textiles products (fabrics) by production value in 2002

26. Treemost important clothing products by production quantity in 2002

27. Research and Development • Turkish textile industry has been transformed from labor-intensive to capital-intensive industry. • This transformation is based on the imported or imitated technology. • The awareness of the importance of R&D to catch up with the competitors increases.

28. Research and Development • Some topics in the R&D activities are: • Textile raw materials • Fashion clothing • Quality control • Ecological textiles • Yarn technology and machineries • Die-press technology

29. Quality • Quality standards that are required by the buyers and European Union has a positive impact on the products. Number of Textile & Clothing Firms Obtaining ISO Standards

30. Table shows the percentage of the number of textileand clothing firms that received ISO 9001 and 9002 certifications in the group of companiesin all industries with the same certification

31. STRENGTHS • An integrated textile chain within the country (from raw material to textiles and to clothing) • Ability to produce commodity and specialized products (having well-established know-how) • Proximity to the EU • Relatively low wages

32. Experience in providing high level of customer service (as a result of longstanding tradition in the sector) • Broad domestic raw material basis (selfsufficiency due to being one of the leading cotton producers) • Young and motivated workforce (recently increasing number of skilled workforce through vocational programmes) • Entrepreneurial spirit

33. WEAKNESSESS • Lack of highly skilled workers in SMEs • High total costs (labour, utilities, etc.) due to high taxes • Deficiencies in R&D activities (recently started) • Reliance on standardized products (through large proportion of subcontracting links in production) • Concentration on SMEs in clothing • Diversification of its export markets to reduce strong reliance on the EU market • Lack of government support and bureaucratic obstacles • Inability to attract FDI

34. Assessment of Competitiveness of Turkish Textile and Clothing Industry • The contributions of the textile and clothing industry to the economy are vital for Turkey. • The global competitiveness determinants of Turkey shifts from low cost to quality, fashion, creation, brand development and innovativeness. • Turkey has a good performance in many categories like production quality, use of technology, ability to make design, collections and organizational matters such as marketing, distribution and delivery.

35. Assessment of Competitiveness of Turkish Textile and Clothing Industry • To access to EU market, free to quotas are the latest development for Turkey • Turkey should be preparing itself by focusing on differentiation and moving away from cost based competition. • It should improve product mix, become a unified manufacturers’ to determine the future of Turkish textile and influence government policies in creating and financing the conditions of the textile industry.

36. CONCLUSION • Decreasing lead times, better quality/price ratio and creation of brands • Turkey faces competition after 2005. • Need of a restructuring by foreign investment • Future growth markets are USA, Canada, Japan and China.

37. THANKS FOR YOUR ATTENTION