THE TEXTILE AND CLOTHING INDUSTRY

DİLEK YURDAKUL 2002431041İBRAHİM BAYKUL 2002431005

INTRODUCTIONINTRODUCTION

Turkey’s Textile and Clothing industry is regarded Turkey’s Textile and Clothing industry is regarded as a locomotive industryas a locomotive industry

The textile and clothing industry is developing day The textile and clothing industry is developing day by dayby day and increasing its exports by the and increasing its exports by the availability of raw materials, relatively low labor availability of raw materials, relatively low labor costs, closeness to Europe, the custom Union costs, closeness to Europe, the custom Union agreement with the European Union.agreement with the European Union.

It has some challenges due to rising labor costs, It has some challenges due to rising labor costs, inefficiencies problems,inefficiencies problems, other low costs other low costs supplierssuppliers……

History of Textile IndustryHistory of Textile Industry

In the Ottoman Empire period, the development In the Ottoman Empire period, the development was based on cotton production.was based on cotton production.

Between 1923-1930 economy can be considered Between 1923-1930 economy can be considered as liberal. Textile was one of the protected sectors as liberal. Textile was one of the protected sectors of the new republicof the new republic

Between 1933-1945 the period was called etatism. Between 1933-1945 the period was called etatism. The first supported sector was textile in this The first supported sector was textile in this period.period.

Sümerbank established to support this sectorSümerbank established to support this sector

History of Textile IndustryHistory of Textile Industry

Untill 1950s the government was the major player Untill 1950s the government was the major player through Sümerbank, after that the role of private through Sümerbank, after that the role of private sector increasedsector increased

The first phase of development was textile The first phase of development was textile oriented exports period at the beginning of 1980soriented exports period at the beginning of 1980s

The second phase was clothing oriented exports The second phase was clothing oriented exports period at the second half of 1980speriod at the second half of 1980s

History of Textile IndustryHistory of Textile Industry

In 2000, a high inflation rate had a negative In 2000, a high inflation rate had a negative influence on this sector’s export performanceinfluence on this sector’s export performance

In 2001, the clothing subsector faced a reduced In 2001, the clothing subsector faced a reduced competitive position by high labor and energy competitive position by high labor and energy costs, problems with the raw materials supplies…costs, problems with the raw materials supplies…

Today, textile and clothing industry is an outward Today, textile and clothing industry is an outward oriented industry.oriented industry.

FIRMS IN THE INDUSTRYFIRMS IN THE INDUSTRY

Transition from state-owned enterprises to private Transition from state-owned enterprises to private owned enterprisesowned enterprises

40.000 medium-sized businesses are currently in 40.000 medium-sized businesses are currently in operation operation

Most of the companies are family owned and Most of the companies are family owned and managedmanaged

The lack of educated young peopleThe lack of educated young people

COST STRUCTURECOST STRUCTURE

Turkey is losing its cheap labor cost advantage in Turkey is losing its cheap labor cost advantage in the recent yearsthe recent years

Comparison of the Labor costs ($/hour) in the Textile IndustryComparison of the Labor costs ($/hour) in the Textile Industry

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

COST STRUCTURECOST STRUCTURE

Governmental support through discounting Governmental support through discounting electricity prices in East and South East Anatoliaelectricity prices in East and South East Anatolia

Review of cost structure:Review of cost structure: 55-65% Raw material cost55-65% Raw material cost 5-20% Labor cost5-20% Labor cost 5-10% 5-10% EEnergy costnergy cost

PRODUCTION AND CAPACITY PRODUCTION AND CAPACITY UTILIZATIONUTILIZATION

One of the largest producers of cotton in the worldOne of the largest producers of cotton in the world Textile and clothing industry is basedTextile and clothing industry is based on cotton.on cotton. Also a major producer in all types of yarn, fabric, Also a major producer in all types of yarn, fabric,

clothing, household textiles and other ready-made clothing, household textiles and other ready-made productsproducts

Production volume in the clothing industry Production volume in the clothing industry increases in parallel to the increase in foreign increases in parallel to the increase in foreign demand demand

PRODUCTION AND CAPACITY PRODUCTION AND CAPACITY UTILIZATIONUTILIZATION

Among the top ten global producers of wool cloth, Among the top ten global producers of wool cloth, carpets, synthetic filament and fibcarpets, synthetic filament and fibrree and polyesterand polyester

Capacity improvements from 1970’s Capacity improvements from 1970’s Overall capacity utilization ratioOverall capacity utilization ratio (CUR) is 80%.(CUR) is 80%.

BARRIERSBARRIERS

WTO member since 1995 WTO member since 1995 In Customs Union with the EU since 1996In Customs Union with the EU since 1996 Free trade agreements with the partners of Free trade agreements with the partners of

the EU, such as the EFTA countriesthe EU, such as the EFTA countries Agreements of the EU with competitors of Agreements of the EU with competitors of

Turkey Turkey USA and Canada’s quotas on textiles and USA and Canada’s quotas on textiles and

clothing from Turkey clothing from Turkey

CONCENTRATIONCONCENTRATION

Clusters:Clusters: Aegean(Aegean(IIzmir and Denizli)zmir and Denizli) Mediterranean( Adana)Mediterranean( Adana) South East(Kahramanmaraş and Gaziantep)South East(Kahramanmaraş and Gaziantep) Central Anatolia(Kayseri)Central Anatolia(Kayseri) Marmara region (with İstanbul, Bursa and Tekirdağ) Marmara region (with İstanbul, Bursa and Tekirdağ)

is the most significant one.is the most significant one. Istanbul is the most important contributer in terms of Istanbul is the most important contributer in terms of

the number of establishments and total employment.the number of establishments and total employment.

CONCENTRATIONCONCENTRATION

Tekirdağ(Çorlu) is one of the newest textile Tekirdağ(Çorlu) is one of the newest textile clusters clusters

Specialization:Specialization: Bursa and Denizli in weaving and home textiles Bursa and Denizli in weaving and home textiles Gaziantep and Adana in cotton textiles Gaziantep and Adana in cotton textiles Kahramanmaraş in yarns and clothing Kahramanmaraş in yarns and clothing

ExportExport

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

ExportExport

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

ExportExport

Main Five Markets of the Turkish Main Five Markets of the Turkish Clothing IndustryClothing Industry

(2003-10 Months- 1000 US$ )(2003-10 Months- 1000 US$ )

1-1-Germany Germany 2.817,9422.817,942

2-2-UKUK 1,353,9961,353,996

3-3-U.S.A.U.S.A. 1,3147991,3147994-4-FranceFrance 705,791 705,7915-5-NetherlandsNetherlands

544,000 544,000

Main Five Markets of the Turkish Main Five Markets of the Turkish Textile IndustryTextile Industry

(2001 Annual – 1000 US$)(2001 Annual – 1000 US$)

1- Italy1- Italy 341,077341,0772- Germany2- Germany 234,845234,8453- USA.3- USA. 170,086170,0864- UK 4- UK 161,792161,7925- Romania5- Romania 160,382160,382

ImportImport

Turkey is highly dependent on machinery and Turkey is highly dependent on machinery and equipment imports. They are mainly from Italy and equipment imports. They are mainly from Italy and Germany.Germany.

Turkey also imports raw materials, semi-finished Turkey also imports raw materials, semi-finished and finished goods mainly from Italy, Germany, and finished goods mainly from Italy, Germany, US, South Korea and China. US, South Korea and China.

The share of the textile and clothing industry’s The share of the textile and clothing industry’s imports in the total imports were 5.5% and 6.7% imports in the total imports were 5.5% and 6.7% respectively in 2002.respectively in 2002.

ImportImport

ImportImport

Main Five Suppliers of the Main Five Suppliers of the Turkish Clothing IndustryTurkish Clothing Industry

(2003-10 months- 1000 US$)(2003-10 months- 1000 US$)

1-1-Italy Italy 61,543 61,543

2-2-China China 47.385 47.385

3-3-Spain Spain 35244 35244

4-4-U.K. U.K. 26.991 26.991

5- Germany5- Germany 22,319 22,319

Main Five Suppliers of the Main Five Suppliers of the Turkish Textiles IndustryTurkish Textiles Industry

(2001-10 Months- 1000 US$)(2001-10 Months- 1000 US$)

1-1-Italy Italy 430,856 430,856

2-2-USA USA 418,840 418,840

3-3-Germany Germany 301,073 301,073

4-4-China China 278,803 278,803

5-5-S. Korea S. Korea 225,486 225,486

The Sector’s Share In The The Sector’s Share In The EconomyEconomy

The sector has great importance in terms of The sector has great importance in terms of economic development with share of economic development with share of

GNP above 10%GNP above 10% Industrial production around 40%Industrial production around 40% Manufacturing labor force around 30%Manufacturing labor force around 30% Exports around 35%Exports around 35%

General and Foreign InvestmentGeneral and Foreign Investment

The huge investments made to renovate The huge investments made to renovate machinery machinery

The R&D investments are very lowThe R&D investments are very low The Turkish textile and clothing industry make The Turkish textile and clothing industry make

heavy investments in almost all the subsectorsheavy investments in almost all the subsectors Turkey has foreign partnership, joint ventures, Turkey has foreign partnership, joint ventures,

licensing and technology agreement with the licensing and technology agreement with the global competitorsglobal competitors

Government IncentivesGovernment Incentives

Incentives are available for projects which reduced Incentives are available for projects which reduced inequality among regions, spead capital inequality among regions, spead capital ownership, create employment, make use of ownership, create employment, make use of advance technology and increase advance technology and increase competitiveness.competitiveness.

Incentives are mainly in the form of investment Incentives are mainly in the form of investment allowance, exemption from various taxes and allowance, exemption from various taxes and credits from newly-created Investment Fund.credits from newly-created Investment Fund.

PRODUCT DIVERSIFICATIONPRODUCT DIVERSIFICATION

Product category unit Number of Establishments

Production Quantity

Production value, mn TL

Cotton yarn of uncombed fibres n.p.r.s. for other

weaving

Tons 64 307180 979127281

Cotton yarn of combed fibres

n.p.r.s. for other weaving

Tons 34 117615 444657366

Multiple or cabled yarn of nylon or other

polyamides n.p.r.s.

Tons 10 99383 398229003

Tree most important textiles products (yarns) by production value in 2002

Product category unit Number of Establishm

ents

Production Quantity

Production value, mn

TL

Cotton fabrics denim > 200

g/m2

Meter 9 169632133 862305856

Cotton fabrics,weighi

ng<200 g/m2,excl. net curtain,colure

d(Raw linen,coarse white calico)

Meter 31 328446033 609353376

Woven fabrics of synthetic

fibres mixed with cotton,

polyester and viscon

Meter 19 107537483 399830983

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

Tree most important clothing products by production quantity in 2002

Product Category

unit Number of Establishments

Production Quantity

Production value, mn TL

T-shirts knitted or crocheted of

cotton

No 124 219,328,489 1,265,324,557

Men's or boys' trousersbreeches etc. of denim

No 16 30,419,831 516,246,474

Women's or girls' briefspanties boxers

No 18 28,052,166 56,318,666

Research and DevelopmentResearch and Development

Turkish textile industry has been transformed from Turkish textile industry has been transformed from labor-intensive to capital-intensive industry.labor-intensive to capital-intensive industry.

This transformation is based on the imported or This transformation is based on the imported or imitated technology.imitated technology.

The awareness of the importance of R&D to catch The awareness of the importance of R&D to catch up with the competitors increases.up with the competitors increases.

Research and DevelopmentResearch and Development

Some topics in the R&D activities are:Some topics in the R&D activities are:

Textile raw materialsTextile raw materials Fashion clothingFashion clothing Quality controlQuality control Ecological textilesEcological textiles Yarn technology and machineriesYarn technology and machineries Die-press technologyDie-press technology

QualityQuality

Quality standards that are required by the buyers Quality standards that are required by the buyers and European Union has a positive impact on the and European Union has a positive impact on the productsproducts..

Number of Textile & Clothing Firms Obtaining ISO Standards

ISO 9001 ISO 9002

Textile and/or clothing

67 161

Total 831 1994

Percent %8,06 %8,07

Table shows the percentage of the number of textile and clothing firms that received ISO 9001 and 9002 certifications in the group of companies in all industries with the same certification

STRENGTHSSTRENGTHS

An integrated textile chain within the country An integrated textile chain within the country (from raw material to textiles and to clothing)(from raw material to textiles and to clothing)

Ability to produce commodity and Ability to produce commodity and specialized products (having well-specialized products (having well-established know-how)established know-how)

Proximity to the EUProximity to the EU Relatively low wagesRelatively low wages

Experience in providing high level of customer Experience in providing high level of customer service (as a result of longstanding tradition in the service (as a result of longstanding tradition in the sector)sector)

Broad domestic raw material basis (selfsufficiency Broad domestic raw material basis (selfsufficiency due to being one of the leading cotton producers)due to being one of the leading cotton producers)

Young and motivated workforce (recently Young and motivated workforce (recently increasing number of skilled workforce through increasing number of skilled workforce through vocational programmes)vocational programmes)

Entrepreneurial spirit Entrepreneurial spirit

WEAKNESSESSWEAKNESSESS

Lack of highly skilled workers in SMEsLack of highly skilled workers in SMEs High total costs (labour, utilities, etc.) due to high taxesHigh total costs (labour, utilities, etc.) due to high taxes Deficiencies in R&D activities (recently started)Deficiencies in R&D activities (recently started) Reliance on standardized products (through large Reliance on standardized products (through large

proportion of subcontracting links in production) proportion of subcontracting links in production) Concentration on SMEs in clothingConcentration on SMEs in clothing Diversification of its export markets to reduce strong Diversification of its export markets to reduce strong

reliance on the EU marketreliance on the EU market Lack of government support and bureaucratic obstaclesLack of government support and bureaucratic obstacles Inability to attract FDI Inability to attract FDI

Assessment of Competitiveness of Assessment of Competitiveness of Turkish Textile and Clothing Turkish Textile and Clothing

Industry Industry The contributions of the textile and clothing The contributions of the textile and clothing

industry to the economy are vital for Turkey.industry to the economy are vital for Turkey. The global competitiveness determinants of The global competitiveness determinants of

Turkey shifts from low cost to quality, fashion, Turkey shifts from low cost to quality, fashion, creation, brand development and innovativeness.creation, brand development and innovativeness.

Turkey has a good performance in many Turkey has a good performance in many categories like production quality, use of categories like production quality, use of technology, ability to make design, collections and technology, ability to make design, collections and organizational matters such as marketing, organizational matters such as marketing, distribution and delivery.distribution and delivery.

Assessment of Competitiveness of Assessment of Competitiveness of Turkish Textile and Clothing Turkish Textile and Clothing

Industry Industry To access to EU market, free to quotas are the To access to EU market, free to quotas are the

latest development for Turkeylatest development for Turkey Turkey should be preparing itself by focusing on Turkey should be preparing itself by focusing on

differentiation and moving away from cost based differentiation and moving away from cost based competition.competition.

It should improve product mix, become a unified It should improve product mix, become a unified manufacturers’ to determine the future of Turkish manufacturers’ to determine the future of Turkish textile and influence government policies in textile and influence government policies in creating and financing the conditions of the textile creating and financing the conditions of the textile industry.industry.

CONCLUSIONCONCLUSION

Decreasing lead times, better quality/price Decreasing lead times, better quality/price ratio and creation of brands ratio and creation of brands

Turkey faces competition after 2005.Turkey faces competition after 2005. Need of a restructuring by foreign Need of a restructuring by foreign

investmentinvestment Future growth markets are USA, Canada, Future growth markets are USA, Canada,

Japan and China.Japan and China.

THANKS THANKS

FOR YOUR FOR YOUR

ATTENTIONATTENTION