Turkey's textile sector has seen impressive growth in its exports over the course of 2005, with the first 10 months of the year seeing overseas sales of textiles and clothing reaching $15.52bn. This represented a 7.23% increase over the January to October period of 2004, according to the Istanbul-based Textile and Apparel Exporters' Association (ITKIB.)
This trend has been reflected in the sub-sectors of Turkey's textile industry. Ready-to-wear and apparel exports came in at $11.48bn between January and October 2005 versus the $10.75bn recorded in the same period in 2004, according to ITKIB. Overseas sales of textiles and raw materials followed suit, bringing in just over $4bn, up from the $3.72bn for the first 10 months of last year, while leather and leather products did even better, registering $530.2m compared to $399.4m.
All this suggests that the threat posed by South-east Asia with the lifting of global quotas in January 2005 has not had as much of a negative impact as some expected. This is despite China's textile exports to Europe climbing 28.4% in volume in the first nine months of 2005 compared to the same period in 2004, according to data from the EU.
A number of factors have accounted for the resilience of Turkish textiles. Imposing restrictions on 10 categories from China until 2008 has, to a certain degree, helped Turkish exporters retain their sizeable share of the European market. The trend moreover shows little sign of reversing in the short-term. Suleyman Orakcioglu, head of the Istanbul Ready-Made Garment Exporters Association, for one expects the EU and the US to next year put in place further safeguards against the potential influx of Chinese products, complementing existing restrictions.
However, the resilience of Turkish textiles also has much to do with local strengths, while an increased emphasis on quality has seen local textile manufacturers working with the likes of Tommy Hilfiger, Lacoste and Benetton.
"The Turkish textile and retail sector will be protected if it continues to develop quality and speed of delivery," Mehmet Tuysuz, general manager of textiles firm Ekoteks told OBG. Whilst it takes 22 days to reach the UK from China by ship, finished garments from Turkey can reach Britain within five.
Meanwhile, the emphasis on quality has found expression in pricing, with Orakcioglu saying products bearing the label "Made in Turkey" have increased 18% thanks to a concentration on better-quality manufacturing with high value-added.
This however is not to deny the fact that Turkey's lower end of the market producers have suffered at the hands of competition from South-east Asia. Those who are unable to make the shift to high-quality production are likely to face extinction, if they have not done so already, thanks to Asia's cheap labour costs. Whilst it costs $6.50 to manufacture a blouse in China, the same item would cost $7 in Eastern Europe, $8 in Turkey and $10 in the UK, according to a recent survey performed by business consultancy AT Kearney.
Official statistics testify to the challenge that Turkey's less-competitive textiles producers have had to face, with 40 major yarn producers closing their doors in 2005 due to external competition. Equally, the cost of labour is unlikely to diminish in the future, with the growth of the Turkish economy and workers demanding an increased share of the spoils of economic success. The strength of the Turkish lira has also placed exports on less of a competitive footing.
High levels of bank debt have also proven to be a problem for the sector. Little surprise that 14.1% of bank loans to the textiles industry are non-performing. The president of the Turkish Clothing Manufacturers Association (TGSD), Aynur Bektas, puts this down to the inability of bankers to understand the industry. What is needed are small, short-term package credits, he says.
But most attention has focused on Turkey's success stories. An example, cited in a report from Business Digest in October, is Turkey's Zorlu Group, which is manufacturing Benetton's home textiles. The Turkish giant is producing, distributing and marketing the Italian brand across the world, with the exception of the Mediterranean area. Zorlu had already won world-wide production and distribution rights for Benetton's Sisley Casa Brand home textiles back in June 2005.
Others have prospered as well. In October, the Turkish casual wear producer Koniteks announced it had received $4m to export sportswear and denim to the IC Company of Denmark for 2005 and 2006. Then there is clothing manufacturer Arat Tekstil, which has become a supplier for British-based retailer Marks & Spencer.
Little wonder that industrial insiders refer to Istanbul as the next fashion centre of Europe, thanks in part to investment from established French and Italian companies. However, Turkey will have to continue developing its own brands whilst coming up with the latest designs if it is to achieve its goal. The resilience of the sector's quality manufacturers bodes well though, with an increasing number of local manufacturers developing quality products to protect themselves from the Asian threat and maximise returns, seen as the formula for survival and prosperity.