Though concerned about the ongoing threat posed by Chinese and Indian competitors, Turkey's textile manufacturers have some reason to smile, with exports in the second half of 2006 and early 2007 registering something of a pickup.
According to the Istanbul Textile & Apparel Exporters' Association (ITKIB), Turkey exported $930m worth of ready-to-wear apparel in January 2006, compared with $1.1bn in January 2007, an increase of 16.43%. Meanwhile, textile and raw material exports spiked almost 33% over the same period, to $4.5m.
Insiders expect the trend to continue. "We reached a growth rate of 8% in the sector last year," said Aynur Bektas, chairperson of the Turkish Clothing Manufacturer's Association. "We hope the Turkish ready-to-wear industry will grow 30-40% from $10bn to $14bn, in 2007."
Meanwhile, Suleyman Orakcioglu, chairman of ITKIB, predicted exports for the ready-to-wear industry would fetch $15bn in 2007.
The reasons for export growth at the end of 2006 and into 2007 are clear. Industry insiders cite two events in 2006 as key growth factors - the lowering of the special consumption tax (OTV) for textile producers and the corporate tax rate dropping from 30% to 20%. A strengthened euro in relation to the Turkish lira, which boosts Euro-zone demand, coupled with European export quotas on goods flowing from Asia, also worked to the benefit of Turkish exporters. Europe ranks as the largest export market for textile producers in Turkey - a relationship anchored by the Customs Union, which provides a tax exemption for Europe-bound Turkish exports.
Equally important has been Turkey's continuous drive to focus on the higher end of the textiles and apparel market. The speedy delivery times to Europe provides an essential advantage for Turkish textile producers, allowing them to respond more quickly than their lower-cost Asian counterparts to the changing demands of European retail stores. The flair of Turkish designers along with the production, marketing and design experience of the industry likewise count as strengths. So indeed does the flexibility of production and the positive quality-cost ratio of Turkish textile products. The industry also continues to invest in cutting-edge technologies for the production of up-market goods.
These advantages fail to fully offset the threat posed by Asian producers. Many local textile manufacturers complain that while sales have risen, company profits have declined because of competition from the Far East. Textile manufacturers that have not developed a strong brand or reputation abroad are up against a swarm of low-cost Asian producers, in spite of selective European, US and domestic quotas to restrict the deluge from the Chinese industry. The price of labour is also a factor. Industry insiders place the hourly labour rate at just under $3 in Turkey's textile industry, compared with $0.48 in China, $0.67 in India and $0.37 in Pakistan.
Many Turkish textile manufacturers have not only responded to the pressure by focusing on brand development, quality production and design, but have also looked to take advantage of foreign initiatives to facilitate trade and investment. Egypt stands out with the recent allocation of a 2m sqm area, Polaris International Industrial Park, which serves as a Turkish free trade zone within Egypt's Sixth of October City Qualified Industrial Zone (QIZ). The QIZ provides exports, which include a certain percentage of Israeli content, duty-free to the United States. Turkish firms in the industrial park also have tariff-free access to the US market through the QIZ. Some sector insiders have expressed concern that the Chinese have moved in next door to the Turkish manufacturers in Sixth of October City, with their own industrial zone that spans 500,000 sqm.