ISTANBUL — Turkey’s textile and apparel industry is counting on creativity, innovation, quality and speed-to-market to help it survive challenges from China that have dislodged it from its spot as the country’s top export.
Turkey successfully campaigned for the extension of quotas on certain Chinese goods after they were lifted in January 2005, but the impact of the giant Chinese clothing and textile industry is apparent here. Textile and clothing exports, which make up a large portion of overall Turkish exports, managed to post small gains in 2005. Textiles rose to $4.83 billion from $4.5 billion in 2004. Apparel exports increased 4 percent to $13.7 billion. However, for the first time the automotive sector is overtaking textiles and clothing as the top export — a change executives do not expect to be reversed.
“People who visit our trade fairs [in New York, London, Moscow and Shanghai] will see lots of new products, different cloths and patterns,” said Ismail Gulle, chairman of the Istanbul Textile and Apparel Exporters’ Association. “It is this dynamism and creativity that will keep us attractive in the market.
“There had been predictions of a 30 percent shrinkage in exports, so to see even a small amount of increase in a difficult year such as 2005 was very important for us,” said Gulle, who also has his own textile business. “Now we are expecting the moves to bring out better quality goods and make use of regional countries, such as [the countries of] North Africa and Russia, both in terms of production and exporting, to bear fruit in 2006. We do not expect a fall in exports.”
Gulle said the Turkish industry hoped to keep its U.S. exports, worth $210 million, at similar levels in the face of an unfavorable market because of exchange rates and cheaper competition. However, some individual exporters are bracing for a downturn.
Altinyildiz Textiles, one of Turkey’s leading brands, which has the world’s fifth-largest integrated textile factory, sends about 75 to 80 percent of its exports to the U.S., with the rest going to Europe. This year it expects that ratio to change to 60-40, as American buyers increasingly take risks with new Chinese and Indian producers.
“[This year] will be more difficult than the last,” said Onur Guner, assistant director of sales and marketing at Altinyildiz, which has been pioneering the use of high-tech fabric in Turkey. “As [the textile industry] moved from Britain to Italy to Turkey, so now it is moving further east to China and India.
“We have to be creative to succeed,” Guner continued. “The American market is most sensitive to price changes, so China has its biggest impact for us there. But in Europe the firms are smaller, more fashion-oriented and have shorter lead times, all of which gives us an advantage, so we hope to pick up in Europe what we lose in the United States, keeping our exports level in proportion terms at around 40 percent of our total sales.”
The quota extension on Chinese goods will remain until 2008, giving Turkey a crucial but temporary two-year period in which to establish itself as a high-quality, branded producer.
“We need to use this opportunity to replace Italy in the way in which China is replacing us,” Guner said. “We have to signify to the Americans what Italy means for them right now. We also hope that over this year and the next the Chinese will find their costs increasing and their prices rising, so the competition will not be so unfair.”
Despite squeezing out gains for 2005, about 40 yarn factories closed. Other industry producers have been forced to scale down output and move production overseas and have begun investing in other industries as a sideline. Among the textile firms moving into the expanding building sector are: Sarar Holding, which operates the men’s wear brand, Sarar, and has outlets in 14 European countries. Chairman Cemalettin Sarar told the newspaper Radikal that the company would not be investing further in textiles this year because of high costs and low profit margins, opting to focus on building hotels and shopping centers.
High costs domestically — including a 40 percent tax on workers’ wages — and a weak dollar are also hurting Turkish textile firms, Gulle said. These factors were an even bigger disincentive than Asian competition and will continue to affect the market this year more than the imminent removal of cotton subsidies and the reduction of state support for agriculture, both scheduled for 2006, he said.
An increasing number of applications point to the growing rigor in an industry striving to infuse more quality into the Made in Turkey label, said Mehmet Tuysuz, head of textiles testing laboratory Ekoteks.
“There was a 120 percent increase in applications last year compared to 2004,” Tuysuz said. “More and more companies are seeking quality certificates. There is a definite rise in quality in Turkey. There are also many more technology-based products coming to us.”
Some sectors are managing to flourish in this difficult environment. Denim, in particular, has been the focus of many large, wealthy manufacturers and has spawned several brands looking to emulate the success of Mavi Jeans in America. Isko Sanko, for instance, is increasing its denim production capacity to 200 million meters a year from 70 million. The company is not worried about Asian competition, marketing executive Tolga Yasa explained, because it produces high-quality, ultra-comfort denim with the latest technology.
“For us, 2006 will be a good year,” Yasa said. “We are always going to customers with new ideas and the response is great. Our only problem would be that they are initially cautious in the face of such innovation.”