Market Overview

Textile and Apparel industry has a great contribution to the Turkish economy. The industry has been denominated as the locomotive of the Turkish Economy for years. Turkey's textile and apparel exports continued rising recently after began falling in January, with elimination of EU and US quotas.

The industrialisation efforts of the 60's and 70's gave birth to the modern textile industry in Turkey. At the beginning, this sector was operating as small workshops. But the sector showed rapid development and during the 1970's began exporting. Today, Turkey is one of the important textile and clothing producers and exporters in the world.

Turkey's textile and clothing manufacturers began relocating production in Eastern Europe and Central Asia. In the last three years, Turkish textile and apparel companies faced raising difficulties, after having substantially succeeded in the eighties and the first part of the nineties.

Chinese textile exports after a decades-old quota system limits ends on January 1, 2005 and the World Trade Organization believes that within three years the Asian giant could be producing over half of the world’s textiles, up from 17% in 2003.

The end of the quota regime has spawned fears of widespread job losses around the world, including in Turkey, whose own textiles and apparel exports stand at around $20 billion a year.

Thus, it is necessary to understand the Turkish textile and apparel sector, the weakness and the strength it has in the World market.

Current scenario of Textiles and Apparels in Turkey

The textile and apparel sector has been the backbone of the Turkish economy with a vital role to play in the industrialisation process and market orientation of the economy in the last two decades. In the 1980s, it was the leading sector related to the global economy and the export revenues of this hard currency earning sector contributed substantially to the overall economy. The textile sector continued to be one of the major contributors to the Turkish economy, being one of the fastest growing sectors in the 1990s with an average 12.2% annual growth, while the Turkish economy had an average growth of 5.2% per year. Total investment in the sector exceeded US$ 150 billion, of which more than US$ 50 billion was invested in the last 5-10 years.

Textile industry started out in the 1960s in small workshops, have rapidly developed and transformed Turkey into a global competitor.

The total number of firms in the sector, dominated (95%) by the private sector, number around 44,000 and 25% of them are active exporters. The apparel industry is constituted mainly (80%) of small and medium sized firms whereas the technology-intensive textile production has been undertaken by large-scale companies. Today, around 20% of Turkey's 500 largest companies are involved in the textiles and apparel sector.

Low labor costs, a qualified workforce, relatively cheap raw materials have played an important role in the significant growth of the sector; as well as a liberalized economic environment and export-led policies in the last two decades.

The production value of the sector is over US$ 20 billion. Employment in the sector is estimated to be about 4 million people (2.5 million employed directly and a further 1.5 million indirectly through the sub-sectors). Official statistics also reveals that around 500,000 employees in the sector due to unregistered labor force.

The apparel sector exports approximately 60% of its production. Capacity utilization rates are approximately 75% especially among exporting manufacturers.

Turkey ranks also among the top ten global producers of wool cloth, carpets, synthetic filament and fiber, polyester and polyamide filament. While Europe's 3rd largest polyester producer is a Turkish-US joint venture, Turkey's synthetics production mounts to 15% of Western Europe's capacity.

Economic Contribution

Textile and clothing industry has a great contribution to the Turkish economy. For example, textile and clothing industry accounts for:

• 10% in GNP

• 40 % in industrial production

• 30% manufacturing labor force

• 35% of exports earning

The textile and apparel sector contributes over 20 billion USD to the Gross National Product. The sector is mostly important for its export earnings; its share in the country's total exports has been between 33-39% since 1990.

The major export market for Turkish textile and apparel goods is the EU countries, which account for about 65% of total textile and apparel exports. Turkey ranks 2nd in apparel and textile imports to the EU having an 8.2% and 4.8% share in the EU's total textile and apparel imports respectively as of 2003.

Export scenario

Textile and apparel exports increased by 14.6% on average per year during 1980-2003. Especially until the second half of 1990s, the sector's exports increased at a rate above the increase in total exports of Turkey as well as the increase in global textile and apparel exports. In 2003, the sector's exports totaled US$ 15.1 billion, having a share of 32.6% of the total exports. Exports rose to 23% in 2003, terms of value to 2002. The increasing share of apparels in exports since 1986 signifies the efforts to produce more value added products.

After the EU, the USA is a big and impending market. Turkey is the 19th apparel supplier and ninth textile supplier of USA with a 1.9% and 2.9% share respectively. Beside the EU and the US market, new markets are North African countries namely, Tunisia, Egypt and Algeria; Middle East countries namely Syria, Israel and Saudi Arabia; Eastern European countries namely Romania, Bulgaria, Poland and Hungary; and CIS countries. The sector faces quotas only in the USA and Canada. The Russian Federation was also a big market for the Turkish textile and apparel sector till the financial crisis of August 1998. It was the 3rd biggest market for apparel and 9th for textile products in 1997. Russia is still a promising market for textile and apparel sectors with its high consumption potential that will come out in the following years especially after developments towards better integration to the world economy and WTO membership prospects.

Cotton market

Turkey is a very important cotton country, which is an advantage in raw materials, for the clothing industry. Turkey is a traditional cotton producer and uses this advantage in the textile and apparel sector. Turkey ranks 1st in Europe and 6th in the world cotton production with an average production of 800,000-900,000 tons per

year. Moreover, with the completion of irrigation projects within Southeastern Anatolian Project (GAP), Turkey's most comprehensive development program, current cotton production is expected to double by the year 2005.

During 2003-04 season Turkey produced 893,000 tons of cotton. About 30% of the cotton production is high quality long staple cotton and the rest is of medium quality. The cotton industry provides a competitive edge to the textiles industry, which utilizes cotton as its essential raw material.

Cotton Market Trends

Main destinations for cotton yarn exports are Italy, Portugal, Greece and Belgium and for cotton fabric the UK, Italy, USA and Belgium. Whilst Turkey used to be a net exporter of cotton, the trade balance reversed in 1992 and since then Turkey has been a net importer of cotton since domestic demand has persistently exceeded available stocks. Beside cotton, Turkey has a strong standing in synthetic fiber, wool and mohair productions. Turkey ranks ninth in synthetic fiber, eighth in wool and third in mohair production in the world.

Home Textile Industry

Besides the Turkish textile industry Turkish home textile industry has also shown a growth in terms of production and exports. In recent years the production of home textiles has shown a stable increase due to the rise in domestic and external demand for home textiles. Turkish home textile industry has recorded growth in terms of production and exports in recent years. Almost all kinds of home textiles are produced in Turkey. These may be listed as follows in order of their export values: bed linens, bedspreads, table linens, towels, bathrobes, voiles, curtains, lace, interior blinds, curtain or bed valances, blankets, cushions, pillows, quilts, eiderdowns.

In home textile sector, besides large scale firms there are many small and medium sized firms scattered all around the country. As a division of the textile industry, the home textiles sector accounts for 3.2% share in Turkey's total exports and have been an important sub-sector for the Turkish economy. European countries are the most important markets for Turkey s home textile exports. At present Germany, the UK, France, the USA, Netherlands and Russian Federation are the major markets for Turkey s home textile exports. New markets such as Poland, Hungary, Romania and CIS countries are gaining more and more importance.

Foreign Investments in the Sector

The products of the Turkish textile and apparel sector have a good reputation in foreign markets as a result of the availability of high quality cotton in Turkey, wide usage of CAD (Computer Aided Design) and CAM (Computer Aided Manufacturing) and the increase in the number of qualified personnel.

Conclusion

The sector is aware of the trend in international markets towards increasing demand for healthier and more environmentally friendly products and tries to adapt itself to these developments by legal and technical regulations.

Nevertheless, it is hard to keep its competitive position in the world market full of emerging players. Thus, manufacturers have shifted their operations to value-added products and creation of brand names. Currently, 30% of Turkish manufacturers have their own designs and brands in international markets.

As current studies reveal, developed countries will have a decreasing share in global textile production while the developing countries will increase their manufacturing capacity to meet the increasing demands. It is also estimated that by 2005, the developing countries will increase their self-sufficiency in textile production. The US with an estimate of 200% increase in textile consumption is also estimated to have a 32% decrease in self-sufficiency by the year 2005.

Turkey, with its adaptability to European standards and regulations related to environment, health, quality, and safety is aiming to move into the production of more and more value added products, into an era in which the Turkish textile industry will be known for its quality trademarks and will be pricing a product for the Made in Turkey sign.