Textination Newsline

• AUTOMATION AND STRONGER FOCUS ON THE DOMESTIC MARKET

Beijing (GTAI) - The Chinese apparel industry is repositioning itself. Increased wage costs force more automation, more customers demanding more quality.
Nowhere else in the world so much clothing is being produced as in China. According to the sector portal http://www.ask.com, alone 22.9 billion pairs of socks were being produced in 2017. This was 4.8 percent more than in the previous year, and the production of jeans amounted to more than 0.6 billion pieces according to information from http://www.chyxx.com, an increase of 5.0 percent.
China is not only the world's largest production nation, but also by far the world's largest export nation in the sector. However, countries such as India, Vietnam, Bangladesh and Cambodia are catching up enormously due to lower wages. As a result, China - measured by its share of world clothing exports - has lost around 5.5 percentage points since 2013, down to only 32.4% in 2017.

¹⁾ SITC Pos.84; ²⁾ Partially estimated on the basis of information provided by the ITC
Source: UN Comtrade, GTAI calculation.

By contrast, Bangladesh (+3.7 points), Vietnam (+2.0 points) and Cambodia (+1.3 points) in particular recorded gains in the period from 2013 to 2017. In absolute terms, Chinese apparel exports fell by 15.6% to USD 157 billion since the record year of 2014 (USD187 billion). No improvement is in sight as exports are stagnating in 2018.

¹⁾ SITC Pos. 84; ²⁾ partly estimated on the basis of ITC data; 3) excluding Laos and Brunei
Sources: UN-Comtrade; ITC; GTAI calculation

Rising wage costs as investment driver
Due to rising personnel costs throughout the country, manufacturers were and are under considerable cost pressure. With an average hourly wage for a Chinese worker of the equivalent of around USD 5.2 (2017), China has not only left classic emerging markets such as Thailand (USD 2.3) or Mexico (USD 3.9) behind - not to mention India with USD 0.8 - but is already approaching individual European countries (e.g. Greece 2016: USD 6.0).

Companies have met and continue to meet this challenge through increased automation. Between 2015 (9.1 million) and 2017 (7.8 million) alone, the workforce of the textile and clothing industry shrank by 14.3 percent - according to the Chinese statistical office. More and better machines make it possible to say goodbye to the previous labor-intensive production - and thus lower cost pressure with more precise and faster execution. Imports of textile machinery are also benefiting from this. These rose in 2017 by a whopping 34.1 percent year-on-year to nearly USD 3.9 billion.

Germany no longer number one textile machinery supplier
Although Germany lost its position as most important supplier country for textile machinery to Japan, it was still able to increase its deliveries by 28.3 percent to USD 1.1 billion. This corresponded to a supply share of 28.3 percent. Japanese manufacturers achieved a ratio of 30.0 percent with just under USD 1.2 billion (+52.8 percent). Competition from Italy came to only 11.5 percent. The good performance is remarkable due to the fact that a number of German textile machine manufacturers have invested heavily in recent years in the region in order to be able to meet the wishes of Chinese customers more effectively.

^*) SITC-Pos. 724
Source: UN-Comtrade; GTAI calculation

Due to the high pressure to modernization Chinese textile machinery imports in the first seven months of 2018 increased by almost 15 percent compared to the previous period. German machine manufacturers in particular benefited from this development, with deliveries increasing by 30 percent in the same period. As Japanese exports of textile machinery to China stagnated at the same time, German manufacturers are likely to take the lead again in 2018.
As the garment exports come under such severe pressure, the industry is now increasingly geared towards the local market. Whereas ten years ago about half of the value of production was exported, today it is only about a third. In fact, the Chinese spent an average of around 4.8 percent of their disposable income or 1,238 Renminbi (RMB; around 183 US dollars; 1 USD = 6.7531 RMB, annual mean rate of 2017) on clothing in 2017, according to the Chinese Statistical Office. With an average disposable annual income of 25,974 RMB and a population of 1.39 billion, this translates into a market volume of approximately USD 255 billion.

China's consumers demand quality and design
This makes the Chinese clothing market one of the largest in the world - and one that is becoming increasingly diversified. Local offerings range from the cheapest mass-produced goods, qualitatively and visually appealing products in the mid-price segment up to luxury and haute couture. Much has changed in the upper price segment in particular. "In the past, the Chinese exported the best qualities, but today they keep them for themselves," says a British sourcing expert who has been working in the Kashmir business for decades, describing the development.

In general, Chinese consumer demand is becoming increasingly sophisticated and differentiated. In addition to the tendency towards recognized brands, an increasing individualization of consumption can also be observed. The question is what fits well, pleases and is also somehow "special". "People in the North used to buy cashmere clothes because they warmed well," explains Cheng Xudong, president of the private Dongrong Group. The design was of secondary importance - and accordingly most of the pieces were "old-fashioned".

"Today, cashmere clothes also look very good," Cheng adds. "That's why it's bought not only in the north, but also in the more southern parts of the country." In general, the middle class in particular is looking for a high-quality lifestyle - and clothing is a part of it. The entrepreneur is convinced that if the textile and clothing industry succeeds in adapting to the higher quality demands of local customers through a technical upgrade and improved design, then the industry will continue to do well in the future.

Additional information
Further information on the economic situation, the sectors, business practice, law, customs, tenders and development projects in China can be found at http://www.gtai.de/china The website http://www.gtai.de/asien-pazifik provides an overview of various topics in the region.

• Clothing exports are declining 

New Delhi (GTAI) - Structural weaknesses and fiscal reforms are affecting the Indian textile industry. Modernization and diversification are necessary. For this where support measures will come into force.

In the 2016/17 fiscal year (April 1st to March 31st), India's government initiated a number of fundamental reforms such as the introduction of the nationwide Goods and Services Tax (GST) and a partial currency devaluation. These measures are intended to advance the economy as a whole in the medium to long term, but have led to uncertainty and difficulties in individual sectors, including the textile industry. Added to this are high cotton prices. The government is now trying to help the industry with individual measures. It remains to be seen whether these will be sufficient and lead to a sustained improvement. Finally, there are structural weaknesses which are also slowing down the growth of the Industry.

"The by the introduction of GST caused dent and monetary depreciation has now been overcome. However, the structural problems remain, so that no fundamental changes in the textile industry are to be expected", according to the assessment of a German supplier with many years of experience in India in talks with Germany Trade & Invest (GTAI).

Government launches aid measures
However, some government measures should provide relief. At the beginning of August 2018, import duties on 328 textile products, especially fabrics and nonwovens, were increased from around 5 to 10 percent to up to 20 percent. Also, at the beginning of the month, the Executive Board introduced four bills to amend the general VAT Act introduced on July 1st 2017. This should make refunds, for example of taxes on intermediate products, easier and faster. The introduction of GST and the delays in reimbursement have put particular pressure on the liquidity of small and medium-sized companies, which make up the bulk of textile companies. For example, the denim industry temporarily had to take 25 to 30 percent of its capacity out of production after the tax introduction.

 Also, the Ministry of Textiles wants to strengthen the to it entrusted weakening industry. At the beginning of August 2018, for example, it added changes to the Technology Upgradation Funds Scheme (TUFS), which has been in existence since 1999. This now expanded technology promotion program allows cooperative banks to provide financing to textile companies for technological improvements. They also become accessible for liability partnerships. Of the approximately USD 1.1 billion, that the central government budget is holding for the textile industry in the fiscal year 2018/19, one third, 14 percent more than in the previous year, are intended for the TUFS. Manufacturers of synthetic fibers and the clothing industry in particular are likely to benefit from this, according to industry sources.

The existence of an own Ministry of Textiles shows how important this industry is for India, not only as a source of foreign exchange, but also as an employer. The entire sector, from spinning mills, weaving mills to clothing and other finished goods, contributed around 14 percent to value creation in the manufacturing industry and 13 percent to foreign exchange revenues in 2017, and employs directly 40 million and indirectly 60 million workers.

As one of the world's leading producers of cotton, jute and silk, India has comparative advantages in the textile sector and can look back on a long tradition in processing. Accordingly, cotton is the main raw material in yarn and fabric production. After all, 5.7 billion tons of yarn were spun in 2016/17, achieving an annual average increase of 3.1 percent between 2011 and 2017. The weaving mills processed 63.5 billion square meters of fabric in 2016/17, after 61.7 billion in 2011. The proportion of cotton fabrics rose from 51 to 61 percent in 2011 to 2017. The remaining part is accounted for approximately equally by synthetic and blended fabrics.

 
Production and export growth come to a halt Based on the previously strong growth the government is optimistic. According to forecasts by the Ministry of Textile, India's textile and clothing industry is expected to more than double its sales between 2015 and 2021. Exports are expected to increase from USD 35 billion to USD 82 billion, after doubling in the period from 2006 to 2014 from USD 17.6 billion to USD 37.6 billion. After that, however, they stagnated and, at USD 35 billion in 2017/18 and missed the by the government set target by USD 10 billion. The production of textiles and clothing declined from 2015 to 2017. It is unlikely to improve in 2018.

¹⁾ Financial years from 1 April to 31 March; ²⁾ Provisional data for 2016/17 and 2017/18
Source: Statistical Office India
     

Clothing industry needs to modernize 
India's textile industry has cost advantages over industrialized countries and advanced emerging countries such as China. Smaller developing countries, however, have become well-known competitors in the meantime and have partly surpassed India in terms of clothing. So Bangladesh and Vietnam exported more clothing than India. In addition there is growing competition from other low-wage countries such as Cambodia, Sri Lanka and Indonesia. Some of these countries have free trade agreements with the EU, while India has difficulties in negotiating them. The smaller competitors have also geared their clothing industry to exports and modernized it accordingly. After all, they do not have significant local markets. The Indian textile manufacturers are different: If there is not enough quality for export, the domestic market, which has a population of 1.3 billion inhabitants and is growing strongly, is still there, industry representatives explain to GTAI.

India's apparel industry therefore still has a considerable potential for modernization and requires new production technologies, particularly to improve operating efficiency. Other structural weaknesses include strong wage increases with insufficient productivity growth and a shortage of well-trained skilled workers. Other disadvantages are the fragmentation of the clothing industry - many companies lack size - and the lack of adaptation to global fashion trends. While the fashion world is more prone to fiber mixed fabrics, the Indian clothing is not yet following this trend. There is a lack of product diversification.

The spinning and weaving sector looks more modern. Industry experts attest to it a leading international position in terms of size, technology, productivity, quality and price. This is also evident when importing machines. India was the most important export market for German spinning machines to China in 2017 and the fifth largest market for weaving machines, according to the Textile Machinery Association of the German Engineering Federation (VDMA). In textile finishing machinery, India does not rank among the top six export markets, but its competitor Bangladesh does.

Double-digit growth in foreign direct Investment 
Foreign investments in the Indian textile industry are welcome and 100 percent foundations by foreign companies are welcome. On promotional trips to countries such as Japan, Germany, Italy and France, India is actively attracting investors and has not been unsuccessful. The inflow of foreign direct investment into the textile sector, including dyed and printed textiles, amounted to USD 2.7 billion between April 2000 and September 2017. Cumulative investments increased by an annual average of 17.3 percent between 2010 and 2017. However, the bulk of the investment is being stemmed by national Indians. Total investments in India's textile sector from June 2017 to May 2018 amounted to USD 4.2 Billion.

• Companies expand branch network

Bonn (GTAI) - Thanks to the constantly good economic situation, the Germans are in best consumer mood. Turkish retailers also want to benefit from this and are expanding their store network in Germany. However, in order to be successful in the country, they have to respect a lot. Turkish investments in production facilities are seldom in Germany. However -the location offers a decisive advantage to the companies.

Modern furnished industrial lofts characterize the picture of the Düsseldorf Schwanenhöfe. Scenery restaurants, studios and companies have recently established themselves on the former chemical site in the district of Flingern. Since September 2017, the Turkish glass manufacturer Pasabahce became represented here with a showroom. On nearly 300 square meters expensive wine glasses, carafes and numerous other glass products are exhibited. After New York, Madrid, Milan, Shanghai and Moscow, it is the sixth outlet outside Turkey for the Istanbul company. Pasabahce is part of the Sisecam Group and one of the largest glass producers in the world.
 
Most Turkish investors come from the clothing industry
Turkish companies are currently focusing on the consumer goods market in Germany and are opening up business like Pasabahce. The investment focus is on the apparel market. Of the 211 projects by Turkish companies listed the Financial Times fDi-intelligence database between 2003 and 2017, every fifth is assigned to the textile and clothing industry. Another 11 percent comes from areas such as the furniture or cosmetics industry. For most traders, the local Turkish community does not play a major role as a target group. The Turkish companies are competing with other international brands in the German market for a broad western consumer group.

Turkish fashion houses are expanding
This includes the newcomer Yargici, which opened  four stores in top location throughout Germany in 2017. It was the first foreign engagement of the Istanbul clothing company. "In this and the coming years, more branches will be added, after all, we did not come to Germany to open just a few stores only", Germany boss Erik Schaap explains confidently.

The Turkish fashion company Sarar has been present here for over 17 years. In the year 2000 it opened its first branch on the Düsseldorf Königsallee. Since then, the company has invested about EUR 15 million in the country and opened eight boutiques. Sarar also wants to continue growing and is planning to reach 20 stores by 2020. However, Turkish retailers in Germany do not find it easy, as Sarar Europe GmbH marketing manager Salim Ünyeli admits: "The competition is very strong due to the ubiquity of Zara, H & M and Co. Most consumers do not know Turkish labels and prefer for the same price known Western brands."
"The tensions between Germany and Turkey have damaged our business, and potential customers are deterred from buying from a Turkish company." (Marketing Manager Salim Üniyeli of Sarar Europe GmbH.

Who thinks Turkish, fails
Turkey expert Suat Bakir knows the typical pitfalls for Turkish companies looking to start a business in Germany. Bakir is the capital representative of the German-Turkish Trade Association (DTW) and was previously managing director of the Turkish-German Chamber of Commerce and Industry for seven years. "Many fail because they do not spend money on professional advice and ask a Turkish acquaintance for advice instead," Bakir said. Gastronomy and clothing chain in particular have a high fluctuation rate, because it is particularly important in these segments to find and use the right location and a suitable marketing. "Anyone who thinks in Germany like a Turk and does not adapt its products to German consumer taste will not succeed on the long term," Bakir says. Because of the strained relations between the two countries, he advises against introducing a Turkish brand on the German market right now: "The German tourist, who is currently avoiding Turkey, will probably not buy from a Turkish company."
 
Deutsche Bogenn opens factory
Although only very few Turkish companies have invested in production facilities in Germany so far, Suat Bakir recognizes potential in this area. Turkish companies could adopt the positively occupied brand made in Germany, if they would manufacture in the country. The most recent example is the company Deutsche Bogenn, which opened a new plant for plastic pipes last year on Rügen. Behind the extra German sounding name the Turkish Dizayn Group is hided. From its new location, the company wants to produce pipes for various infrastructure projects with 100 employees and sell them worldwide.

Low investment volume
Turkey so far has played a minor role as an investor in Germany - despite the many bilateral relations. Turkish companies have invested just EUR 1.8 billion in the Federal Republic. According to Suat Bakir a key reason is the low level of internationalization of Turkish companies. Another obstacle are the visa restrictions for Turkish business people. The DTW estimates that so far 1,300 companies of Turkish origin have settled in Germany, one in three in North Rhine-Westphalia alone. That is a merit of a committed location marketing. Suat Bakir recommends that all federal states should exploit the interest of Turkish companies and promote their state more in Turkey. Mecklenburg-Vorpommern has already recorded a recent success with the establishment of Deutsche Bogenn on Rügen.

• Production and export on the upswing
• Environmental problems and other challenges remain

The leather industry in Bangladesh reports rising exports and growing domestic demand. The location scores with low labor costs and the availability of leather. However, too many tanneries still burden the environment. The industry structure of the manufacturers of leather goods and shoes ranges from outdated to modern. International, export-oriented companies are showing the way.

Bangladesh's leather industry is the second largest exporter of the emerging market after the apparel industry. The majority of exports in the 2016/17 financial year (July 1st 2016 to June 31st 2017) were USD 537 million on leather shoes (USD 495 million in the previous year), followed by leather goods with USD 464 million (388 million). The export of leather footwear rose again by 9 per cent in the second half of 2017, leather goods were at the same level as in the same period of the previous year.

By contrast, leather exports reached USD 233 million in 2016/17 (USD 279 million), down 29 percent in the second half of 2017. The main reason is lower demand for leather in China. Instead, it is increasingly being processed in Bangladesh into finished products for domestic and foreign customers.

Potential not yet exhausted
The Department of Commerce wants to quadruple the total exports to USD 5 billion by 2021. It has mandated this task at the Bangladesh Leather Sector Business Promotion Council. This should increase with suitable measures both the production quantities and the processing depth in the country. Leather production and processing have potential because they could well repeat the successful development of the domestic textile and clothing industry.

International investments are welcome. Foreign investors can find a subsidiary in their own hands and apply for subsidies and tax exemptions. Eight export processing zones and other special economic zones offer many legal and technical advantages, says the investment authority Bangladesh Investment Development Authority.

The Association of Leather Goods and Footwear Manufacturers & Exporters of Bangladesh (LFMEAB) reports that companies from Taiwan, China, South Korea and Japan are increasingly investing in the industry. Among other things they are relocating production from China to Bangladesh.

Source: Central bank

According to the Central Bank in the fiscal year 2016/17 USD 82 million were directly invested in the leather industry (previous year: USD 48 million).  Taiwan was by far the largest investor with USD 50 million (USD 14 million).

Also, former investors show a successful development. As an example the German company Picard Lederwaren has a joint venture in 1997 and produces now  32.000 leather bags per month and 40.000 small leather goods per month.

Certified manufacturer of leather goods
The most important buyers of leather goods and shoes are the EU, Japan and the USA. The EU and Japan generally do not impose quotas or import duties on Bangladeshi imports under their preference systems for developing countries.

The export-oriented leather goods manufacturers usually produce at a technical level required by the customers. These include certifications and exams. The trade association LFMEAB is committed to meeting industry-standard levels among its 150 member companies. The European Union also supports a sustainable, resource-efficient development of the leather sector with its ECOLEBAN project. Several tanneries and leather factories have been proven to adhere to the labor and social standards of the UN organization ILO and the ISO standard 14001 for environmental management systems.

With increasing demands and volumes, leather processing companies will also import more quality materials such as soles and accessories. Their machines and equipment are also from abroad.

Problematic conditions in leather production
However the leather is manufactured under problematic conditions. The agricultural land has a population of about 24 million cattle and thus about 1.7 percent of the world's total. The meat industry also processes buffalo and goats in larger quantities. Animals suffer from improper slaughter. Modern slaughtering processes and advanced processing steps could improve the quality of leather production.

The number of tanneries is estimated at more than 200, producing approximately 29 million square meters of leather per year, two-thirds of it are leather from beef skins. The industry has a poor reputation, the situation in many companies is criticized by independent observers. In most companies processes and equipment for occupational safety and environmental protection are not available. According to various reports children are working in poorly controlled factories.

The situation in Hazaribagh is dramatic. The Supreme Court has ordered already in 2003 that the approximately 150 small tanneries from this residential area in Dhaka should move to an alternative location. The public company Bangladesh Small and Cottage Industries Corp. was commissioned to set up the leather industry park Savar Tannery Park in a northern suburb of Dhaka. The complete relocation to the new leather cluster in Savar has since been delayed again and again.

According to the Bangladesh Tanners Association, the move to the Savar leather-industrial-park should have taken place in the meantime, however the local central sewage treatment plant seems not to work completely. The tanneries pollute the environment there as well. Media also report still tannery activity in Hazaribagh.

More skilled workers needed
In a recent 2013 survey the number of leatherworking companies was estimated at 3.500. The manufacturers develop their own designs for the domestic market and some want to place their own brands internationally.

But the intensity of training of skilled personnel does not keep up with the industrialization of the industry. Tanneries and leather industry employ directly and indirectly about 75.000 people. Their knowledge and skills are often based on old and traditional procedures and short briefings.

The need for skilled personnel is estimated at 60.000 persons. A center of excellence is involved in the training since 2009. The Center of Excellence for Leather Skills Bangladesh (COEL) has trained around 15.000 people in machinery and design since. Two universities train engineers in this field. The University of Dhaka has established an Institute of Leather Engineering and Technology, and the Khulna University of Engineering has a leather technology department.

The Ministry of Commerce and the association LFMEAB has organized in November 2017 the first edition of the trade fair BLLISS (Bangladesh Leatherfootwear & Leathergoods International Sourcing Show). The organizers were able to present the procurement market and want to continue the event annually. The industry event attracted 30 exhibitors and 20.000 visitors. The next edition will take place from  November 24th- 26th 2018 in conjunction with the leather technology fair Leathertech (http://www.leathertechbangladesh.com).

• Companies want stay away from cheap contract manufacturing

Istanbul (GTAI) - The highly export-oriented Turkish textile and clothing industry wants to increase its competitiveness on world markets by investing in design. The hitherto widespread contract manufacturing for foreign brand manufacturers is losing importance in favor of own collections. With a law from 2016, the Turkish state explicitly promotes investment in design.

The Turkish textile and clothing industry is going through a structural change: While the garment industry was once particularly interesting because of the comparatively low labor costs for contract manufacturing orders from Western companies, Turkish manufacturers are increasingly working as designers for international clients. In addition to well-known Turkish fashion manufacturers such as Ipekyol, Vakko and Zorluteks, more and more Turkish textile companies are also manufacturing and marketing their own brands. In parallel, they are expanding their online sales network. For example, Ipekyol intends to close half of its stores in the next 20 years.

In order to meet the changing demand of foreign cooperation partners, Turkish clothing companies are increasingly investing in research and development projects, as the Turkish business magazine Ekonomist reports.

For example, Hassan Tekstil (http://www.hassan.com.tr) based in Istanbul, founded in 2017, has a 45-member R & D department. The company, whose revenues of USD 232 mio in 2016 were generated 35 percent from exports, plans to spend1.5 percent of its revenue on R & D activities.    

Another company that is increasingly investing in R & D and design is TYH Tekstil (http://www.tyh.com.tr) in Istanbul. This purely export-oriented company with a turnover of around USD 100 mio (2016) employs 15 fashion experts. About 1.5 to 2 percent of sales, which will reach around USD 130 mio in 2017, will be used for design projects and the development of collections, according to the Economist's report. In addition to contract manufacturing for well-known international brands such as Gant and COS, TYH Tekstil also developed its own brand Roqa for women's outerwear. Meanwhile, 20 to 25 percent of exports are from the supply of private label products.

Innovative workwear for security forces

According to Economist, another manufacturer with increasing R & D activities is Narkonteks (http://www.narkonteks.com) in Izmir. This company, which does not produces for international companies only, produces also goods under its own brand "Blackspade". Narkonteks also supplies customers in the Netherlands with technical textiles for security personnel. The manufacturer employs 30 engineers for its R & D activities. Of the targeted sales of TL 100 mio in 2017, 1.5 percent will be spent on R & D activities.

In 2016 Narkonteks generated around TL 80 mio. (1 Euro = 4.50 TL). The company Farb Textile (http://www.farbetextile.com) in Izmir, which sews for European fashion companies such as Bestseller, Inditex and Mango, emphasizes increased design activities also, according to Economist. About 60 percent of the production are own brands. The turnover of TL 100 mio (2016), should be increased to TL 130 mio.
 
One of the larger R & D investors is the clothing manufacturer Taypa Tekstil in Istanbul (http://www.taypa.com.tr) with a turnover of EUR 100 million, which exports about 80 percent of its production. The parent company TAy Group, which supplies large fashion houses such as Levis, Inditex and Tommy Hilfiger, uses 5 percent of its revenue for research and innovation projects and employs 25 designers, writes the magazine Ekonomist. The share of own brands in sales of currently 21 percent is to be increased to 50 percent in the foreseeable future.

Taypa invests in major project in Algeria

In addition to the existing production in Egypt Taypa Tekstil manufactures in Serbia and Algeria. In a clothing factory in Kraljevo, Serbia, EUR 35 mio should be invested over the next five years. A large-scale project called "TayalSPA" is being planned in Algeria for the construction of an integrated textile and clothing factory in the Sidi Khetab industrial zone in the province of Relizane. According to Taypa CEO Burak Karaarslan, quoted in the business paper "Dünya", this project, with an support of 50 percent by the Algerian government will receive investments totaling USD 2 billion in three phases until 2023.

USD 800 mio will be invested in the recently started initial construction phase. The company will start with yarn production first. Thereafter, from the end of 2018, the production of denim and other fabrics will commence. After completion of the first phase, the annual production will reach 30 million meters of denim and non-denim fabrics, 14 million meters of fabrics for shirts, 3,200 tons of knitwear and 30 million pieces of ready-made garments.    

Government encourages investment in research and development

The Turkish state has been promoting investments in design since 2016: By Law No. 6676 of February16th 2016 (Government Gazette "Resmi Gazete" No. 29636 of 26.02.16) amending Law No. 5746 of 28.02.08 on the promotion R & D activities, in contrast to the previous practice, investment in design projects were concluded in the government support. Thus, companies that employ at least 15 people (previously 30) in the R & D sector can benefit from tax and customs privileges. Imported products for research projects are exempt from import duties.

Comprehensive support measures in the form of project-based grants for the marketing of Turkish brands abroad also include Regulation No. 2016/1 of the Turkish Monetary Credit and Coordination Council, which was announced in the Official Gazette No. 29898 of November 24th 2016. The implementation of subsidies is the responsibility of the Ministry of Economy.

According to figures from the Ministry of Science, Industry and Technology, there are a total of 38 R & D and 29 design centers nationwide in the textile and clothing industry.

Germany is most important target market

Turkey is a major exporter of textiles and clothing. According to official statistics, the country exported USD 24.3 billion worth of textiles and clothing in 2016 (including USD 16.7 billion in ready-to-wear articles). The export association IHKIB is targeting USD 60 billion in ready-to-wear exports in 2023. In apparel, Germany is the most important customer with a share of 18.8 percent. For textiles and textile raw materials, the country is the fourth largest market for Turkish exporters with 5 percent.     

Source: Export Association IHKIB; Turkish Ministry of Economy

Source: IHKIB; Ministry of Economy

Source: IHKIB; Ministry of Economy

Source: IHKIB; Ministry of Economy  

• In 2017 stagnation expected
• British buy by mouse click

• Textile companies comparatively broadly placed 
• Garment sector scores too little internationally 

New Delhi (GTAI) - India is one of the world's largest manufacturers of textiles. Cotton fabrics and home textiles are among the export hits. The clothing industry plays a comparatively small role and threatens to fall behind in competition. Both areas are required to produce higher qualities and more sustainable. The Ministry of Textiles supports the fragmented industry. Foreign suppliers and buyers can explore the market at trade fairs.

The Indian textile and clothing industry is of an overall economic importance. It accounts for 14% of the total industrial production and employs directly 51 million people. Additional further 68 million people in households and micro enterprises are working for the industrial companies. Because the national economy as a whole needs to create about 12 million additional jobs per year, the government has chosen the textile industry as an employment motor. India, in contrast to the textile giant PRC, has high advantages with its labor cost.

 
The availability of natural materials such as cotton, jute and silk is a further advantage of the textile industry, which can look back on a long tradition of processing. India is now the world's largest producer of cotton. In the cultivation year 2016/17 year (4.1 - 31.3) estimated 5.9 million tons are expected to be harvested.

The cotton will be processed into yarns and fabrics. For the production of yarns, 61 million spindles (measured in spindle equivalents) are available. In 2015/16, they spun about 5.7 million t of yarn, of which 4.1 million t are made out of cotton fibers. The production of cotton cloths was about 38 billion sqm., mainly produced in decentralized weaving mills with simple mechanical looms. The global trend in clothing, however, goes to artificial fibers. In order to protect their domestic production the Ministry of Finance levies tariffs.

Textile industry with its own ministry and many promotional programs 
The Ministry of Textiles subsidizes the sector through several programs, which support the technical modernization, the construction of industrial parks, qualification, training and marketing. Garment factories may even be reimbursed for duties and fees paid. For this purpose the budget of the Ministry of Textiles was once again significantly increased in the financial year 2017/18.

The textile and clothing industry does not only want to score on the domestic market, it also wants to play a bigger international role. In a five-year plan, the Ministry of Textiles had targeted an expansion of exports to USD 64 billion by 2016/17. This target has not yet been achieved, in 215/16 the exports of textiles and clothing amounted to USD 37.6 billion. The exports of textiles even shrank against the year before. 

Sources: Ministry of Textiles, Ministry of Statistics and Programme Implementation

The local garment industry has good chances of development on a large and growing domestic market. According to industry estimates the retail sector sold clothing worth approximately USD 45 billion in 2016. Experts say the world's fifth-largest market is expected to grow well above 10% in the medium term. The backlog of the 1.3 billion inhabitants is not yet covered. The trade imports international branded goods mainly from China and Bangladesh. Standard articles and custom-made products are sewn by the local industry.

Garment sector with opportunities and problems 
Cheap wages are a location advantage. They vary however very different within the subcontinent. The statutory minimum wage regulations differ between the 29 federal states. In addition the person's age, the company membership and abilities are used to calculate the minimum wage.

Due to the increasing production costs in China, labor-intensive manufacturing is moving to more favorable locations. Not only labor costs play a major role here. The complex labor law strongly restricts the efficiency of labor markets in India. Investors consider the labor law, logistics and the structure of supply chains as to be difficult. The World Bank found in its study "Stitches to Riches" in 2016 (see https://www.openknowledge.worldbank.org/handle/10986) that Bangladesh, Indonesia, Cambodia and Vietnam, surpass the competitor India in the points quality, delivery times, reliability and sustainable social responsibility.

India is also missing free trade agreements (FTAs) which facilitate access to international markets and regulate them reliably. The European Union and India have been negotiating as an example a comprehensive FTA for over 10 years with longer interruptions.

Fragmented sector structure with international Champions 
Information on the number of companies, their size classes and investment volumes are not available. Smaller textile companies and retailers are partially not registered and do not pay taxes. Medium-sized companies are very flexible, but they need to   mechanize, automate and upgrade technically in order to survive.
Larger companies look back on their long-standing tradition and have developed into internationally networked corporations. According to the Indian financial service Moneycontrol, the three largest corporations in the clothing industry are: KPR Mills (last net sales circa USD 300 million), Page Industries (USD 270 million) and Gokaldas Exports (USD 170 million); In the textile sector in general: Bombay Rayon (some USD 640 million), Sutlej Textiles (USD 350 million), SEL Manufacturing (USD  300 million), Mandhana Industries (USD 250 million); in the knitting sector: Nahar Industrial Enterprises (USD 270 million), Rupa (USD 160 million); Cotton spinning: Vardhman Textiles (USD 860 million), Trident (USD 560 million), Indo Count (USD 310 million); Spinning of synthetic fibers: RSWM (USD 450 million), Indorama (USD 390 million), Sangam (USD 230 million); Weaving and other processes: Alok Industries (USD 1.8 billion), Welspun (USD x750 million), Garden Silk (USD 370 million); Other areas: Arvind (USD 830 million), Nahar Spinning (USD 310 million), JBF Industries (USD 550 million), Bombay Dyeing (USD 280 million).

Foreign textile companies invest and explore
The government is promoting the "Make in India" campaign in the textile sector for foreign direct investments. Company foundations are for 100% in foreign hands (see http://www.makeinindia.com/sector/textiles-and-garments). The sector attracted USD 2.4 billion from 2000 to 2016 in FDI.

Foreign companies can explore the markets at various trade fairs. The textile ministry wants to expand the “Textiles India”, which took place in Gandhinagar (Gujarat) in June 2017, to a mega-event (https://www.textilesindia2017.com). The international garment industry also met at the same time at the „India International Garment Fair" (http://www.indiaapparelfair.com).

The "National Garment Fair" will take place from July 10th to 12th in Mumbai (http://cmai.fingoh.com/event/65th-national-garment-fair-1/Registration). And Messe Frankfurt is organizing "Techtextil India" from September 13th to 15th in Mumbai. Here German exhibitors can participate in a community stand (http://www.auma.de/de/messedatenbank/seiten/moesetailseite.aspx?tf=135499).

• Chinese fashion companies are becoming more creative and work on their branding
• German fashion has a hard time with it

Beijing (GTAI) Chinese fashion has the reputation for being less creative and of poor quality. Well established brands are rare. But this is now changing. More and more local designers succeed in making a name for themselves on a national and an international level. This is why it will be harder for imported clothing to establish itself on the Chinese market in the future. Chinese designers meet the local taste with a mixture of Western and Chinese elements.

When it came to buying clothes, Chinese customers had for several decades only two choices - either settle for cheap domestic bulk goods or spend a lot of money on an imported product. First came the luxurious brands, especially from Italy and France, which China's new millionaires adorned themselves with, then more and more shops opened, targeting the ongrowing middle class and in which also German business clothing sold well.

But the local competition does not sleep. The Chinese textile and clothing industry faces a massive financial pressure; therefore many companies have to take a decision; either they become better or they have to go. Anyone who remains has to change his production and his products in such a way that they can meet the more and more demanding customers, especially within the domestic market.

This includes the positioning of own brands. The Dongrong Group from Inner Mongolia is currently following this path. It has become well known for manufacturing cashmere products for famous British and Italian fashion labels, and now sells its own design under its own label ("Dongli") in its own shops.

Owning a store – or even better several stores - is the dream of most young Chinese fashion designers, who are increasingly making a name for themselves on the Chinese market. This is also due to the retail structure in the People’s Republic of China, which is unusual for Germans. The typical German clothing retailers with several brands in the assortment do not exist. Instead, mono-brand stores dominate - either as single stores or in the large malls as sublet retail space.

Nevertheless, Chinese companies have a lot to catch up on branding and quality. Even the familiarity of important Chinese suppliers is usually limited to local buyers. For the majority of European customers, however, they are not even a concept. But according to industry insiders, this is also changing. The number of successful Chinese fashion designers and companies is growing even internationally.

Despite deficits in areas like creativity and branding, the scene is growing and finds an ongrowing customer base. Accordingly, things will become even more difficult for German fashion, which usually cannot compete with the glamour of the Italian or French competition. Although there are more Chinese people who are able to spend a lot for good fashion, but there is also a larger local offer, which is price oriented to foreign markets and meets the Chinese taste with a skillful mix of Western and Chinese traits.    

Chinese Importes of Apparel*)
(in Mio. US$, change in comparison to the previous month in %)

*) HSPos. 61+62
Source: China Customs; calculation by Germany Trade & Invest

China's fashion designers are becoming more successful internationally

Many of the new Chinese fashion designers have studied abroad, worked and / or cooperated with foreign designers, and now combine typical Chinese with modern Western clothing and cuts. With their designs, they do not only create interest in the relevant fashion weeks abroad, but are also increasingly bought in China. Pioneers are fashion designers like Ma Ke ("Wuyong", "Mixmind"), who designed the clothes for China's elegant First Lady Peng Li-yun, or Paris-based Guo Pei, who was named by the Time Magazine 2016 as one of the 100 most influential people in the world. In the meantime, a large number of fashion designers and designers have made themselves a more or less wellknown name.

Among the new labels are for example the Eve Group from Beijing or ANNDERSTAND (founded by Yu Ge, who gained experience already at Louis Vuitton and Gucci) from Shanghai. With tailor-made models from Yu Ge, the underwear brand AtoG Lingerie (founder: Zhou Yingying) even made it to the fashion weeks in London, New York, Milan and Paris. They are particularly popular among the middle and upper classes. These population groups are often looking for a modern, national identity and would like to dress up individually and elegantly - apart from the unattainable big brands from France or Italy, which nevertheless are already in the Chinese metropolises almost "at every corner”.

Return to old traditions 

For example, exquisite new editions of Chinese sheath dresses (Qipao) aree in demand - such as by HanartQipao from Shanghai. Founder Zhou Zhuguang is convinced: "Qipao is the future and perhaps also the beginning of a Chinese haute-couture." The costs of a Hanart dress range from 3,800 to 60,000 yuan (RMB, circa 570 to 9,030 US $, 1 US $ = circa 6,642 RMB, yearly average 2016). Buyers have often embraced a refined Chinese lifestyle - including tea drinking, reciting poems, and collecting Chinese antiques.

Recalling some decor patterns of national minorities, such as the elaborate embroidery art of the Dong or Miao nationality from southern China, is also popular. In particular, Vimemo (founded in 2009 by Yu Ying) from Guizhou has earned a reputation. Vimemo employs about 3,000 female embroiderers and batik dyeing worker in homework and ensures that techniques, which only a few grandmothers are still proficient in, do not die out. In this sense, a research and development center with a school is to be built in 2017. The very high-priced pieces of silk or cotton are sold in own shops (at the Beijing International Airport, for example) or via the Internet.

The Chinese designer, Su Renli, uses the old techniques of handicrafts (for example, the dyeing of fabrics in yamswurze extract) combined with sustainably produced materials and modern cuts. Other promising brands with an individual style are, for example, Zuczug or Icecle based in Shanghai, some of them partly coming into the market with serious eco-friendly products.

Despite the growing health awareness and promising approaches - such as the recently founded "Uncover" project - sustainable fashion in China has so far only been a niche. Against this background, the company Jiaxing Jiecco ("LangerChen") in Zhejiang, founded by Miranda Chen and Philipp Langer, is producing their fabrics that are mainly certified according to the strict Global Organic Textile Standard (GOTS) primarily for foreign customers. Genuine eco-fashion or fair produced clothing has so far been a concept for the fewest Chinese. "After discussing food safety, the discussion about healthy clothing will follow," Miranda Chen is convinced. But time has not yet come.

• Projects planned for USD 2.3 billion by 2020
• Doubling of exports of finished products strived

Tashkent (GTAI) - The textiles and clothing industry of Uzbekistan remains one of the most important investment and cooperation sectors for foreign companies. A new expansion program for the period 2017 to 2020 provides for the implementation of 140 projects. The expected inflow of capital to the industry in a value of up to USD 2.3 billion is planned to account for about half of the foreign investment.

The textile and clothing industry should be expanded more than ever into an important export part of the central Asian republic. The specific activities for the targeted doubling of exports by 2020 versus 2016 are listed in the presidential regulation "On the program of measures for the further development of the textile, clothing and tricot industry 2017 to 2020" of December 21st 2016.

Full domestic processing of cotton fibers strived

With an annual output of 3.4 million tons of raw cotton and 1.1 million tons of cotton fibers, Uzbekistan is one of the world's six largest cotton producers. The production of 25,800 tons of cocoons is also considerable high (an average figure for 2012 to 2015). In the first half of 2016 55% of the produced cotton fibers were further locally processed. According to the program this rate should rise to 100% by 2020. It is also planned to reduce the amount of cotton yarn in textile exports in favor of more refined cotton products. Yarn now stands for 53% of the value of exported finished textile products.

The plan is to expand the production of finished textile products until 2020 by 120%, including 170% of yarn, 200% of finished tricot fabrics, 240% of finished yarn and clothing and 270% of hosiery. The share of finished goods in the textile and clothing industry is expected to increase from 47.0 to 65.5% and in export from 42.0 to 70.0%. The program also includes measures to adapt the Uzbek sector norms and standards   to the common international standard rules.

Supply and cooperation opportunities for 140 individually planned projects

Up to USD 2.3 billion shall be invested in 140 expansion and renewal projects by 2020, including complexes with a full value chain. Commercial banks or their investment companies which are providing loans for the co-financing of the projects may, depending on the project, acquire up to 100% of the capital stock of the new or modernized enterprises.

The main contact partner for the projects is the public shareholder company O'zbekyengilsanoat.  It owns 380 textile, clothing and tricot companies, as well as some silk processors, among of them many joint ventures. The company is comparable to a branch of the Ministry of Industry. It stands for a large part of the output and export of the Uzbek textile and clothing industry (estimation for 2016: about USD 1 billion).

Its tasks include the coordination and participation in investment projects. For example, all projects involving O'zbekyengilsanoat companies are subject to a technical review by the scientific and technical advice of the shareholder company. Import contracts for the needs of the projects are also subject to a review.   

Wide preferences for investors

Projects are flanked by several stimuli up to 1st January 2020. The state grants tariff preferences for the import of equipment, complements and spare parts, an exemption from the profit and wealth tax as well as from the duty to the central road fund. Export-oriented manufacturers of finished cotton-, blended-  and silk-fabrics-, finished clothing and tricots, head coverings, stockings and textile gallantry goods will be freed from the mandatory exchange of the foreign exchange in Uzbekistan Sum. Imports of raw materials, auxiliaries and materials can be promoted with customs clearance extension of up to 60 days.

The new central foreign trade company Ustextilexport has been founded to act as a service provider for the needs of all country-based industry players, including small businesses. This applies both to the exploitation of foreign markets, the supply of already established trading houses for textiles and clothing abroad with Uzbek products as well as to the participation in the procurement of technologies and materials for the domestic textile and clothing industry.

The current goals for the expansion of the textile and clothing industry are all rather too ambitious. Medium-term industry programs have already been launched in previous years. Despite some reached progress, the results have been rather sparse. The output and the effectiveness of the production remained far behind the targets. Already in 2012, 407,000 tons of cotton yarn, 350 million square meters of cotton fabrics and 273 million pieces of clothing should have been produced. The for 2012 targeted exports of USD 1.5 billion were also missed in 2016 (a good USD 1.0 billion).

The reasons for this are complex. Too little has been invested so far in the modernization of the existing enterprises. The companies complain about bottlenecks in the provisioning of working capital, in the supply of energy and, above all, in the exchange of foreign exchange for the procurement of imports (spare parts, auxiliary materials, etc.). Another obstacle is the over-regulation of import and export transactions.

Nevertheless, the industry remains a profitable business field for foreign companies. In addition, the signs are good for improving the business environment in the country. After the new President Shawkat Mirsijojew took office in December 2016, a positive mood goes through the country. First regulations for more entrepreneurial freedoms have already been adopted. A whole bunch of further measures is in sight.

1) In addition to the textile and clothing industry, the light industry comprises the sectors of cotton ginning and production of leather goods / shoes;
2) About two-thirds of the output is attributable to the textile and clothing sector;
3) Investments in the sectors cotton ginning, carpets and leather / leather products are less than 10% of the annually in the light industry invested capital.

Source: State Statistics Committee, Tashkent

Contacts
GAK O´zbekyengilsanoat (Staatliche Aktionärsgesellschaft O´zbekyengilsanoat)
ul. Bobura 45, 100100 Taschkent/Republik Usbekistan
Contact personIlchom Haydarov, Vorsitzender der GAK O´zbekengilsanoat; Schochruch Rachimow, manager investment department
Tel.: 00998 71/239 17 11, -253 93 54, -239 17 11, -253 93 58 (administration for investment projects), Fax: -253 93 58, -56 04 (department fir investment)
E-Mail: info@engilsanoat.uz, info@legprom.uz, Internet: http://www.engilsanoat.uz, http://www.legprom.uz

• Large-scale projects in Honduras
• More vertical integration strived

Following the US President's decree against the Pacific Pact TPP, Central America's textile and clothing industry counts for its main market on further tariff advantages compared to the Asian competition. Next to the so far dominating subcontracting work the sector wants to intensify the production of pre-products, what requires more and better textile machinery for this purpose. Guatemala is already investing, while Nicaragua will continue to stay mainly with sewing and tailoring. The largest technology market was lately El Salvador.

Honduras wants to expand its textile and clothing industry strongly. The aim of the "20/20" program is to significantly increase exports and with it new jobs. One focus should be the production of sportswear and other synthetic clothing, including pre-products. Central America's "largest factory for polyester yarn" (DTY) went into construction at the end of January 2017 in Choloma. It is expected to cost USD 73 million and produce 25,000 tons per year. According to Mario Canahuati, a Honduran shareholder of the investor United Textiles of America, an additional USD 120 million factory for synthetic materials and garments should be added later.

Observers believe the sector's expansion plans are realistic because it can stem the relatively large investment in the synthetic fiber production. In the Honduran textile industry there are many joint ventures with US partners which can raise capital in North America. In the other countries of the region the sector companies are more strongly medium-sized. They are depending more on the local capital market with its high interest rates and restrictive banks.

Honduras, Guatemala and El Salvador invest

According to a machine representative the textile manufacturers in Guatemala will invest more in dyeing machines in order to become more independent from suppliers and keep the quality better under control. According to Invest in Guatemala the sector there delivers higher quality end products than the competition from El Salvador and Honduras, on the US market clothing from Guatemalan is almost twice as expensive.

The textile industry in Guatemala and El Salvador is more vertically integrated than in Honduras: it produces relatively quite a lot of yarn and fabrics by itself and is less dependent of the typical subcontracting (Maquila) method, which only imports textiles and re-exports them as finished clothing. Honduras mainly processes imported synthetic fiber yarns, which the country - like El Salvador - manufactures partly by itself.

The best market in Central America for a large German textile machine manufacturer is currently El Salvador, which imports the most technology in the region. The customers are quite innovative and work more concept orientated, which makes the cooperation easier. Due to increased yarn prices, some weaving companies are currently investing in spinning machines, a machinery salesman says. According to the Central America Strategic Sourcing Review, more than 20% of the factories are "vertically integrated".

In the opinion of machine representatives, Nicaragua is still concentrating on subcontracting. Investors are reluctant to spend larger sums which would be needed for modern textile  manufacturing. In addition there is a lack of good specialists for the foreseeable future, the level of training is only sufficient for easier sewing and clothing manufacturing. In Panama the textile industry does not play a nameable role; in Costa Rica, which is also relatively prosperous, the sector is larger, but exports little.

Central America’s textile and clothing industry

*) Costa Rica 29 Mio.; Clothing = almost total industry exports; 80% of exports are for the US; data from US import authority. Source: ITMF; national associations and authorities; Press

Central America Textile companies are usually located in a free zone and produce for export, mainly the US. In Honduras, according to a study by the Central Bank, Maquila - with textile / clothing as the largest segment - produced 36% of pre-products for other contractors and 64% of final products, which in turn were exported up to 99%.

US protectionism could even help

The protectionism, which is announced in the main market USA, develops some optimism to Central America's textile industry. As listed in “Honduras 20/20” it now can deliver more cheaply to the US than the competition from China or Vietnam because of existing trade agreements. At an - now not targeted anymore - omission of cutting US customs duties for Vietnam, it would be much more expensive. In addition, a garment factory in Honduras is able to deliver to the US in two days, a delivery from Vietnam requires twenty days. In the today so very fast fashion world, this is the main reason why Wal-Mart & Co. are ordering massive masses in Central America.

Until now, Central America has been supplying mainly cheap clothing for the US mass market, but, as a German machinery exporter is hoping, they will try to settle themselves against the Asian competition with higher valuable goods. For this the Central American manufacturers would need better technology, which preferable comes from Europe. In the view of other representatives Central America will need in future productive machines that are cheap at the same time. Chinese machines with European components are a big competition.

Machinery imports rising

Central America Imports of textile machinery and sewing machines have risen by one-third to over USD 130 million between 2013 and 2015. In addition, according to the International Textile Manufacturers Federation (ITMF), Honduras has imported 170 round knitting machines in 2014 and 2015, Guatemala only 26, El Salvador 23 and Nicaragua ten. Germany was the fifth most important delivery country. Leading supplier was the USA. For Guatemala, with its many Korean-owned textile companies, Korea (Rep) was the main supplier.According to ITMF, Central America will shift its investments somewhat away from the clothing area towards the textile sector. Already today, the representative of a German manufacturer says: "We are currently selling very well in Mexico and Central America." 

Central America‘s1) imports of textile machinery (bn. US$) 2)

1) without Honduras and Nicaragua; 2) SITC 724, without household sewing machines, (724.33), household washing machines, (724.71), machines for dry-cleaning(724.72), leather machines(7248), parts for household washing machines; 3) El Salvador only
Source: UN Comtrade