Textination Newsline

• 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 The industry structure of the manufacturers of leather goods and shoes ranges from outdated to modern.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).

• Chinese companies are planning several major projects
• Germany is supplying more textile and clothing machinery

Several Egyptian and Chinese companies have announced some heavy manufacturing investments in textiles and clothing. The government is committed to creating new production priorities for textiles and wants to increase added value. Labor-intensive industries benefit from the low value of the Egyptian pound for their exports. For textile and clothing machinery, Germany achieved a delivery share of around 20 percent in 2016. In the Egyptian textile and clothing industry, the signs point to expansion and modernization. Local media reported on a series of investment plans by Chinese and Egyptian companies. According to the newspaper Al Gomhouria, a Chinese producer is planning the world's largest textile factory for USD 6 billion in the economic zone on the Suez Canal. The Chinese companies TIDA and Shoon Dong Roy want to build a clothing factory for USD 800 million. Sino-Egypt Minkai plans to build a textile industry complex for around USD 750 million. The local paper and stationery manufacturer Mintra plans to start the production of sports shoes with an initial investment of USD 50 million. Manufacturing in the 10th of Ramadan City is scheduled to begin in mid-2018, serving both the domestic and overseas markets. Egypt is still importing about 85 percent of the shoes sold in the country.
Oriental Weavers plans to purchase new production lines, machinery and equipment in 2018. For this purpose, EUR 6 million are to be invested. According to the newspaper Al Shorouk, the expansion will be financed by a bank loan.

State relies on new textile cities and more value added
The Egyptian state also wants to strengthen textile and clothing production. The Ministry of Investment and International Cooperation, the Supreme Council for Textile Industries and an unnamed Chinese partner want to set up a free zone for textile production in Minya. The ministry plans to provide part of the funding through international institutions and create specialized training programs for workers. According to media reports, the project value should be at USD 324 million.

In early 2017 the Egyptian Ministry of Industry announced that it would set up new textile production centers at a total of ten locations. In particular, spinning mills and weaving mills are in the spotlight. This perspective is shared by the Ministry of the Public Sector. It is aimed primarily at increasing value adding and therefore carried out a study in 2017.

Import demand for textile and clothing machinery is expected to increase
Egyptian textile and clothing companies often produce with a lot of manual work and partly outdated machines. On the one hand, the government is keen to ensure that as many jobs as possible are created for the approximately 800,000 young people who enter the market each year. On the other hand, a more automated and modern production of textiles and clothing would enable more complex products. These could be sold at a higher profit, but may also require less human labor.

An Indian company has secured a contract to modernize cotton processing. In compliance with a framework agreement with the Cotton and Textile Industries Holding, Bajaj Clothing automates cotton ginning systems. A total of eleven companies in different parts of the country will be equipped with the new machinery until August 2018. In late December 2017, Egypt Today announced that the government wants to modernize the spinning and weaving mills in Northern Egypt. The investment volume will amount to a total of one billion Euro over a period of five years.

The newly announced projects are expected to increase the demand of import machinery in the near future. Like other types of equipment, the vast majority of textile and clothing machinery will be imported into Egypt. Deliveries from Germany were able to improve both in absolute terms and relatively in 2016, despite an overall shrinking of the volume of imports. The German supply share jumped from 15.8 to 20.4 percent compared to 2015.

Source: UN Comtrade

The consequences of the release of the Egyptian pound in November 2016 will mainly benefit labor-intensive industries and those that are processing mainly local raw materials. After October 2016, the value of the EURO soared from just under 9 to 21 Egyptian pounds and has stabilized at this level. According to various figures the textile and clothing companies in the country employs between 1.0 and 1.2 million workers. It is reported that state-owned enterprises are strongly represented in the textile sector, while the private sector plays a greater role in the clothing sector.

The advantage is dampened by the import requirements for cotton. In Egypt, especially soft and high-quality long-staple cotton is grown and exported. By contrast, domestic textile and clothing companies mainly use short-staple cotton from abroad as a raw material. Their import as become more expensive due to the currency developments. Nevertheless the competitiveness of Egypt's textile and clothing exporters has improved as a result of the new foreign exchange situation. Their exports should have developed better in 2017 than at the peak of the currency liquidity crisis in the previous year. At that time, exports fell by12.6 percent to around USD 1.7 billion.

Source: UN Comtrade

Increasing labor costs at Asian production sites, long transport routes and sometimes dissatisfaction with the product quality make some customers look for new sources of supply for textile and clothing products. According to a report by the news portal Middle East Eye, Egypt lies at least with USD 100 as a monthly salary for workers roughly equivalent on a level with India or Bangladesh and about half of Chinese salaries. In addition, the country at the Suez Canal is capable of fast deliveries to Europe and the United States. Regional competitors include Turkey and Tunisia. Egyptian manufacturers are not always recognizable as such, as they often manufacture for major international brands. Middle East Eye names Calvin Klein, Decathlon, Tommy Hilfiger and Zara as examples. In November 2017, Dice Sport and Casual Wear agreed to supply Levi Strauss & Co. with children's clothing.

Since 2017, Egypt became part of the Better Work Program of the International Labor Organization. The program includes 30 apparel factories in which the working conditions should be improved. Such confirmations could then give Egyptian products competitive advantages in export. However, to stand up to the tough international price warfare and at the same time to meet by the customers expected production standards will be a challenge.

• Industrial parks should enable a quantum leap
• Progress in infrastructure, Deficits in foreign exchange provision

The Ethiopian textile, clothing and leather industry scores not only with comparatively low wages and high-performing personnel, but also with modern industrial parks. In the meantime the technology has to be fully imported and the supply of materials needs to be greatly expanded. There is a great progress in logistics, but unfortunately not in foreign exchange procurement. German suppliers of relevant equipment should definitely consider Ethiopia in their acquisition.

So far, only Mauritius has made a name for itself as a producer of high-quality clothing south of the Sahara. Attempts to locate textile and clothing companies in Namibia and Lesotho in a larger style have not been very successful. Meanwhile Kenya and Ghana have far too expensive production conditions. "Clothing companies are nomadic,” says a consultant, who is specializing in the trade, "they go where it's cheapest for them."

Meanwhile, Ethiopia offers several advantages: Wages and additional costs are far below the Chinese ones. A worker in the Ethiopian factories earns an average of USD 909 a year, according to a survey by the US Center for Global Development, compared to USD 835 in Bangladesh, USD 1,776 in Tanzania, and USD 2,118 in Kenya. Another advantage is appreciated by employees: Ethiopia has a long tradition of textile and clothing production as well as in leather processing and thus at least an expandable base of skilled workers.

The supply of native cotton and leather meanwhile is considered strongly expandable. In times of drought, such as in 2016 and partly in 2017, the supply of cotton is insufficient. However, the government is cooperative and increasingly open to the needs of producers. Thus, the infrastructure has been currently sustainably improved, in particular the transport routes to the seaport Djibouti, from where Europe is much faster to reach than from the Far East. In addition, the Ethiopian capital Addis Ababa has a capable aviation hub with a dozen direct flights to the EU, including Frankfurt and Vienna. There is also a modern air freight center.

Modern industrial parks as a game changer

Just as important as the delivery routes are the "modern" production conditions in the emerging industrial centers all over the country, Made by China: pothole-free roads, guaranteed electricity and water supply, proper waste and wastewater disposal, workers' settlements in the vicinity. From the Ethiopian point of view, a great many jobs are created, families are fed and foreign exchange is earned.

According to its government, Ethiopia is in a transformation process away from an agrarian economy and towards an industrialized state. By 2025, the country should reach a "middle-income status" and become the largest industrial production hub in Africa. To achieve this, Ethiopia is investing heavily in roads, railways and power generation, in health and education, in urban and rural development, and in the creation of industrial clusters.

Ambitious export specifications

In July 2016 the Hawassa Industrial Park was officially opened, dedicated to the export of textiles and clothing, and is the largest industrial park in sub-Saharan Africa. As early as 2018, the park is expected to employ 60,000 workers and generate USD 1 billion in exports of clothing and textiles - a steep target given in a view of the current export figures. As early as 2030, Ethiopia wants to reach a total of USD 30 billion by exporting textiles and clothing - but it's still a long way off. At present, 15 in-ternational companies are already investing in Hawassa, including the US PVH Corporation (formerly Phillips-Van Heusen Corporation, prominent brands: Calvin Klein and Tommy Hilfinger) and Epic Group (Hong Kong), a supplier of, among others, Walmart , JC Penny, Levi Strauss, VF Corporation, Tesco, Sansbury's, Marks & Spencer and C & A. Epic wanted to go to Kenya first, but then decided for Ethiopia at the last minute, which, according to Epic boss Ranjan Mahtani, is "still unpolished," but has the most potential.

The challenges are considered to be high: "Our seam-stresses have never got a job before and have never seen a sewing machine," Mahtani says training therefore is a top priority. At the same time, however, his company also relies on state-of-the-art automatic machines, for example for attaching bags. The production halls are also all around computerized with RFID technology. The current efficiency Mahtani estimates at 25 to 30 percent. After experience with other production sites, results of 75 to 80 percent are possible after about ten years.

Wide range of new industrial parks under construction

In July 2017, another industrial park was opened in Kombolcha City. A whole range of other parks are in various stages of realization and all are focused on the apparel, textile, pharmaceutical and medical device manufacturing sectors. According to the Ethiopian Government, there is no shortage of interested investors from the PR of China, India, Turkey, the US, Hong Kong and South Korea. Ethiopia benefits from the African Growth and Opportunity Act of the United States, which, for example, reduces its import duties by 16.8 per cent on cotton pants and 30 per cent on synthetic shirts. In addition, Ethiopia has a duty-free access to the EU market under the Everything-but-Arms initiative.

Source: Comtrade, as of 18 October 2017

Note: The import figures mentioned above are based on Ethiopian data, which for various reasons are not considered particularly reliable. Equally not reliable are often the relevant export data of the partner countries, because all sea transports go via Djibouti and deliveries statistically are recorded often as exports to Djibouti.
Source: UN Comtrade, as of 18 October 2017

German exports expandable

German exporters of technology for the textile, clothing and leather industries are not yet well positioned in Ethiopia. According to the preliminary figures of the Federal Statistical Office (SITCM 724), in 2016 only EUR 1.06 mio of relevant technology went to Ethiopia, compared to EUR 1.05 mio in the previous year and EUR 5.02 mio in 2015.

• Rising numbers of visitors and exhibitors
• Internationalization is progressing 

• Fair as an opportunity for cooperation
• Investment climate is improving

Bonn (GTAI) - With a population of almost 200 million, a high proportion of young people and a growing middle class, Pakistan offers good prospects. In particular, the China Pakistan Economic Corridor has the potential to trigger a new growth spurt and attract foreign investment. The 10th Expo Pakistan, which takes place in Karachi from November 9th -12th 2017, provides an opportunity to initiate business with Pakistani partners.

Largest trade fair

EXPO Pakistan is the largest trade fair in the country and offers the most comprehensive presentation of the country's export economy and service sector. In addition to local companies, numerous exhibitors from the neighboring countries also present their products to international visitors. Among others goods from sectors leather, textiles and clothing, sporting goods, automotive and automotive parts, pharmaceutical products, machinery and services in the field of information technology, logistics and health will be exhibited.

The four-day EXPO Pakistan, which has been held every two years since 1997, is directed exclusively to foreign buyers during the first three days. B2B meetings between suppliers and buyers will be arranged by the Trade Development Authority of Pakistan (TDAP). According to the Pakistani Trade Promotion Agency at the last trade fair in 2015 business contracts worth of approximately USD 1.2 billion were generated. In addition more than 70 declarations of intent were signed. The framework program for the trade fair participants included, among other things, company visits and fashion shows. Within the framework of EXPO 2015, 571 Pakistani manufacturers and exporters exhibited their products and services. According to the organizers a total of 750 foreign buyers and importers from 77 countries visited the fair.

Prospects for the economic development remain positive.

In the recent years the Republic has recorded an annual economic growth of around 4 percent. According to the forecasts of the International Monetary Fund, the gross domestic product (real) will reach 5 percent in 2017 and will increase an average growth of 5.5 per cent by 2020. Growth drivers are above all the increasing privat consumption as well as high investments in the transport infrastructure and the energy sector. As uncertainty factors remain the domestic policy conditions before the parliamentary elections in the second half of 2018 as well as the macroeconomic stability. The analysts of the Economist Intelligence Unit (EIU) expect an average current account deficit of 4.4 percent of the GDP from 2017 to 2021.

The course of the Karachi Stock Exchange (KSE 100) has steadily improved to more than three times since 2012. The index provider Morgan Stanley Capital International (MSCI) has once again raised Pakistan from a "frontier market" to an "emerging market" in May 2017. The financial crisis in 2008 led to a temporary closure of the stock exchange due to a liquidity bottlenecks and thus to the exclusion from the MSCI EM Index. An improved market classification was followed by a strong course correction. The in July published trade deficit of USD 27.5 billion, as well as the rising government debt contributed to a 20% drop in the courses by mid-September.

A major contributor to Pakistan's current high debt is not least the high investment in the mega project China Pakistan Economic Corridor (CPEC). The corridor is a collection of various infrastructure projects with a current value of around USD 62 billion, which has been realized throughout the country since 2013. They are part of the Chinese Megaproject "Belt and Road" with investments in the sectors energy, transport and special economic zones. The Republic finances many projects primarily through borrowing. The impact on the country is assessed. The through the corridor improved location attractiveness of the country is expected to promote the domestic economy, reduce the trade deficit and relieve the state budget.

Economic structure and trade

The Pakistani economy is the second largest in South Asia after the neighbor India. The gross domestic product rose from around USD 35 billion in the early 1980s to just under USD 283 billion. Above all the transformation from an agricultural to a service state has promoted this positive development. The service sector accounts for about 59 percent of the GDP. Central segments are trading, transport, storage and communication. The industrial sector however with a share of 20 percent is still upgradeable. The clothing, leather and textile sector has the most important share of the industry and represents the largest export sector with 67 per cent.

Germany was the fourth largest customer of Pakistani goods with USD 1.7 billion in 2016. Textiles and clothing as well as leather and leather goods had a share of about 87 percent. In the same year, German companies however exported goods worth USD 1.2 billion. Machines 33 percent, chemical products 18 percent and electrical equipment 7 percent formed the main export goods.

Improvement of the energy supply

The establishment and management of a factory for foreign companies in Pakistan are still proving difficult. According to the Doing Business Report 2017 the World Bank Pakistan ranks 144th out of 190 countries. Corruption, protection of intellectual property rights, protracted legal enforcement and poor power supply are among the greatest obstacles. A positive change in the power supply situation or the overall infrastructure should become achieved by the CPEC.

The Trade Department of the Pakistani Embassy is available for further questions and information during the 10th EXPO Pakistan.

Contact:

Embassy of the Islamic Republic of Pakistan
Commercial department
Schaperstrasse 29
10719 Berlin, Germany
T +49 (30) 212 442 02
cc@pakemb.de, tdo@pakemb.de

• Domestic production is attractively priced
• Foreign brands shift production tu Russia

Moscow (GTAI) - The Russian market for clothing and tex-tiles has recovered from the crisis. The Fashion Consulting Group expects a sales increase of up to 5 percent for 2017 and 2018. The production of clothing and textiles is also on the rise in the first half of 2017 by more than 6 percent. Low unit costs make sewing and weaving in Russia attractive and attract foreign brand manufacturers.

The Russian clothing and textile industry is again on a growth path. The market research agency Fashion Consulting Group expects a sales increase of up to 5 percent to Ruble 2,41 billion, (EUR 37.35 billion, exchange rate January 1st to August 31st 2017: 1 EUR = 64.518 rubles) for 2017 compared to the previous year. However, the business development in the first half of 2017 re-mained below expectations as the spring was short and the summer unusually cold. The most likely expectation therefore is a market growth of 2 to 3 percent.

However, with the crisis based Ruble devaluation the signs have changed. Imports become more expensive and domestic production becomes profitable. The unit labor costs in the Russian cloth-ing and textile industries have now become more competitive with those in China. This creates sales opportunities for manufacturers of automated production machinery and sewing machines.

Foreign garment manufacturers move production to Russia
First companies are already considering moving their production to Russia. For example the company Modny Continent, which is known for the brand In-City and is currently producing in China. Other wellknown
Russian labels like Sportmaster and Acoola, as well as foreign fashion brands such as Zara, Nike, Finnflare, Uniqlo and Decathlon are planning to launch their own productions in Russia. Some Russian companies are sewing under a foreign brand name and hide their origin.

Already one step further is Adventum Technologies. The to the Textime (Tekstajm) Group belonging company opened a new plant for the production of special clothing in the area of Tula for Rubles 650 million in March 2017. In Roslawl in the Smolensk region, the Roztech company is installing a plant for the manufacture of Dikaja Orchideja underwear for Rubles 100 million. PrimeTec (Prajmtek) has started the production of terry cloth in the area of Ivanovo for Rubles 670 million.

Source: Research of Germany Trade and Invest

Government pushes import substitution
The Ministry of Industry promotes domestic manufacturers of clothing and textiles with Rubles 145 billion as part of the strategy for the development of the light industry by 2025 and the anticreep plan. By the year 2020 the market share of Russian textiles should rise to 50 percent and 300,000 new jobs should be created. This will make Russia more independent from clothing and textile imports.

The government specifically supports individual textile segments. With regulation no 857 of August 27th 2016, it promotes the production of school uniforms in Russia. Also for research and development in the textile industry funding will be provided: for 2017 Rubles 3 billion are available, 2.2 billion from the anti-crisis plan.

However, the somewhat stabilizing Ruble threatens to cross the plan of the government, it cheapens the imports. In the first quarter of 2017 imports of textiles and footwear increased by 22.7 percent.

*) First half year 2017 compared to the same period of last year
Source: Federal Statistical Office Rosstat

Weak ruble makes manufacturing in Russia attractive
The ruble devaluation benefits the labor-intensive textile industry. Many Russian fashion brands, who have placed orders to foreign sewing companies, are trying to redirect them to Russia. The factories in the textile clusters of the areas Ivanovo, Leningrad, Tula, Tver, Vladimir, Perm and Vologda are ready for new settlements. Ac-cording to plans by the regional government, textile production should also be set up in Tatarstan. The proximity to polymer producers in the region should ensure the supply of chemical fibers for the manufacturing of work wear and uniforms.

Without an own production of wool, silk, flax and synthetic fibers the Russian textile industry can-not get on its feet. However - to date, not all textiles and basic materials can be obtained from domestic sources. This is why very fine fabrics come e.g. from Europe. Local producers are to re-place imports especially in polyviscose, worsted, polyamide and polyester.

In order to reduce the import dependency of polyester, a new combine for the production of poly-ester fibers is being developed in Witschuga in the Ivanovo region. ThyssenKrupp, Uhde-Inventa Fischer, Oerlikon Neumag and Czech Unistav Construction are building the new Ivanovsky Poly-efirni complex, which is scheduled to commence production in 2020.

Foreign textile imports could be replaced much faster by Russian goods and the growth rates would be much higher if the banks would provide affordable loans to local textile manufacturers to buy new equipments. But this does not happen according to the president of the Russian Union of Entrepreneurs of the Textile and Light Industry Andrej Razbrodin.

Investors are faced with various challenges in setting up textile productions in Russia: the produc-tion plants are mostly outdated, skilled workers are a shortage as well as sales partners. Only if the Russian government's development program for the garment and textile industry will be suc-cessfully implemented, these problems could be overcome.

• Sales are increasing since four years
• Developing of up new markets abroad

Prague (GTAI) - Czech textile and clothing manufacturers are among the winners of the good economic situation. The trend towards domestic products and the rising purchasing power are inspiring the companies. At the same time they benefit from a growing demand from abroad. According to the association ATOK the turnover of the sector rose to Kc 53,5 billion (just under EUR 2 billion) in 2016. It was the fourth year of growth in a row.

An important growth driver of the Czech textile industry is the automotive sector. The largest sales are achieved with technical textiles, and these are mostly used in the over 1.3 million passenger cars, which are rolling in the Czech Republic off the assembly lines every year. The German automotive supplier Borgers is therefore the second largest textile manufacturer in the country. The company produces textile trims for trunks, passenger compartments or underfloor at four locations in the Plzen region. About 200,000 parts leave the factory every day for VW, BMW, Mercedes, Porsche, Bentley and Rolls Royce. The largest textile company in 2016 was the company Juta with productions of geotextiles, insulation materials and packaging material.

The positive dynamism of textile manufacturers is continuing in 2017. According to statistics from January to May the production index rose by 3% and the value of new orders even rose by 5%. On the other hand the garment manufacturers have to announce sales reductions following the strong year before. Future growth could be curbed by rising wages, the appreciation of the national currency and a lack of staff.

Sources: Association of the Textile, Garment and Leather Industry (ATOK), Calculations by Germany Trade & Invest

Even more dynamically than the sector's profits the foreign trade has developed in 2016. Since the Czech Republic is being used as a transit and logistics location by international trading companies, the volume of exports is significantly higher than the total turnover of the domestic manufacturers. According to the ATOK association, in 2016 textiles were exported for Kc 63.8 billion (EUR 2.36 billion) and clothing for Kc 47.2 billion (EUR 1.74 billion). This was an increase of 5% for textiles and 31% for clothing. Import of textiles rose by 6% to Ks 59.3 billion (EUR 2.19 billion), import of garment rose by 20% to Kc 67.9 billion (EUR 2.51 billion).

This has somewhat reduced the trade deficit in clothing. In the major fashion chains however foreign goods still dominate. Czech vendors have little chance of coming to the shelves and taking part in the fast fashion cycles and fast fashion changes. The association ATOK estimates that they have a market share of a maximum of 20% in clothing retailing. As a result, domestic manufacturers are increasingly focusing on direct selling, either via internet shops or through their own sales outlets. They also strengthen the building of their own brands, after having carried out commission work for international fashion groups for many years. Customized products are in the trend also. Some companies that have hitherto mainly served the home market are now looking increasingly at foreign markets. The swimwear and underwear producer Timo from Litomerice, for example, wants to supply to Germany also in the future, reported by the economic newspaper Hospodarske noviny.

Textile companies invest more and more abroad
The East Bohemian specialist for bathroom textiles, Grund, already has a sales company in Lower Saxony. The carpet manufacturer is now planning to build a factory in the south of the USA and intends to invest more than USD 1 million. Silon from South Bohemia, which is one of the largest manufacturers of polyester fibers in Europe, is building a manufacturing plant for plastic compounding in the USA in order to reduce the delivery time for raw materials and to be closer to the customer. There are interesting developments in the research area. The institute VUTS from Liberec, has developed, together with Taiwanese scientists, a pneumatic loom that can produce 3D fabrics made of high-strength polyester silk. The material can be used for boat building or flood protection. The machine should be presented for the first time at a trade fair in 2019. Until then the textile manufacturer Veba from Broumov wants to have developed a new 3D fabric. It is intended to reinforce matrices.

After the extra economy in 2015 due to the last-time levy of EU funds from the old funding period, investments in the textile industry had shrunk in 2016. According to the Ministry of Economic Affairs the manufacturers invested some Kc 2.78 billion (around EUR 100 million), a sixth less than in the previous year. On the other hand, investments in the garment sector were up by a quarter to over Kc 850 million (around EUR 31 million). The development was also reflected in the import figures for textile machines. At the beginning of the year 2017 imports rose again in some product groups, thus opening up sales opportunities for finishing manufacturers. German suppliers account for roughly half of the machinery supply for the textile industry.

In April 2017 the Moravian nonwoven fabric manufacturer Retex had issued a tender for a production plant for over EUR 7 million. In Zatec near Usti nad Labem Unifrax wants to build a production plant for silicate fabrics. Juta is currently investing around EUR 13 million in the production of grids and plans to get the plant expansion at Dvur Kralove into operation in autumn 2017. The Japanese Toray Textiles is expanding its factory for airbag fabrics and printing plates in Prostejov over the next four years. The North Moravian supplier of outdoor clothing, Tilak, is also expanding its production facilities in Sumperk.

Source: Czech Statistical Office

• Competition is tough
• Demand is growing

Warsaw (GTAI) - The dynamic demand for clothing and shoes in Poland is unbroken in 2017. The clothing sector, which is in a tough price competition, consolidates itself through mergers. A merger between the two large men’s outfitter Bytom and Vistula is due. In the case of women's fashion, the trend is towards timeless quality goods, which also opens up opportunities for German suppliers. Retail sales of textiles, clothing and footwear are the fastest growing of all product groups in Poland. According to the Central Statistical Office (CIS) in the first five months of 2017 the real growth was 16.1% above the value of the previous year's period. The total retail sales increased by 6.9%. For the full year 2016 these growth rates were 16.4 and 5.7%, respectively.

The in spring of 2016 introduced children's allowance and the fact that many Poles spend their summer holidays in Poland are stimulating the demand even more. This also results in additional supply chances for German suppliers. However, they are in an intense competition with domestic manufacturers and dealers. Sector experts have calculated that the stock exchange listed companies for clothing and footwear could have increased their revenues by an average of 16% in the first half of 2017. The CCC shoe chain was the most successful company with an increase of one third.

*) preliminary data
Source: Company data

The positive development is mainly attributable to the increased number of chain stores, the expansion of sales areas and the increase in online trading. Now the sector wants to strengthen its position through mergers.

Vistula on expansion course
The two men’s outfitter Bytom and Vistula want to use synergy effects and operate more successful on the market by merging. Since the middle of April 2017 they are negotiating about this step which could be completed by the end of the year. According to market observers, Vistula should have to issue new shares in order to be able to take over Bytom. The merger would end the tough price competition of the two competitors in formal clothing. They would be able to arrange joint purchases and coordinate their logistics.

Source: Market research company PMR, 2017

According to own data Vistula had 366 own shops with a total area of 30,500 sqm. in 2016, Bytom 111 sales salons with 12,690 sqm. The revenues of the Vistula Group were with ZI 599 mio in 2016 (around EUR 137 million, 1 EUR = 4.36 ZI, average rate 2016) almost four times higher than those of Bytom with ZI 153 mio. The net profit of Vistula was with ZI 35.2 mio almost three times as high as that of Bytom (ZI 12.4 mio).

Vistula owns more clothing brands like Wolczanka and the noble mark Lambert as well as the brand Deni Cler for ladies fashion of the high-end segment.The jewelry manufacturer W.Kruk is also part of the group. Industry experts see Vistula continuing to expand.

A further possible takeover candidate is the brand for chic women's wear "Simple" with the same name trade chain and an online business, which is currently owned by Gino Rossi. Simple had recently weakened and is currently being restructured to get better results again. The chairman of the Vistula Group, Grzegorz Pilch, sees opportunities for a takeover of a company for women's clothing in 2018 at the earliest.

Also the manufacturer of ladies wear Monari is looking for take-over candidates. The competition in this segment is the largest. According to the Gino Rossi chairman Tomasz Malicki customers are increasingly looking for high-quality clothing with simpler cuts, that can be worn for longer than a season. Another large garment company, Prochnik, is considering investing in an online business.

LPP stays with casual everyday fashion
Unable to withstand the competition was the brand Tallinder, which was introduced for elegant men’s wear by the market leader LPP in 2016. The shops had to close again. LPP, on the other hand, is successful in casual everydays fashion, often sewn in the Far East. The company sells its five brands Reserved, Mohito, Cropp, House and Sinsay in a total of 1,704 stores in 19 countries, including Germany. Demand is developing dynamically for example in Russia.

In Poland itself there are around 1,000 shops, the number of which could drop in the future with a simultaneous enlargement of the sales areas at the individual branches. This was said by the chairman of LPP, Marek Piechocki, to the daily Rzeczpospolita. The total LPP sales area should increase by about 10% until 2021 and the company's sales should increase by 15 to 20%. At the end of 2017 LPP is planning to operate 19 Reserved stores in Germany.

One of the leading exporters is the company Redan, which is well represented in Central Eastern Europe. It sells brands such as "Top Secret", "Troll" and "Drywash". Redan owns the TXM discount chain which includes around 380 stores locally and abroad as well as an online shop. The company OTCF with its brand for sportswear "4F", has a wholesale network in more than 30 countries.

In addition to the large chains, numerous Polish fashion designers create their own designs. In the premium segment, the brands "La Mania" by Joanna Przetakiewicz and "Emanuel Berg" by Jaroslawa Berg-Szychulda can be found in foreign fashion centers. In several Polish cities the chain Hexeline is represented with its own sales saloons, which produces high-quality women's fashion in its own studio in Łódź.

With the "Product Warmia Mazury" award, which special products from Warmia-Masuria can receive, the fashion designer Barbara Caly-Jablonska can provide her hand-sewn wedding, evening and cocktail dresses as well as stage costumes. Their creations are inspired by the traditions of the area.

According to its deputy chairman Marcin Czyczerski the sales area of the shoe chain CCC will be enlarged by around 100,000 m² in 2017. In March 2017 the chain owned 870 stores with a total area of 471,300 sqm. In the first quarter alone, eight sales salons with 12,700 sqm were added. CCC needs to increase the profitability of its activities in Germany and Austria.

Even though it is not easy for Polish suppliers of clothing and footwear to gain a foothold in Western European markets, they are still exporting to there, especially to Germany. More than half of the in Poland produced textiles go abroad, almost half of their clothing. Fashion and accessories are shown in Poland at numerous trade shows. The next Poznan Fashion Show  (http://www.targimodypoznan.pl/pl/) will take place from September 5th -9th 2017.

• The sector lives from export
• Clear sales plus for technical textiles

Bonn (GTAI) - The turnover of the Austrian textile industry fell by around 1% to EUR 1.4 billion in 2016. The export sector generates over 70% of its revenues. After about half of all jobs have been lost in the last 20 years, the textile industry has now been stabilized at the present level. The area of technical textiles is particularly dynamic.

Austria's textile industry recorded a production and sales reduction of 1% each in 2016 after two very positive economic years before. Revenues thus fell to EUR 1.4 billion. As a recent sector report from UniCredit Bank Austria shows, the sector was mainly short of domestic orders, which in 2016 could only partly become offset by an increase in foreign sales of 3.5%. Despite the slight reversal in 2016, the results of the last three years show that the sector has been stabilized.

"The restructuring of the domestic textile industry, which has resulted in a reduction of jobs by around half in the last two decades, is likely to be at the culminating point, although a further moderate capacity reduction can finally not be excluded. But the domestic textile industry proves its competitiveness since it has already succeeded in overcoming the decline in the domestic demand - especially also as a result of the erosion of the clothing industry - with higher foreign sales," according to the conclusion of UniCredit Bank Austria economist Günter Wolf.

Economic recovery for textile manufacturers in sight

After a negative start into the first quarter of 2017, the sectors economy has stabilized and should continue to gain momentum in the further course of the year. The background of the expected upturn are the higher economic growth rates in major Western and Eastern European markets, especially in France, Poland, Hungary and the Czech Republic, which account for almost 20% of domestic textile exports. This can compensate the lack of demand from Germany, the most important single market for Austrian textiles with an export share of 28%. In the first quarter of 2017, the foreign trade turnover of the sector rose by about 5%. On the other hand the textile industry in Austria itself cannot expect any growth momentum, what the decline in domestic sales of 6% until March 2017 has already indicated. A production plus in a low single digit range for the textile industry is nevertheless possible in 2017.

Technical textiles keep the industry alive

According to Wolf, the growth of the textile industry in 2017 is once again based on the demand for textiles for technical applications. According to provisional data about these products a sales growth of 1% was achieved already in 2016, which then accelerated to a remarkable plus of 13% in the first two months of 2017. On the other hand, the decline in the turnover of the weaving mills, the textile finishers and the manufacturers of knitted fabrics is continuing. The decline in the spinning mills of 5% in 2016 has at least decreased.

Foreign trade sales account for 71% of the total turnover of the textile industry; this is therefore much more than the average of the entire industry (59%). Bank Austria economist Wolf says: "In the long term, Austria's textile industry is securing its economic survival with its export successes. The basis for this was the comprehensive restructuring and the resulting strengthening of the competitiveness of the sector. "The foreign turnover of the sector rose by a total of 24% to around EUR 1 billion in the period from 2009 to 2016, with which the domestic sales losses of 8% became offset.

According to Bank Austria, the success of the domestic textile manufacturers is, in principle, based on improved productivity and concentrating on high-quality products. Economically, textile manufacturers in Austria can only survive in innovative niche areas. With an added value of EUR 60,000 per employee, compared with EUR 39,000 in the EU average, the sector is in the top position of the European market.

Internet address
Industry analyzes of Bank Austria
Internet (in German language):
https://www.bankaustria.at/boersen-und-research-analysen-und-research-oesterreich-wirtschaftsanalysen-und-studien.jsp

• 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.