The opening of the fifth International Fair for Textiles and Ready-Made Clothing in Ankara on August 19 confirmed Turkey's confidence in textiles as an engine for domestic economic growth. Though Turkish textile producers may be able to stand up to foreign competition at present, local enterprises need to remain nimble footed as pressure from the international marketplace heats up in the coming years.
Trade fairs reflect positively on growth potential. With 423 firms from 57 countries attending the event, Turkish companies will have ample opportunity to nurture business links with foreign producers and, more importantly, buyers. Local confidence in the meantime remains high following the release of a WTO study in August underlying the resilience of Turkish textiles to foreign competition. Such good news is nothing to shrug at either, as Asian producers gear up to crowd out less-competitive players from Western markets following the dissolution of the Multi Fibre Agreement in 2005.
The strength of the industry though has much to do with EU trade as more than 75% of Turkish textile exports head to Europe, according to the Financial Times. Meanwhile, price-busting products from India and China have difficulty competing with the speed of Turkish delivery to neighbouring states. "What the Chinese can deliver in six months we can deliver in six weeks. In home textiles there are some companies that cut delivery times to two weeks," according to Ahmed Sapmaz, export manager of Kucukcalik textiles. With European consumers continuing to demand the latest fashions, Turkish textile firms retain their status amongst the suppliers of choice.
To confine Turkey's strength solely to delivery times though would be to ignore another advantage. China, though streaking ahead in labour costs, continues to lag behind Turkey's design and fashion segments of the market. Such brands as Mavi Jeans and Bilsar have set a precedent in their efforts to penetrate Europe and the US. Turkish brands moreover have continued to knock at the door of foreign markets with local labels such as Ipekyol looking to follow the trend.
Meanwhile, the Turkish market has enjoyed the benefits of hosting foreign brands. Not surprising then that the industry boasted 56 foreign-owned companies and joint ventures in 2002. Establishing licensing and technology agreements with global big-hitters is, after all, one way to enhance local competitiveness. In this context licensing agreements permitted the likes of Levi's, Lee and Jordache to penetrate the local market whilst satiating the fashion-based desires of urban trendsetters.
Though to suggest that Turkey is fully protected from Chinese and Indian textile manufacturers would be misguided. WTO calculations based on cost and efficiency suggest that China's share of the EU clothing market will jump to 29% from the present 20% after January 2005. Indian exports will emulate the trend, rising to 9% from 5% in the same period. The model also suggests that Turkey's rate of EU penetration may fall from 10% to 6%. These figures, though alarming, must be qualified. The primary - and essential - flaw in such projections is their failure to incorporate, or take into consideration, Turkey's rapid rate of delivery.
Though Turkey is unlikely to incur a three-percentage-point loss in the European market, the strength of Indian and Chinese exports cannot be dismissed. The share of Turkish exports to the US market has shrunk, with Chinese textiles gobbling an even larger piece of the American pie. In the first half of 2004 Turkish exports to the US fell from 10% down to 7%. Telling then that Turkey does not enjoy the same level of speedy delivery to the US as it does to Europe. Analysts must also remember that as much as 80% of Turkey's industry is dominated by small- and medium-sized firms - many of which subcontract to price-sensitive European and US brands.
Equally concerning is the condition of the Turkish lira. The 2001 crash, as expected, provided a strong price advantage for Turkish exporters. Conversely, today's economic growing pains are likely to be first felt by exporters - with a strong lira and single-digit inflation hitting price competitiveness.
Part of the solution to Turkey's vulnerability though may lie with government support. "Unless the government takes measures to support manufacturers, exports will cease to grow," says Kemal Sahin, Chairman of Sahinler Holding. Government assistance might take the form of measures to encourage the development of niche areas in the textiles industry where labour output is low - as with curtains. Some producers think that the government's hands-off approach has done little to guide industry in the right direction; particularly as Asian producers line up to take foreign markets by storm. Others industrialists take issue with this state-dependent view. Turkey, they argue, should take advantage of its highly skilled workforce and focus on the production of value-added textiles. Equally, though, many wonder what the government could achieve in interfering with the market - new state institutions designed to assist the industry may in fact do more in terms of employing bureaucrats than in terms of saving the jobs of textile workers.
Alarmism would be misplaced given Turkey's strong, and long-standing, position as a major supplier of textiles. The country remains the world's fifth largest exporter - amounting to a breath-taking $12bn in 2003. And with the majority of textile products heading for the EU under the preferential terms of the 1995 customs union, Turkish textile producers can afford a little slack. Yet nerves will continue to fray as 2005 draws nearer and global heavyweights step heavily across national borders.
