Turkish textile sector still ailing despite moderate damage in 2009

Deemed one of the most important sectors of the economy by many with its high levels of exports and important contributions to gross domestic product (GDP), the Turkish textile sector lost blood during the crisis due to a steep fall in external and domestic demand, resulting in the closure of many textile companies and layoffs across the country. A total of 4,405 employees from the Turkish Textile, Knitting and Clothing Industry Workers’ Union (TEKSİF) lost their jobs, while 7,568 textile workers were sent on unpaid leave in the 10 months between October 2008 and July 2009.

Nevertheless, the sector is still considered as having been less influenced by the economic downturn than any other sector in Turkey. İstanbul Textile and Apparel Exporters’ Union (İTKİB) President İsmail Gülle, considering the performance of the sector in the face of the crisis as “the best of the worst,” explained: “While other sectors suffered from declines in exports and capacity utilization by rates of up to 30 percent, our sector contracted by only 18 percent. In this regard, contrary to our previous forecasts that the sector would take the most serious hit from the crisis, textiles sustained relatively less damage.”

According to Gülle, the sector saw the worst of the crisis in 2008, when input costs, especially electricity prices, were increased to incremental levels and the lira gained value against foreign currencies. In 2009, foreign exchange rates increased against the lira, and the sector started to recover from the recession, he said.

İstanbul Ready-to-Wear and Apparel Exporters Association (İHKİB) President Hikmet Tanrıverdi, sharing his assessments regarding the sector’s performance in 2009, noted that the most serious problems of 2009 were declining production, capacity utilization and exports due to contracting markets. He said the ready-wear and apparel sector sustained a recession in performance rather than a contraction in real terms. There are positive indicators that the recession in the global economy has lost momentum and this will surely have encouraging effects on the Turkish ready-wear and apparel industry, he argued.

Textile exports down by 22 percent

The textile sector, which has traditionally been one of the sectors driving the country’s exports, suffered from a significant drop in exports starting in October 2008. The downturn was most severe in the first five months of the year, when exports saw declines of more than 30 percent each month compared to the same months of the previous year. However, starting from June, the falling rates began to slow. October was the first month in which a rise in exports was observed over the last 12 months. Even though figures for November were again down, they were only 0.3 percent lower than those in November 2008, a drop that is also deemed to be a result of seasonal factors such as the Eid al-Adha (Feast of the Sacrifice) holiday, during which Customs was closed.

As of the end of November, sector exports fell by 22 percent in 2009 compared to the same period of the previous year, İTKİB data revealed. In yet another good sign for the sector, the decline in textile exports was lower than the decline in the country’s total exports, which was 27.3 percent in the first 11 months of 2009. This relatively low drop led the share of textiles in total exports to rise from 5.3 percent in 2008 to 5.7 percent in 2009, indicating that the sector’s 2009 performance on general exports is indeed better than the previous year’s.

According to estimates of Turkish Clothing Industrialists Association (TGSD) President Ahmet Nakkaş, for year-end 2009, textile exports will fall by nearly 20 percent over the previous year, to $5.5 billion, while the ready-wear industry is likely to sustain a drop of 15 percent, falling to $13.5 billion from last year’s level of $15.7 billion. Nakkaş also predicted that exports will rebound to their 2008 levels in two or more years’ time.

Textile sector seeks government support

Concerns about the sector’s future were widely shared by sector actors who stressed the urgent need to introduce necessary incentives to support the ailing sector amid still ongoing problems due to the economic recession. Young Industrialists and Businessmen Association (GESİAD) President Bahadır Özgün complained that the government had failed to extend the sector the required support in the face of the crisis and added that despite improvements seen in exports figures, textile firms are still anxious about the future. All Textile, Thread, Hosiery and Clothing Workers’ Trade Union (ÖZ İPLİK-İŞ) and textile company Birko Holding are two bodies that demanded government support for the sector, which is very prominent for Turkey as it employs some 700,000 workers.

In February, a comprehensive package of measures on which the government had been working to protect the Turkish economy against global financial turbulence was passed by Parliament. With the package, some corporate taxes on investments were reduced for textile companies and leather manufacturers and dealers if they move their plants to designated cities. Most players, however, deem the package far from satisfactory.