TURKISH

TEXTILE AND APPAREL

SECTOR















July 2002





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Introduction

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

The Structure of the Sector







The total number of firms in the sector, dominated (%95) by the private
sector, number around 44,000 and of them are active exporters. The
apparel industry is constituted mainly (80%) of small and medium sized
firms whereas the technology-intensive textile production has been
undertaken by large scale companies. Today, around 1/5 of Turkeys 500
largest companies are involved in the textiles and apparel sector.

Low labor costs, a qualified workforce, relatively cheap raw materials have
played an important role in the significant growth of the sector; as well as
a liberalized economic environment and export-led policies in the last two
decades.
Textile industry started out in the 1960s
in small workshops, rapidly developed
and transformed Turkey into a global
competitor.

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The amount of textile production was 260,000 tons in 1998 and the
production volume of apparel was estimated as 223,000 tons in 1999. The
production value of the sector is over 20 billion USD. Employment in the
sector is estimated to be about 4 million people (2.5 million employed
directly and a further 1.5 million indirectly through the sub-sectors)
although the official statistics reveal around 500,000 employees in the
sector due to unregistered labor force.

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

Turkeys spinning and weaving capacity and its share in global and
European spinning capacity can be seen in the tables below.

INSTALLED SPINNING CAPACITY, 1999

Short Staple
Spindles
Long Staple
Spindles
OE Rotors
Turkey 5,758,488 748,584 422,012
Europe 22,352,424 7,194,868 3,753,440
World 167,303,996 16,497,838 7,677,804
Turkeys Share in Europe %25.8 %10.4 %11.2
Turkeys Share in the World %3.4 %4.5 %5.5
Source: ITMF, International Textile Machinery Shipment Statistics










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INSTALLED WEAVING CAPACITY, 1999

Looms Primarily for
Weaving Yarns Spun on
the Cotton System

Shuttle-Less Shuttle
Filament
Weaving
Looms
Wool
Weaving
Looms
Turkey 16,587 30,000 3,000 6,250
Europe 271,406 79,890 44,670 57,800
World 703,793 1,558,127 553,830 138,920
Turkeys Share in Europe %6.1 %37.6 %6.7 %10.8
Turkeys Share in the World %2.4 %1.9 %0.5 %4.5
Source: ITMF, International Textile Machinery Shipment Statistics


COTTON YARN PRODUCTION
AND CAPACITY UTILIZATION
Production (tons)
Capacity Utilization
Rate (%)
1990 530,000 79.7
1991 484,000 66.6
1992 528,000 67.1
1992 530,000 63.1
1994 600,000 65.6
1995 630,000 62.4
1996 764,000 63.9
1997 870,000 64.4
1998 898,000 62.4
1999 913,000 65.4
Source: Industrial Development Bank of Turkey

80% of the exports of the apparel industry are made of cotton. Turkey
produces around 900,000 tons of cotton yarn and 450,000 tons of cotton
fabric per year.
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COTTON FABRIC PRODUCTION
AND CAPACITY UTILIZATION
Production (tons)
Capacity Utilization
Rate (%)
1990 314,000 89.0
1991 302,000 83.2
1992 331,000 88.7
1992 361,000 91.4
1994 344,000 84.9
1995 370,000 84.1
1996 420,000 85.7
1997 450,000 83.3
1998 440,000 77.2
1999 420,000 73.7
Source: Industrial Development Bank of Turkey

Turkey ranks also among the top ten global producers of wool cloth,
carpets, synthetic filament and fibre, polyester and polyamide filament.
Recently manufacturers have invested for increasing production capacity
especially in polyester production. While Europes 3
rd
largest polyester
producer is a Turkish-US joint venture, Turkeys synthetics production
mounts to 15% of Western Europes capacity.

The Sectors Share in the Economy










The sector has great significance in terms of
economic development with a share of

GNP above 10%
industrial production around 40%
manufacturing labor force around 30%
exports around 35%

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The textile and apparel sector contributes over 20 billion USD to the Gross
National Product.

The sector is mostly important for its export earnings, its share in the
countrys total exports has been between 33-39% since 1990.

Source: Undersecretariat of Foreign Trade


Foreign Trade in the Sector







The major export market for Turkish textile and apparel goods is the EU
countries which account for about 65% of total textile and apparel
exports. Turkey ranks 2
nd
in apparel imports and 5
th
in textile imports to
the EU having an 11.6% and 8% share in the EUs total textile and
apparel imports respectively as of 2000.

33.4%
33.8%
37.4%
36.6%
35.5%
38.4%
37.4%
37.4%
38.8%
37.2%
36.1%
33.3%
30% 32% 34% 36% 38% 40%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Sector's Share in Total Exports, 1990-2001
Turkey is the 6
th
biggest raw cotton
supplier, the 14
th
biggest textile
supplier and the 7
th
biggest apparel
supplier of the global textile and
apparel market.
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After the EU, the USA is a big and impending market. Turkey is the 19
th

apparel supplier and 10
th
textile supplier of USA with a 1.8% and 2.9%
share respectively.

Source: Undersecretariat of Foreign Trade

Beside the EU and the US market, new markets are North African
countries namely, Tunisia, Egypt and Algeria; Middle East countries
namely Syria, Israel and Saudi Arabia; Eastern European countries
namely Romania, Bulgaria, Poland and Hungary; and CIS countries. The
sector faces quotas only in the USA and Canada.

The Russian Federation was also a big market for the Turkish textile and
apparel sector till the financial crisis of August 1998. It was the 3
rd
biggest
market for apparel and 9
th
for textile products in 1997. The sectors
exports to the country fell by 43% in 1998 and by 61% in 1999. Russia is
still a promising market for textile and apparel sectors with its high
consumption potential that will come out in the following years especially
after developments towards better integration to the world economy and
WTO membership prospects.

Textile and apparel exports increased by 14.6% on average per year
during 1980-2000. Especially until the second half of 1990s, the sectors
Major Export Partners, 2000
Germany
(28.6%)
UK (10.9%)
USA (14.2%)
France (6.2%)
Italy (5.1%)
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exports increased at a rate above the increase in total exports of Turkey
as well as the increase in global textile and apparel exports.

In 2001, the sectors exports totaled 10.4 billion USD, having a share of
33.3% of the total exports. Exports rose 10.7% in quantity in 2001,
though rise in terms of value leveled at around 2.9% compared to 2000.

The increasing share of apparels in exports since 1986 signifies the efforts
to produce more value added products.

TEXTILE AND APPAREL EXPORTS (1980-2000)
Million
USD
Textile
Exports
Share
in Total
Exports
(%)
Apparel
Exports
Share
in Total
Exports
(%)
Textile
and
Apparel
Exports

Change
(%)
Share
in Total
Exports
(%)
1980 671 23.1 106 3.6 777 - 26.7
1981 915 19.5 302 6.4 1,217 56.6 25.9
1982 1,069 18.6 367 6.4 1,436 18.0 25.0
1983 1,055 18.4 544 9.5 1,599 11.4 27.9
1984 1,181 16.6 989 13.9 2,170 35.7 30.4
1985 1,151 14.5 936 11.8 2,087 -3.8 26.2
1986 1,043 14.0 1,069 14.3 2,112 1.2 28.3
1987 1,133 11.1 1,728 17.0 2,861 35.5 28.1
1988 1,334 11.4 2,127 18.2 3,461 21.0 29.7
1989 1,338 11.5 2,448 21.1 3,786 9.4 32.6
1990 1,424 11.0 2,898 22.4 4,323 14.2 33.4
1991 1,374 10.1 3,219 23.7 4,594 6.3 33.8
1992 1,369 9.5 4,010 27.9 5,379 17.1 37.4
1993 1,457 9.5 4,158 27.1 5,615 4.4 36.6
1994 1,945 10.7 4,490 24.8 6,435 14.6 35.5
1995 2,131 9.8 6,189 28.6 8,749 36.0 38.4
1996 2,352 10.1 6,344 27.3 8,696 -0.6 37.4
1997 2,730 10.4 7,089 27.0 9,819 12.9 37.4
1998 2,812 10.4 7,644 28.3 10,456 6.5 38.8
1999 2,734 10.3 7,145 26.9 9,879 -5.5 37.2
2000 2,819 10.1 7,195 25.9 10,013 1.4 36.1
Source: Undersecretariat of Foreign Trade

The sector imports some raw materials, semi-processed goods and
finished products mainly from Italy, Germany, USA, South Korea and
China.
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TEXTILE AND APPAREL IMPORTS (1985-2000)
Million
USD
Textile
Imports
Share
in Total
Imports
(%)
Apparel
Imports
Share
in Total
Imports
(%)
Textile
and
Apparel
Imports

Change
(%)
Share
in Total
Imports
(%)
1985 287.8 2.54 1.5 0.01 289.3 - 2.55
1986 334.5 3.01 2.1 0.02 336.6 16.3 3.03
1987 548.5 3.87 2.3 0.02 550.8 63.6 3.89
1988 521.3 3.64 3.1 0.02 524.4 -4.8 3.66
1989 624.3 3.96 6.6 0.04 630.9 20.3 4.00
1990 1,049.0 4.70 18.0 0.08 1,067.0 69.1 4.78
1991 872.9 4.15 26.5 0.13 899.4 -15.7 4.27
1992 1,189.3 5.20 35.1 0.15 1,224.4 36.1 5.35
1993 1,591.9 5.41 47.5 0.16 1,639.4 33.9 5.57
1994 1,600.7 6.88 36.6 0.16 1,637.4 -0.1 7.04
1995 2,621.8 7.34 59.3 0.17 2,681.1 63.7 7.51
1996 2,812.6 6.45 169.7 0.39 2,982.3 11.2 6.84
1997 3,379.3 6.96 230.5 0.47 3,609.9 21.0 7.43
1998 3,305.2 7.20 230.9 0.50 3,536.1 -2.0 7.70
1999 2,573.4 6.32 199.6 0.49 2,773.0 -21.6 6.81
2000 3,197.8 5.87 256.3 0.47 3,454.1 24.6 6.34
Source: Undersecretariat of Foreign Trade

In the year 2001, imports of textiles decreased 17.2% in terms of
quantity and the fall in the total value of imports leveled at around 14.5%
to 2.95 billion USD when compared to 2000.

Cotton











Turkey is a traditional cotton producer and uses
this advantage in her textile and apparel sector.
Turkey ranks 1
st
in Europe and 6
th
in the world
cotton production with an average production of
700,000 tons per year. Moreover, with the
completion of irrigation projects within
Southeastern Anatolian Project (GAP), Turkeys
most comprehensive development program,
current cotton production is expected to double
by the year 2005.
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Turkey has a production capacity of 800-900 thousand tons of cotton per
year. About 30% of the cotton production is high quality long staple
cotton and the rest is of medium quality. The cotton industry provides a
competitive edge to the textiles industry, which utilizes cotton as its
essential raw material.

COTTON MARKET TRENDS
Thousand
Tons
Production Export Import
1990 619 151 79
1991 578 146 49
1992 603 73 153
1993 585 182 201
1994 614 80 150
1995 750 60 187
1996 792 147 170
1997 779 110 363
1998 796 115 361
Source: State Planning Organization

In 1999, cotton grown in Turkey was around 788,000 tons and cotton
fabric production was 1.4 billion meters.

Main destinations for cotton yarn exports are Italy, Portugal, Greece and
Belgium and for cotton fabric the UK, Italy, USA and Belgium.

Whilst Turkey used to be a net exporter of cotton, the trade balance
reversed in 1992 and since then Turkey has been a net importer of cotton
since domestic demand has persistently exceeded available stocks.

Beside cotton, Turkey has a strong standing in synthetic fibre, wool and
mohair productions. Turkey ranks ninth in synthetic fibre, eighth in wool
and third in mohair production in the world.





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Leather & Footwear








The sectors share in total production is around 2.5%, in exports it is
around 2% and employs 1.5% of the labor force. Being 10
th
largest sector
of Turkey, production is mainly located in organized industrial zones.

Main export partners of the industry are Italy, the UK, Spain, France and
Australia. Although the production is capable of satisfying domestic
demand, the sector is dependent on imports for raw materials and the
import partners are Germany, Russia, USA, France and the UK.

Registered leather and leather products exports are above 400 million
USD and together with footwear; the figure is over 500 million USD. The
luggage trade besides registered trade is estimated to be around 3-3.5
billion USD.

LEATHER AND LEATHER GOODS EXPORTS
(Million USD)
1994 465
1995 472
1996 380
1997 372
1998 389
Source: Undersecretariat of Foreign Trade

The latest figures for registered exports of leather and leather products
add up to 263.5 million USD in the January-June period of 2001. The
increase in demand for leather and leather products in the world and the

Leather and leather products are amongst
major export items. 1,200 firms with a total
processing capacity of 400,000 tons per year
operate in the sector. Capacity utilization is
around 60%.
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fact that leather goods became a fashion item expanded the sector's
movement space.

The leather industry was somewhat disorganized and ill-prepared in the
aftermath of the Customs Union, compared to the textile sector in
general. With the Customs Union established, a serious market extension
was ensured to both EU countries and third countries. The tariff rate of
22% against third countries before 1995 was reduced to 5.8%. The result
was a boost in imports. Leather apparel imports from EU countries
increased by 853.3%, and those from non-EU countries registered an
increase by an extraordinary rate of 2033.9%. The competitiveness of the
shoemaking and leatherwear industry was affected against third countries.










Home Textiles












As for the footwear industry, there are about
30,000 shoe manufacturers in Turkey with an
annual output of 270 million pairs of shoes and
400,000 employees. The sectors exports are over
100 million USD. Export partners are mainly
Germany, the Middle East, CIS and Eastern
European countries while imports are mainly from
Italy and other European countries.
Turkish home textile industry has recorded
growth in terms of production and exports
in recent years. Almost all kinds of home
textiles are produced in Turkey. These may
be listed as follows in order of their export
values: bed linens, bed spreads, table
linens, towels, bathrobes, voiles, curtains,
lace, interior blinds, curtain or bed
valances, blankets, cushions, pillows, quilts,
eiderdowns.
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In home textile sector, besides large scale firms there are many small and
medium sized firms scattered all around the country. As a division of the
textile industry, the home textiles sector with an export value of 859
million USD and a 3.2% share in Turkey's total exports in 1999, has been
an important sub-sector for the Turkish economy.

European countries are the most important markets for Turkey's home
textile exports. At present Germany, the UK, France, the USA,
Netherlands and Russian Federation are the major markets for Turkey's
home textile exports. New markets such as Poland, Hungary, Romania
and CIS countries are gaining more and more importance.


Foreign Investments in the Sector







17 of the 61 foreign partnerships in the textile sector are with German
firms, 5 are with British firms and 5 are with American firms. 52 of the
204 foreign partnerships in the apparel sector are with German firms, 23
are with British firms, 22 are with Dutch firms, 17 are with Italian firms
and 14 are with Swiss firms.

55 foreign direct investment allowances were issued in the year 2001,
which entailed a total of 37.3 million USD of foreign capital entry into the
textile and apparel industry. Joint ventures are increasing due to local
manufacturers interest in establishing licensing and technology
agreements with global competitors in order to enhance their
competitiveness in the international market.


The industry is also luring for foreign
investors who have already invested in
265 firms, 61 of which are in the textile
and 204 in the apparel industry as of end
of April 2002.
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Government Incentives for the Sector

The apparel and cotton cloth industry has been receiving incentives which
sum up to %10.3 of total incentives given by the government in the year
2001. 370 projects totaling a 1.092 trillion TL worth investment have
received incentives, and an amount equivalent to 867 million USD is to be
financed by foreign sources.

Incentives are available for projects which reduce inequality among
regions, spread capital ownership, create employment, make use of
advanced technology and increase competitiveness. Incentives are mainly
in the form of investment allowance, exemption from various taxes
(including import duties and levies and VAT on the purchase of machinery
and equipment) and credits from newly-created Investment Fund.

Carded, worsted and cotton yarn production; grey cloth, woven fabric,
knitted or woven pile fabrics production; net, curtain and upholstery
woven fabrics for home textiles production; textile finishing and yarn,
knitted or woven fabric production for sacks are the most favorite areas
for the investment in the priority development regions in Turkey.


The Effects of the Customs Union with the EU











Turkey experienced already a very important impact
of EU accession when the Custom Union went into
force in 1996. With the abolishment of all duties
and equivalent charges on imports of industrial
goods from the EU. Also tariffs and equivalent
charges on the importation of industrial goods from
third countries started to be harmonized with the
EU's common external tariff at a gradual pace.
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After customs union with the EU, a lot of legal and practical measures
have been taken by the government, within the context of the obligations,
concerning conformity with the Common Trade Policy. In this respect,
Turkey put into force a law on the protection of competition, a law on the
protection of consumers and decree laws on patents, copyrights, trade
marks and industrial designs. Turkey also signed free trade agreements
with EFTA, Israel, Hungary, Romania, Czech Republic, Slovakia, Lithuania,
Latvia, Estonia, Slovenia, Bulgaria, Poland, Macedonia, Croatia and Bosnia
-Herzegovina.

After the CU, the weighted tariff rate in industrial imports from EU and
EFTA countries has fallen from 10% to 0. In the imports from third
countries, this rate had fallen from 15% to 5.6% on average and in 2001
the rate was 4.5%.

The pressure on prices in the aftermath of the CU with EU is striking when
we look at the fact that the sectors exports to EU in quantity increased by
372% from 1995 to 2000 but the value of exports increased only by 21%
in terms of the USD and by 75% in terms of the Euro during the same
period. Although the devaluation of the Euro against the USD after the
EMU is a factor, the pressure on export prices after the CU is apparent.


The Strengths and the Future Direction
of Turkish Textile and Apparel Sector










World textile trade will be subject to WTO
rules and regulations as a whole after the
removal of quotas at the beginning of 2005.
Turkey has the prospects of being a global
production and export hub due to following
factors:
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Relative self-sufficiency in raw material output
Powerful textile infrastructure
Diversified product range
High value-added products
Just-in-time delivery
Relatively low cost, flexible and skilled blue-collar workforce
Well-trained, qualified white-collar human resource
Entrepreneur and easy-adopting nature of Turkish people
Unique geographic location
Neighboring markets with a 600 million population
Customs Union with the EU
A reliable trade partner of the EU
Experience in crisis management

These factors, supported with modern infrastructure and liberal foreign
exchange regulations, have built a strong textile and apparel sector in
Turkey. The products of the Turkish textile and apparel sector have a
good reputation in foreign markets as a result of the availability of high
quality cotton in Turkey, wide usage of CAD (Computer Aided Design) and
CAM (Computer Aided Manufacturing) and the increase in the number of
qualified personnel.

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

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

As current studies reveal, developed countries will have a decreasing
share in global textile production while the developing countries will
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increase their manufacturing capacity to meet the increasing demands. It
is also estimated that by 2005, the developing countries will increase their
self-sufficiency in textile production. The US with an estimate of 200%
increase in textile consumption is also estimated to have a 32% decrease
in self-sufficiency by the year 2005. These numbers are consequential for
the manufacturers who will be competing to acquire greater shares in the
75 billion USD worth US imports of textile and apparel by 2001.

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






















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Professional Organizations and Other Useful Addresses


Istanbul Textile and Apparel Exporters Union (TKB)
www.itkib.org.tr


Turkish Clothing Manufacturers Association (TCMA)
www.tgsd.org


Apparel Side Industrialists Association
www.kysd.org.tr


Turkish Leather
www.turkishleather.com.tr


Leather Garment Manufacturers Association
www.come.to/derikonder


Footwear Industrialists Association
www.turkishoes.org


Home Textile Producers Association
www.turkiyeevteksder.com


Turkish Textile Employers Association (TTSS)
www.tekstilisveren.org.tr


Undersecretariat of Treasury
www.treasury.gov.tr


Undersecretariat of Foreign Trade (DTM)
www.foreigntrade.gov.tr


Export Promotion Center (GEME)
www.igeme.org.tr






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Sources


Textile and Apparel from Turkey: A Summary of Turkey's Potential,
Istanbul Textile and Apparel Exporters' Associations (TKB),
November 2001

Textile and Apparel Sector Research, Ministry of Industry and
Trade, 2001

Turkish Grand National Assembly Textile Commission Reports,
January 2001, November 2001

Textile, Apparel and Leather Sector in Turkey, PWC, June 2002

Leather Industry External Market Research, Export Promotion
Center (GEME), February 2000

Export Promotion Center (GEME) web site (www.igeme.org.tr),
Economic Outlook, Manufacturing Industry, Textile and Clothing

Undersecretariat of Foreign Trade web site (www.foreigntrade.
gov.tr), Textile and Apparel Sector within the Framework of the
Customs Union with the EU