Turkiye year-end review 2023: Recovery from calamity

Turkiye demonstrated remarkable resilience in recovering from the devastating earthquake at the beginning of 2023, which jeopardised its textile industry. The effects of this disaster lingered throughout the year.

Unfortunate start

Turkiye’s 2023 started with a natural calamity when a powerful earthquake of 7.8 magnitude, followed by thousands of aftershocks, rocked southeast of the country near Syrian border on February 6. In the affected region lied Kahramanmaras – a major spinning and dyeing hub. The great devastation left most of the factories incapacitated till June, while some even feared to stretch till year-end. The tremors’ epicentres were surrounded by 11 cities having more than 1,600 companies and about 1,300 textile mills which account for 15 per cent of Turkish garment and textile industry. Around 350,000 workers comprising one-third of the entire sector’s workforce were directly or indirectly impacted due to loss of either their or their loved ones’ lives. For instance, Kipas Textiles—operating 25 facilities and employing 6,500 people—lost more than 40 of its employees in the earthquake. Infrastructure was also severely damaged including communication, electricity and water. The companies in the impact zone had invested in a 25 per cent increase in production capacity over the past three years.

Labour shortage

According to TURKSTAT—the Turkish Statistical Institute, textile and raw materials sector provided 493,000 jobs in February 2023 – a 5.6 per cent decrease compared to the same month of last year, while total employment in textile and ready-to-wear sectors decreased 1 per cent.

On July 18, the United Nations Development Programme (UNDP) announced a $2.5 million initiative to fill up to 3,500 vacant positions in the textile industry and related sectors in the earthquake-affected region. The Sweden, South Korea and Finland funded programme aimed at addressing the acute labour shortages that emerged due to outward migration of skilled workers from the south and southeast of Turkiye after the earthquakes. Even before that, the textile industry was experiencing a voracious need for new workers. In that sense, UNDP’s programme built on its existing partnership with the Education Foundation of the Istanbul Apparel Exporters’ Association (IHKIB), formed in 2022, with an eye on finding durable employment for unemployed Syrian refugees and host community members in “labour-absorptive” industries like textiles. The idea was to challenge the stereotype that refugees were “stealing” jobs from host community members by identifying labour market sectors where demand for workers was going unmet. UNDP’s plan included providing on-the-job vocational training to 500 newly hired textile workers in the earthquake zone, while extending broader life skills training and psychosocial support to 3,000 textile workers and their families. To address the issue of labour shortages, UNDP also planned to work with employers to meet “decent work” standards. All these initiatives were to be closely coordinated with another ongoing $4.5 million UNDP programme to provide recovery grants to small businesses in all 11 earthquake-affected provinces.

UNDP chose to focus on Turkiye’s textile sector, including apparel and shoes, owing to its overall role in the Turkish economy, with sector accounting for around 7 per cent of GDP and 2.9 per cent of exports and employing up to 2.5 million people.

Gloomy first quarter

As per the Capacity Utilisation report by Central Bank of Turkiye, the average capacity utilisation rate of Turkish manufacturing industry for 12-month period was 76.6 per cent. The 66.1 per cent capacity utilisation rate in the manufacturing of textile products decreased 12.9 per cent in March 2023 against March last year. During the month, the textiles and raw materials exports contributed 4.6 per cent in country’s overall exports, and increased 23.1 per cent ($1.1 billion) over February – the month of earthquakes. However, each constituting month of the quarter saw decline only: 5.4 per cent in January, 21.2 per cent in February and 8.6 per cent in March. In quantity terms, the March exports decreased 8.4 per cent (634,000 tonnes) inclusive of 20.1 per cent (246,000 tonnes) decreased export to EU countries and 11 per cent to (69,000 tonnes) Middle East countries.

Amounting almost $3 billion during Q1, 2023, Turkish textiles and raw materials exports contracted 11.9 per cent vs Q1, 2022, despite $1.2 billion worth of exports to 27 EU countries which itself decreased 24.7 per cent compared to Q1, 2022. The exports to its second biggest market Africa dropped 22.5 per cent ($305.7 million), Italy decreased 33.5 per cent ($240.4 million), Germany decreased 19.7 per cent ($210.7 million), and the US decreased 24.9 per cent ($162.3 million). The country with highest export increase of 15.8 per cent was Iran. Among exported products, woven fabric with share of 21.4 per cent decreased 3.2 per cent to $637.1 million, in which, the fabric from synthetic artificial filaments yarns had highest share of 40.5 per cent ($258 million), followed by technical textiles dropping 3.5 per cent at $570.6 million, and exports of yarn decreasing 24.7 per cent with a value of $529 million. As far as other products were concerned, knitted fabric increased 3.2 per cent ($502.7 million), home textiles decreased 13 per cent ($476.3 million), fibre decreased 3 per cent ($287.5 million), and garments increased 11.5 per cent ($158.1 million).

Decline continued in half-year performance

In April, textile exports decreased 26.1 per cent to $921 million, contributing 4.8 per cent share to Turkiye’s overall exports that decreased 17.2 per cent to $19.3 million. The four-month (January to April) exports value stood at $80.8 million, registering an annual drop of 3 per cent. For the period, exports to EU countries declined 26.4 per cent (23 per cent in quantity with 322,000 tonnes) to $1.6 billion and to African countries, it decreased 22.1 per cent (91,000 tonnes) to $412 million. While home textile exports decreased 17.9 per cent to $629 million and fibre exports decreased 7.8 per cent to $365.5 million, the exports of garment sub-industry products increased 5.3 per cent to $208 million. With textile exports depreciating on both monthly and periodic basis, the exported quantities also declined 12.1 per cent (832,000 tonnes) during the four-month period.

For the six-month period of January to June, the cumulative textile exports declined 13.6 per cent to $5.9 billion, led by a 22.1 per cent decrease in exports to EU countries and 18.9 per cent decrease to African countries. Although top three product groups of woven fabric, technical textiles and yarn saw decline in exports, the knitted fabric defied the trend with a 0.9 per cent rise. The decline in textile exports was accompanied by a drop in capacity utilisation and production. The capacity utilisation rate in the textile product manufacturing sector fell to 70.7 per cent in June 2023, from 79.5 per cent in the same month of the previous year. The textile industry production index had earlier declined 11.2 per cent in April 2023 too. The decline in textile exports was due to a number of factors, including the rising cost of raw materials, the ongoing war in Ukraine, and the global economic slowdown.

Nine-month ‘downward’ summary

Combining all three quarters spanning from January to September, exports of textiles and raw materials fell 11.7 per cent short (overall exports increased 0.3 per cent) of last year’s figures, falling from $9.9 billion in 2022 to $8.7 billion in 2023. In quantities, the exports’ decrease was relatively lesser at 4.5 per cent with shipments exceeding 1.9 million tonnes, in which quantities to EU reduced 16.6 per cent (717,000 tonnes). The quantities exported to Middle East had a 11.3 per cent share with 219,000 tonnes. Quantity exports to China – Turkiye’s 10^th largest export market, increased 59.3 per cent when it reached approximately 58,000 tonnes.

The woven fabric remained the biggest exported product group with a contribution share of 20.8 per cent. The second best, technical textiles export valued at around $1.7 billion decreased 6.4 per cent. Within technical textile, nonwoven textile product group accounted for 30.1 per cent share. The third-most important product group of yarn exports decreased 20.6 per cent amounting to $1.6 billion. Among others, knitted fabric was (-) 3.9 per cent, home textiles were (-) 14.6 per cent and fibre was (-) 2.4 per cent. In nine-month period, denim fabric exports decreased 21.1 per cent to $185 million, for which Tunisia was the most important country with $38 million worth of exports. Egypt followed at second position with 17.1 per cent share ($32 million), while Morocco stood third with 9.9 per cent share ($18 million).

Sustainable technology

Advancing technology is opening new horizons, and emphasising the importance of digital transformation for companies who wish to remain permanent in the business world. World over, the companies are implementing numerous innovations starting from design to reduce resource consumption and popularise sustainable fashion. Designing, producing, supplying and selling women’s garment collections as a solution partner of global apparel and retail brands, Sun Tekstil from Turkiye is one such company that created its digital fabric libraries based on its 360-degree photo booth – a scanner that can transfer the fabric surface to the digital environment in high resolution, and the hardware that transfers the mechanical properties of the fabric to the digital environment. Combining all these elements, the company is now able to make digital collection presentations to its customers. As a solution partner to fashion brands, the company has been closely following the digital transformation in the world and has increased its efficiency of sustainable design and production processes. In addition to developing innovative inventions, the company invested in sustainable technologies. To stay tech-centric, the Sun Tekstil supports its expert staff with the training content that it prepares for the latest technologies and the applications carried out through its e-learning platform. Through its digital milestones, the company aims to reduce resources consumption as well as increase production efficiency by minimising error rate.

Additional Custom Duties (ACD)

As per Presidential Decree published on October 16, the ACD applied in the textile and apparel sectors were increased – approximately 5 points in the yarn sector, 7 points in the fabric sector and 9 points in the apparel sector, except on imports of the product group originating from the UAE. The increased customs duty rates aimed to check unfair competition in imports. While the textile manufacturers welcomed the decision, the apparel industry criticised the decision.

Due to additional customs duty, the rate in yarns increased from 10 per cent to 13 per cent, and in fabrics from 20 per cent to 27 per cent. The impact on rates in apparel products was an increase from 30 per cent to 39 per cent, and from 20 per cent to 29 per cent on home textile products. The additional customs duty on knitted goods in Chapter 60 increased to 27 per cent; the duty on 182 products in knitted apparel and accessories placed in Chapter 61 increased to 39 per cent; the duty on 292 products in non-knitted apparel and accessories placed in Chapter 62 also increased to 39 per cent; and, for 83 products in apparel made of woven materials placed in Chapter 63 too increased to 39 per cent.

ALCHEMPro News Desk (WE SB)