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Viewing cable 06ADANA128, TURKEY: SOUTHEAST'S TEXTILE INDUSTRY CONTINUES TO STRUGGLE
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
06ADANA128 | 2006-05-30 12:46 | 2011-08-24 01:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Adana |
VZCZCXRO1324
RR RUEHAST
DE RUEHDA #0128/01 1501246
ZNR UUUUU ZZH
R 301246Z MAY 06
FM AMCONSUL ADANA
TO RUEHC/SECSTATE WASHDC 4164
INFO RUEHAK/AMEMBASSY ANKARA 0713
RUEHIT/AMCONSUL ISTANBUL 0614
RUEHGB/AMEMBASSY BAGHDAD 0103
RUEHDM/AMEMBASSY DAMASCUS 0171
RUEHRB/AMEMBASSY RABAT 0001
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHDA/AMCONSUL ADANA 0764
UNCLAS SECTION 01 OF 03 ADANA 000128
SIPDIS
SENSITIVE
NOT FOR INTERNET DISTRIBUTION
SIPDIS
E.O. 12958: N/A
TAGS: PGOV ECON PREL TU SY IZ
SUBJECT: TURKEY: SOUTHEAST'S TEXTILE INDUSTRY CONTINUES TO STRUGGLE
AGAINST INTERNAIONAL COMPETITION
ADANA 00000128 001.3 OF 003
¶1. (SBU) Summary: Turkey's textile industry continues to face
difficulties in dealing with rapidly growing global competition,
particularly from China and India. Textile industry leaders in
Kahramanmaras, Gaziantep and Adana recently told us that the
textile industry in Turkey's southeast continues to suffer from
foreign competition, despite GOT financial incentives. Many
textile plant owners are downsizing or diversifying their
investments into non-textile businesses, such as agricultural
products and construction materials. Larger textile firms are
responding to international pressure by leveraging their assets
to adjust their position in the international textile market.
Some industry leaders called on the U.S. to include Turkey in
textile-participating qualified industrial zones (QIZ). End
summary.
¶2. (U) Textile industry leaders in Kahramanmaras, Gaziantep and
Adana recently told us that, since WTO quotas were lifted, and
despite GOT financial incentives, the textile industry continues
to suffer in the face of serious Asian competition, particularly
from China and India. From the early 1980s until 2000, the
textile industry has grown extensively in Turkey because
successive governments provided the sector with continuous
financial incentives, hoping to provide increased employment for
the rising population. Indeed, the sector has been the
"locomotive" of Turkey`s exports until recent years. The yarn
industry, which particularly has grown between 1994-2000, today
has a capacity of 7.5 million spindles and 700,000 rotors,
which is much higher than the total capacity of the EU`s 25
countries. Capital-intensive investments, such as
knitting/weaving and dyeing/printing, followed yarn mills, and
have become the largest in the world. However, those investments
were made without much feasibility assessment consideration,
which caused the country to invest nearly $75 billion in the
sector from 1985 to 2005.
------------------------------
KAHRAMANMARAS
------------------------------
¶3. (U) Ranking thirteenth in terms of provincial size in Turkey,
Kahramanmaras has four main industrial sectors; textiles, food,
steel kitchen units (pots and pans), and construction materials.
Private sector investments, mostly in textiles, made during
1990`s contributed significantly to the economic development of
the city.
¶4. (SBU) Mehmet Balduk, President of Chamber of Commerce and
Industry (CCI), and owner of a yarn mill and a weaving mill in
Kahramanmaras told us that his business`s profitability was
below expectations. The weaving mill founded in 2004 is
comparatively new. Its exports increased 250 percent in 2004,
and 40 percent in 2005. They expect an increase of around 20%
for the year 2006. Kahramanmaras is one of the cities
benefiting from the GOT`s regional financial incentives program,
which Balduk said increased investment in the textile sector.
Balduk called for the U.S. to include Turkey in a
textile-participating qualified industrial zone (QIZ), saying
Turkey deserved such trade treatment for its contributions to
peace in Iraq and assistance in the Israeli-Palestinian
conflict.
¶5. (SBU) Hanefi Oksuz, owner of KIPAS, the largest textile
factory in Kahramanmaras, noted that his company is seeing
greater international competitive pressure. However, Oksuz
accepts that KIPAS has been influenced by Asian competition, but
he is not considering leaving the textile sector because it is
KIPAS` main business. KIPAS sells to American companies, such as
GAP. Oksuz complained that American and European customers
imposed labor requirements/inspections on Turkish firms that
they do not impose on their Asian suppliers, which causes a
labor cost disadvantage for Turkish exporters.
¶6. (SBU) Oksuz' discussion of new business ventures revealed
that he sees a diminishing future in textiles for his company.
He has built a very large greenhouse behind one of his factories
and is growing tomatoes organically. If the tomatoes sell well
in the domestic market, he plans to export them to EU countries.
CCI president Balduk told us that KIPAS is considering moving
part, or all, of its textile business to Egypt or North Africa
to benefit from the American QIZ's set up there. Oksuz, said
that KIPAS would direct its new investment money into a cement
factory in southern Kahramanmaras and asked us to find a buyer
in Iraq for his recently mothballed fuel oil-fired electrical
ADANA 00000128 002.3 OF 003
power plant. He explained that rising oil costs had prompted
KIPAS to shift to a coal-fired electrical power plant which
imports its coal.
------------------
GAZIANTEP
------------------
¶7. (SBU) Gaziantep is one of the nine cities in Turkey`s GAP
project (Southeast Anatolian Project, an economic development
project for the southeast region based on agriculture). The city
is the largest and economically most developed in the GAP
region. Being the gateway into GAP, the city has provided the
foundations for the economic growth of the region. The primary
sectors in Gaziantep`s economy are textiles and food. Secretary
General of Gaziantep Chamber of Industry Kursat Goncu told us
that the impact of increased Asian competition on Gaziantep's
textile SMEs has been strong, especially on those enterprises
lacking significant internal capital. He noted that some of
these smaller companies have either gone bankrupt, operate "off
the books" to avoid paying taxes, or have moved significant
parts of their operations to Syria to garner what they hope to
be lower wage costs. The leadership of the Gaziantep-based
Konukoglu family-owned SANKO conglomerate, one of Turkey's large
industrial groups with a textile base, has called for the
government to take steps to relieve currency pressures affecting
Turkey's textile exports and to reduce energy costs for the
sector through a state supplement. The SANKO family also has
called for the U.S. to include Turkey in textile-participating
QIZ's.
------------
ADANA
------------
¶8. (U) Adana is the 6th largest city of Turkey and the largest
of the Mediterranean region, where the industrial development
efforts date from the late 1950s, just like with Istanbul,
Ankara, and Izmir. Textiles is the dominant sector in Adana`s
economy, as it is in several other industrialized regions of the
country.
¶9. (SBU) Tarik Bozbey, a senior executive in several textile
companies in the Cukurova region, and chairman of the
Mediterranean Exporters Union, told us that he was confident in
the overall prospects for the textile sector. He explained that,
unlike the EU countries, Turkey has a textile tradition dating
back over a thousand years, which, he argues, was Turkey's most
important reason for maintaining a textile industry. He added
that Turkey will always have an advantage of physical proximity
to European customers over its Asian competitors. The difference
Turkey can make is to leave production of regular or ordinary
textile products to the Far East, while specializing in higher
value-added products. According to Bozbey, Turkish textile
companies can move to, or open new factories in places like
Jordan, Egypt or Morocco, where there are no tariffs for exports
to the U.S.
¶10. (SBU) Can Piyale, managing director of BOSSA Textiles, the
flagship textile arm of the Sabanci group, one of Turkey's
largest industrial groups, told us that textiles still comprise
an important sector for his group, but increased Asian
competition was challenging many Turkish textile companies. He
indicated that Sabanci saw its market position as placed quite
differently than that of most Turkish textile players, and did
not advocate on behalf of the overall sector, such as SANKO
representatives do. He said that much of BOSSA's work is
finished confection on direct sales contract by major
international retailers. He added that BOSSA`s business is
better so far this year compared to last year, but worse
compared to 2004. Piyale said BOSSA was trying to get an
appointment with GAP for a franchise agreement in Turkey. Their
main export customers are GAP, Liz Claiborne, Marks & Spencer,
Nine West and Hugo Boss. BOSSA has offices in the U.S. and the
U.K.
11 (SBU) Ahmet Coskun, the owner of a nationwide chain of shops
called "Suvari", has been in textile business since the early
1990s. What his father started up as a small business is now on
its way to become an international brand. They export to Europe
and Middle Eastern countries. They already have some shops in
Europe, and are also planning to open in Russia as well.
ADANA 00000128 003.3 OF 003
-----------------------------------------
OUTLOOK FOR TURKEY`S TEXTILE INDUSTRY
-----------------------------------------
¶12. (U) It is certain that Turkey`s textile sector has been,
and continues to be, influenced by Asian competition. Starting
in the late 1990s, conglomerates like Sabanci and Koc, who had
foreseen changing economic trends, downsized their textile
companies or left the sector altogether. Those who downsized
their businesses narrowed their product range in order to
specialize in certain branches of textile so that they could
compete and outperform their foreign competitors. SMEs, most of
which are lacking in internal capital, are struggling to
maintain their businesses, trying alternative business models,
such as outsourcing, subcontracting, or relocation. According to
a local contact who is a member of the Mediterranean Exporter`s
Union, the number of textile companies going out of business in
the Mediterranean and southeastern regions of Turkey is much
higher than in the north and west of the country. Among the
reasons for this are the lack of qualified labor force,
particularly in the southeast; the availability of low-cost raw
materials; the physical distance from main ports; and the
absence of side industries.
On the other hand, the GOT still encourages the textile sector
in the southeast as part of its efforts to develop the region.
Most of the factories that the Prime Minister has opened
recently are textile businesses. Textiles will continue to be
one of the main politically-sensitive sectors in the country
going into the 2007 election season.
REID