Coping with the Fallout: Turkish Textiles Industry Needs Business

Türkiye needs more business from its international partners to keep the industry going. The country is an important apparel and textile supplier to the EU and the US—these markets should not lose the advantage of having Türkiye close by, equipped as it is with flexible and quick delivery ability along with investments made in sustainable production.

Just to give a sense, Türkiye has invested in circular textile plants more than any other apparel and textile country this decade. Over the last three years, businesses invested in new machinery to bring about a 25% increase in production capacity. The new machinery that was ordered before the quake will soon be here. Therefore, in this slow apparel-and-textile demand situation there is no negative effect because these factories are not working yet. We have no capacity shortage.

İf the orders keep coming, the country can recover quicker. We can start work in these factories in 2–3 months. We want to employ the workers who have left the impacted cities in Istanbul, Bursa, Denizli, Trakya Region and other apparel and textile hubs till the factories are back in business.

The good news is that the partners who have been working with Türkiye for long have assured that they will not leave our country because of the natural calamity. They have allowed factories to carry on the orders with provision for delayed deliveries because of transport and other logistic issues.

I reiterate — Türkiye needs business from its partners. This is the biggest help they can give to us. Donations for our container camp projects will also be appreciated.

During the pandemic, apparel producers were faced with too many losses; what with cancellations, bankruptcies, unpaid invoices, and work cuts. Transport costs too had jumped up. Türkiye was just about beginning to bounce back when the Russia-Ukraine war triggered the energy crises, pushing production costs northwards. Also, in Europe and the US—the biggest apparel importers—because of the high inflation and high interest rates, the demand for garments slowed down — an almost 25% reduction. While some factories started to work at half capacity, others had problems over energy shortage, and some lost their competitiveness.

All these woes notwithstanding, brands and retailers still want to buy real cheap! They need to recognise that if they really are honest about sustainable production, they should pay the correct price for the garments they buy. If they do not pay a fair price, the supplier managements also cannot pay fair wages. A supplier cannot pay any less for the raw material, energy and other costs involved in the production, and the only way to reduce price is cutting the wages as most of these countries do not have government laws to protect minimum wages.

In the end it is the workers, at the bottom of the pyramid, who suffer. For example, in Türkiye we have laws to protect the workers, but when the wages cannot be adjusted by the manufacturer it is the competitiveness that takes a big hit.

Brands and retailers — across the supply chain and across geographies — must understand that they need to collaborate with their suppliers for the long term if businesses need to be made sustainable. It works for all if suppliers invest in better conditions for production, and the costs are shared by each stakeholder.

Another challenge for garment suppliers is audit fatigue. Each supplier works with many brands and retailers and each customer wants to audit the supplier they work with, with different audit companies. If a supplier works with 10 customers, it has to be audited by as many auditors. This works out to be dearer both in terms of cost and time. There is an urgent need for one auditing system which would be acceptable to all.

Over the next 5–10 years, our industry will go through tremendous changes to meet a rash of new regulations and legislation brought into action by global apparel importer countries. Most important is the EU Green Deal legislation which aims to achieve 2030 and 2050 carbon emission targets. For this, the industry needs to invest in green and sustainable supply chains with all stakeholders. This will require funding and not many suppliers have the extra finance to do this. Governments and EU funds need to step in to help industry achieve these goals.

Due diligence in purchasing practice: The International Apparel Federation (IAF) is co-initiator of the Sustainable Terms of Trade Initiative (STTI) which combines the forces of 13 manufacturing associations from 10 countries jointly representing about 75% of global apparel production with the aim of improving purchasing practices. The OECD too has drafted a due diligence guidance for the garment sector that is based on the UN Guiding Principles for Responsible Business Conduct. 

Purchasing practice is an important component of due diligence, which means that brands and retailers must make a reasonable effort to analyse, prevent and mitigate bad social and environmental conditions in their supply chains. The OECD work makes it quite clear that improving purchasing practices is an integral part of this effort. So now that the EU has actually proposed to turn the UN and OECD due diligence approach into a law, the need to work on improving purchasing practices gets a legal basis which is exactly what STTI wants.

Digitalisation, blockchain, investments: A few points: 

• Investment in digitalisation and blockchain technologies are important for traceability through the supply chain. We will need technologists to use digitalised machinery, and so we need to invest in education.
• Demand for sustainable products like recycled fabrics will go up. Therefore, investments are critical to push for innovations that make recycled fabrics more affordable.
• New recycling hubs are needed to reduce and facilitate the migration of used garments from one country to another.
• We need more growth of organic fibres and vegan fibres to reduce the use of synthetic fibres.
• We need to reduce overproduction to check waste which is dumped into the environment, and we end up spending more money and energy to get rid of these unsustainable products.
• We need to produce more value-added, long-lasting garments. To do that we need to stop fast fashion.
• Brands and retailers are looking at new supplier hubs like West Africa and Americas to make the garments cheaper. Instead of looking for cheaper production hubs, they should think about how to make the lives of garment workers easier and pay fair wages.

All of the above requires greater collaboration between brands, retailers, suppliers and raw material producers. 

We want to increase our apparel exports every year by 15–20%. At the moment, the apparel export level is $22 billion, and textiles are $33 billion.

• Advantage Türkiye: Türkiye is the third biggest apparel exporter to EU countries and sixth in the world apparel market. Unfortunately, we are 17th in the US market. We have a big advantage competing with other apparel countries considering that we are a fully vertical country when it comes to production. We have cotton production, which is a big advantage, as also capacity of yarns and fabric, from cotton fibre to finished garments without depending on imports.  We offer good quality value-added sustainable products across categories like denims, socks, home textiles, and more.

After the COVID-19 closures, Türkiye received a good quantity of orders from all over the world and increased its export value by nearly 20% in 2022. The biggest reason for this was that brands and retailers did not commit themselves for long-term orders and in wanting to play safe, asked for only as much was needed and with quick deliveries. Being close to the EU and the US, we could deliver in a much shorter time. We can now transport to any US port within two weeks.

• Disadvantages: Our biggest disadvantage is the cost of wages. Compared to Southeast Asian countries, our minimum wage is nearly $700, including all benefits. The Russia-Ukraine war, as mentioned earlier, has led to high energy costs, adding to production costs and resulted in us losing orders in the second half of 2022–23. Whether it be global inflation or rising costs of energy, raw materials or wages, the buyers continue to insist on lower prices.  A weak Turkish lira has been compounding our problems. 

Expansionist Türkiye wants to expand its markets. We do not want to depend entirely on the EU market with 60% of our production already going there. We are working hard to introduce the Turkish apparel industry to the huge US market by organising webinars and B2B events, and tying up with associations like the AAFA. The target set for now is $10 billion in 10 years.

The biggest disadvantage of the US market is having to pay 16% duty on cotton and cotton-rich products and nearly 30% on synthetics. We hope the US government would lift these duties. We import big amounts of US cotton and we want to use this for our advantage to sell back to US duty free at least for the same value.