Clothing manufacturers emphasize "production power"

At the press conference held with the participation of Toygar Narbay, Joint President of the Turkish Clothing Manufacturers Association (TGSD), Ümit Özüren and TGSD Economic Advisor Can Fuat Gürlesel, information was given about the situation in the sector and suggestions and demands were shared for the growth and transformation of the sector.

Narbay said that there was a very rapid growth in world trade thanks to the shopping that was postponed in 2020 when the pandemic started and the expansionary policies implemented by central banks in 2021 and 2022.

Narbay, who stated that both world and Turkish ready-made clothing exports reached high figures in this process, said, "However, as a result of the interest rate hikes and contractionary policies to reduce liquidity initiated by central banks in 2023 in order to control increasing inflation and liquidity, world ready-made clothing and Turkish ready-made clothing exports shrank by 9 percent in parallel in 2023. In 2024, while there was a 2 percent shrinkage in world ready-made clothing exports, there was a 6.9 percent shrinkage in Turkish ready-made clothing exports. This situation shows that the Turkish ready-made clothing sector is negatively differentiated from its competitors."

Narbay stated that the contraction in 2024 corresponds to 1.3 billion dollars and noted the following:

"According to our analysis, 29 percent of the loss was due to the global recession, 46 percent was due to the loss in the Russian, Ukrainian and Israeli markets, namely war zones, and 25 percent was due to our loss of competitiveness. In addition to the contraction in exports, ready-made clothing imports, which were $2.7 billion in 2022, increased to $4 billion by the end of 2024. This clearly shows that the implemented policies reduce competitiveness in exports while increasing imports."

Narbay stated that the Turkish ready-to-wear sector is the world's sixth and Europe's third largest supplier, as well as the second largest supply chain after China, together with the textile sector, and continued as follows:

"We are one of the most important industries in Turkey with our 3.48 percent share in the world ready-made clothing trade and the employment we have created for 590 thousand people despite the losses. We are always in the portfolios of global buyers thanks to our product range, know-how, design, quality, speed and logistics advantages. In fact, global buyers are ready to pay 20-25 percent more than competitor countries. However, due to high inflation and suppressed exchange rate policies in the last two years, conditions specific to our country have emerged. For this reason, buyers do not want to pay the cost difference that is much higher than they can tolerate."

- "Our market share in the EU fell from 5.6 percent to 5.1 percent"

Narbay noted that they revealed the difference between Turkey and its Far Eastern and North African competitors with the competition modeling they produced as TGSD, and said, "Accordingly, in 2024, we became 61 percent more expensive than our competitors in Asia and 46 percent more expensive than our competitors in North Africa due to our rising production and financing costs for a product we sell for $15.2 per kilogram. As a result, in addition to our market loss worldwide, our market share in the EU, our largest and traditional market, fell from 5.6 percent to 5.1 percent."

Drawing attention to the important opportunities facing the ready-made clothing sector, Narbay made the following assessment:

"Trump's policies against China will increase geopolitical risks in the Asia-Pacific region, causing European and US buyers to review their supply security policies and turn to safer production basins. This situation will reflect positively on our country, which has the largest vertical integration after China. In addition, it is an advantage for us that the supply chains of Bangladesh and Vietnam, the largest exporters after China, are largely dependent on China. The second opportunity is that the Border Carbon Adjustment Mechanism will cover ready-made clothing and textiles in a few years. Preparing for this regulation and the accompanying regulations will increase our preferability in the market."

Narbay emphasized that the regulations in question offer important opportunities for Turkey, saying, "If the Russia-Ukraine war ends and peace is established in the Middle East, we can regain the exports we lost in these markets. However, in order to evaluate these opportunities that come to our door, we need support that will enable us to maintain our production power, strengthen our own resources and regain our competitive power. If these are provided, the recovery in the sector will not be limited to exports only, while employment will increase again, imports will decrease."

Narbay said that no contraction is expected in the world ready-made clothing trade this year, and that in Turkey, if exchange rate policies or support mechanisms for exporters are not implemented and there is no recovery in the markets, they expect to finish the year at 17.5 billion dollars.

- "The only way to increase prices is through branded exports"

Ümit Özüren also underlined that the export unit price of the sector will be 15.2 dollars per kilogram in 2024 and said, "We are the third sector with the highest value after the jewelry and defense industry. It is not easy to exceed this value due to the high price competition in the market. The only way to increase the price is through branded exports. So much so that a brand that sells wholesale can increase the value of its product by 2-2.5 times."

Özüren explained that the average unit sales value in branded sales made in retail or e-commerce channels has reached levels of 80-100 dollars, and made the following statements:

"This is only possible if companies invest in innovation, design, branding and digital transformation processes, and comply more with processes such as traceability, transparency and ESG criteria (environmental, social and corporate governance). As TGSD, we are working on the preparation of the Horizon 2040 Strategic Plan that will shape the long-term goals of our sector. We also plan to launch the TGSD Development Academy, which we designed as an online information platform that will provide guidance in areas such as institutionalization, sustainability and innovation within the sector, this year."

Answering questions from journalists after the meeting, Toygar Narbay made the following assessment regarding the loss of competitiveness in the sector: "Companies continue to produce at a loss, only to protect their markets and hoping that things will improve. If the Russian market recovers, there will be a positive effect there, we will only have to wait for another pandemic for the customers who left to come back. That is why we need to lose our customers and markets. Our government is also a government that reacts quickly. I hope that we will be supported without further damage and that we will emerge from this point positively."

Narbay responded to a question about investments in Egypt by saying, "Egypt has a free trade agreement with the US that was signed a long time ago. Turkey is not yet at the cost level to be able to export to the US. The US is a very price-oriented and competitive market. Therefore, many of the companies that go there go to the US to increase their exports and evaluate the opportunity there."

When asked about the bankruptcies in the clothing sector, Narbay said, "In a very busy industry, the number of bankruptcies is also high. Approximately 20 percent of the bankruptcies are in our sector."

Narbay added that the 2,500 lira support per employee given to SMEs in labor-intensive sectors should be given to all companies regardless of their size.