FASHION ALERT - TAJIKISTAN'S TEXTILES HIT THE WORLD MARKET

UNCLAS SECTION 01 OF 02 DUSHANBE 001749 SIPDIS SIPDIS STATE FOR SCA/CEN STATE/EB/TPP/ABT THOMAS LERSTEN COMMERCE/ITA/OTEXA MARIA D'ANDREA USTR ABIOLA HEYLIGER E.O. 12958: N/A TAGS: ECON ETRD TI EAGR EIND ELAB PGOV SUBJECT: FASHION ALERT - TAJIKISTAN'S TEXTILES HIT THE WORLD MARKET REF: (A) SECSTATE 138090; (B) DUSHANBE 1667; (C) Dushanbe 1667 DUSHANBE 00001749 001.2 OF 002 ¶1. This cable responds to action request (ref A) for data on the textile and apparel market in Tajikistan. ¶2. INTRODUCTION: Walking down the streets of Dushanbe, a trained eye easily spots the latest fashion trends among the many pedestrians. Men sport short-sleeve button-down shirts and trousers, or suits of shiny synthetic fibers. A small but growing number of men wear "traditional" clothing reminiscent of more religious Muslim countries. Fewer women wear western clothes since the mass emigration of ethnic Russians from Dushanbe. Many now wear flowery traditional dresses similar to a mumu. Little of Tajikistan's cotton is processed domestically, thus the local market features largely Chinese-made goods, or expensive imported Western wear. However, a small but growing domestic textile industry produces apparel for both internal and external markets. More than just mumus, Tajiks at these joint ventures are producing chic urban wear: EmbOffs purchased weathered jeans at Giavoni's outlet store in Khujand. Foreign investors face snags with infrastructure and corruption, but an oversupply of cotton lures them to Tajikistan. END INTRO. ¶3. Embassy Dushanbe provides the following data on Tajikistan's textile and apparel sector as requested in reftel (a). Data were collected from the State Statistical Agency, Ministry of Industry, and press reports. In addition, please see reftels (b) and (c) for further insight into the domestic textile industry and cotton industry. -- Total Industrial Production 2005: USD 1.336 billion 2006 (mid-year): USD 729.74 million -- Textiles and Apparel Production 2005: USD 234.72 million (includes cotton) 2006 (mid-year): USD 87.21 million (textiles only) -- Textile/apparel share of host country imports 2005: 1.07 % 2006 (mid-year): 1.18% -- Textile/apparel share of host country exports 2005: 20.7 % (includes cotton) 2006 (mid-year): 12.6% (textiles only) -- Exports in textiles and apparel (according to the Ministry of Industry) 2005: USD 32.9 million -- Exports in textiles and apparel to the U.S. (according to the State Statistical Agency) 2005: USD 9,000 2006 (mid-year): N/A -- Total manufacturing employment 2005: 86,500 2006 (mid-year): 87,200 -- Total textiles and total apparel employment 2005: 26,900 (light industry),including 23,200 in textiles industry 2006 (mid-year): 26,500 (light industry) -- Textile enterprises: 18 major textile enterprises, including 13 joint ventures in cotton textile industry; seven new joint ventures are set to open in Tajikistan in 2006 107 textile companies as of Sept 1, 2006 -- GDP (projected): 2006: USD 2.47 billion -------------- Fashion Comes to Tajikistan -------------- DUSHANBE 00001749 002.2 OF 002 ¶4. Turkish, Polish, Russian, Chinese, Korean, Italian and U.S. companies have 13 joint ventures in the textile business in Tajikistan. Textile workers at these joint ventures often earn $75-100 per month, well above the national average. JV Giavoni (Tajik-Italian-U.S.) exports jeans under the "Carrera" brand to the EU, which then re-exports them to the United States. According to the Ministry of Industry, Tajikistan exports textile products to the EU, CIS, Americas, Korea, Vietnam and China. ¶5. In 2006 seven more textile manufacturing companies are set to open in Tajikistan. These are located in Yavan district (4,000 ton capacity of cotton),Matchoh district (6,000 tons), Zafarobod district (3,000 tons),Spitamen (3,000 tons) and a knitting factory in Farhor. On September 18, Khima Textiles opened a new factory in Khatlon Oblast with an initial investment of $18 million in Italian equipment. -------------- Impact of international competition on Tajik textile manufacturers -------------- ¶6. The Deputy Minister of Agriculture has pushed for import quotas to protect the Tajik textile industry from Chinese competition. However, Tajikistan must submit its proposed trade barriers to the CIS Customs Union for their approval, and thus far the union has denied Tajikistan's requests. A major textile manufacturer in Dushanbe, Tajik Textiles, claims to not need protection from Chinese products, describing these as inferior in quality and higher in price than its products (reftel (b)). However, for the majority of processing plants without recently invested foreign equipment, quality does not meet international or even domestic standards. Imports of Chinese products (including textiles) have increased to USD 70 million during the first six months of 2006 - 40% higher than the same period in ¶2005. -------------- Future Outlook -------------- ¶7. According to the government's Light Industry Development Program for 2006-2015, Tajikistan intends to expand its textile industry in order to process all domestically-produced cotton by ¶2015. However, the state does not have any funds allocated for this purpose. Instead, the government is seeking USD 320 million in foreign investment to develop the textile industry. The government lacks resources to invest in textile manufacturing, but may ease onerous regulations on foreign investment to promote development in the sector. In addition, processors should face no shortage of cotton since the government still mandates farmers to grow the crop. ¶8. Corruption, an untrained workforce, and aged equipment remain major barriers to the success of this plan. The lack of infrastructure also constitutes a major obstacle to development of the textile industry. Energy supplies in the winter are unreliable at best, and many factories face severe rationing. Limited transportation networks inhibit the supply of materials to and from factories. Even water and sewage problems can bring production to a halt. But a company that can get through these difficulties can spin a good yarn. JACOBSON