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

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Fashion Comes to Tajikistan
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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.

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Impact of international competition on Tajik textile
manufacturers
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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.

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Future Outlook
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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