Identifier
Created
Classification
Origin
06SOFIA1464
2006-10-19 14:54:00
UNCLASSIFIED
Embassy Sofia
Cable title:
BULGARIAN TEXTILES AND APPAREL SECTOR UPDATE
how-toVZCZCXRO4604 RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG DE RUEHSF #1464/01 2921454 ZNR UUUUU ZZH R 191454Z OCT 06 FM AMEMBASSY SOFIA TO RUEHC/SECSTATE WASHDC 2708 INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
UNCLAS SECTION 01 OF 03 SOFIA 001464
SIPDIS
SIPDIS
E.O. 12958: N/A
TAGS: ECON ETRD KTEX BU
SUBJECT: BULGARIAN TEXTILES AND APPAREL SECTOR UPDATE
REF: SECSTATE 138090
UNCLAS SECTION 01 OF 03 SOFIA 001464
SIPDIS
SIPDIS
E.O. 12958: N/A
TAGS: ECON ETRD KTEX BU
SUBJECT: BULGARIAN TEXTILES AND APPAREL SECTOR UPDATE
REF: SECSTATE 138090
1. SUMMARY The abolition of import quotas for Asian
producers from 1 January 2005 has had no adverse effect on
Bulgaria's textiles and apparel production and export
capacity. The sector experienced an increase in new
investment and technology, which supported higher labor
productivity and wages. Both production and exports
continued to rise, helping local producers maintain a strong
position in the EU--Bulgaria's traditional export market.
Nevertheless, the abolition of the quotas introduced
stronger international competition to the industry, with a
subsequent decrease in employment. The GOB adheres to its
international commitments, including initiatives aimed at
significant reduction or elimination of tariffs, but will
adopt a number of strategic measures to equip local industry
with effective tools against rising global competition. END
SUMMARY
The information below was gathered from the Bulgarian
Association of Apparel and Textile Producers and Exporters;
The Association of Companies in the Light Industry and the
National Statistics Institute.
2. Requested statistics
--------------
--Total industrial production in USD value
Total industrial production grew 7.3 percent year-on-year in
2005. The gross value added (GVA) of industry in 2005 was
estimated at USD 7 billion. In the first half of 2006,
industrial production increased 8.9 percent year-on-year;
and GVA of industry was USD 4 billion.
--Indices of textiles and apparel production in USD value
Combined textiles and apparel production continued to grow
in 2005 despite the removal of trade barriers on January 1.
Total textiles and apparel production increased 5.3 percent
in 2005. However, the index of production of textiles in
December 2005 decreased to 203.8 (2000=100) compared to 205
in December 2004. The index of apparel production grew from
196 to 200.3 (December 2004/December 2005). This shows that
in 2005 the industry's production growth succeeded in
maintaining its production activity. In June 2006, the
index of the production of textiles stood at 102.7 compared
to June 2005, and 248.1 compared to June 2000. In
comparison with the first half of 2005, the index of
production of apparel, including leather, was 114.1 greater,
and 216.4 greater compared to June 2000.
--Textiles/Apparel share of host country's imports and
exports
Total imports of T and A in Bulgaria (USD 1.7 billion)
contributed 10.1 percent to the total volume of imports in
2005. The overall imports of apparel and textiles were an
estimated USD 920 million in the first half of 2006,
comprising 9.2 percent of the total imports as of the first
half of 2006.
The T and A sector continued to be export-oriented in 2005.
The total T and A exports (USD 2.1 billion) contributed 17.9
percent to the Bulgarian total exports in 2005. Textiles
and apparel exports (USD 1.1 billion) represented 15.5
percent of Bulgaria's total exports as of the first half of
2006. T and A exports continued to decrease over the last
two and a half years as a share to the economy total,
estimated at 17.9 percent in 2005 and 21.1 percent in 2004.
A total of 86 per cent of Bulgarian apparel and textiles
exports is for the European Union, while the industry's
total EU exports constitute a third of Bulgaria's total EU
exports.
--Exports in textiles and apparel to the US
Exports to the US decreased drastically by 37 percent to USD
63 million in 2005. The negative trend has continued in
2006, and as of first half 2006 exports to the US are down
by 16 percent. Presently the US is the fourth biggest
textiles export market of Bulgaria, behind the EU, Turkey
and Romania.
--Total manufacturing employment
Total manufacturing employment (processing industry) in 2005
was 622,757 people.
--Total apparel and textiles employment
Total apparel and textiles employment in 2005 was 177,155
people, which was 7 percent less than in 2004. The number
SOFIA 00001464 002 OF 003
of employed in the production of apparel decreased by 3
percent, and by 21 percent in the textiles industry. The
overall trend of employment growth in the sector over the
last few years was interrupted in 2005. The decrease in
employment in this sector is largely due to the rise in
labor productivity and the lack of skilled people who wish
to work in the sector, according to the Bulgarian
Association of Apparel and Textiles Producers and Exporters
(BAATPE). Competition from low-cost imports has also
accelerated the process.
New investment and technology bring higher labor
-------------- ---
productivity and wages
--------------
3. The sector has seen an increase in new investment and
technology, which boosted overall labor productivity in
2005. This has also led to the introduction of a more
highly-skilled, leaner labor force in the industry. Wages
in the sector have subsequently increased 10 percent in
2005. According to the National Statistics Institute (NSI),
the average wage in the sector in 2005 was 205.6 Bulgarian
leva (USD 134) per month. Actual wages in 2005 were
probably somewhat higher due to the practice of paying
additional wages in cash to avoid taxes. The expectations
are for a 10 percent rise of wages in the sector in 2006.
Sales prices and volumes increase
--------------
4. Sales prices in the sector increased by 4.3 percent in
2005. The index of T and A sales on the domestic market
increased from 161 (December 2004) to 215.7 (December 2005).
With legal import growth declining (1 percent for textiles
and 6 percent for apparel) in 2005, the share of domestic T
and A producers to the sales total increased in 2005. In
the first half of 2006, sales revenue from textiles and
apparel, including leather, rose 10.2 percent. BAATPE
estimate that revenues from the sale of apparel and textiles
will continue to rise in 2006, given also the increased
number of orders from abroad.
5. There is no data for 2005 and 2006 showing outflow of
foreign investors from the sector. This is largely
explained by the competitive advantages of the Bulgarian
industry and the attractive profit/expenses ratio.
Competitive edge includes:
-- Long-lasting traditions in textiles and apparel
manufacturing;
-- Good quality at reasonable prices;
-- Short timetable for implementation of the orders;
-- Highly skilled workforce;
-- Proximity to Europe and major fabric producers in the
Euro-Mediterranean zone;
-- No impediments to the import of raw materials.
EU restrictions on Chinese exports benefited Bulgaria . . .
-------------- --------------
6. In June 2005, a Memorandum of Understanding (MoU) between
the EU and China was signed, which aimed at limiting
specific categories of Chinese T and A exports to the EU
considered to be the most sensitive to EU industry.
According to analysis of the European Commission and the
GOB, Bulgaria has since increased its exports in all 10
quota categories subject to limitations on China. During
2005, Bulgaria has increased its EU exports in value terms
by 1.1% as well as its export prices, while the volume of
exports has fallen by 3%. There was a 10% increase in
Bulgaria's exports to the EU in value terms in the first
half of 2006 as well.
. . . while US restrictions appear to have had no positive
-------------- --------------
effect
--------------
7. Evidenced by latest trade figures, US restrictions on
Chinese exports, effective through 2008, have produced no
positive effect on Bulgaria's total exports to the US. The
exports to the US decreased both in 2005 and in the first
half of 2006.
Chinese T and A maintain competitive pressure
--------------
8. As a result of new investment and technology policies, as
well as low-paid labor, Chinese T and A producers maintain
lower prices and create competitive pressure on local
industry. Local producers also suffer from a lack of IPR
enforcement by Chinese T and A producers and a high
SOFIA 00001464 003 OF 003
incidence of pirated goods sneaking through border checks.
While textiles imports from China remained within the range
of 3 percent in the first half of 2006, the import of
apparel rose significantly to 6.7 percent of total imports
of apparel, compared to 4 percent in 2005.
GOB adheres to EU, WTO tariff reduction/elimination
-------------- -------------- policies
--------------
9. Current GOB policies involve adhesion to international
commitments and effective use of liberal trade mechanisms.
The GOB supports the EU initiatives aiming at significant
reduction or elimination of tariffs and/or non-tariff
barriers in the context of bilateral negotiations or through
WTO consultation mechanisms. The GOB is also involved in
addressing IPR problems, rules of origin, eco-labeling, etc.
Currently, the GOB, in cooperation with business
associations from the sector, is creating a set of measures
aimed at improving the competitiveness of the textiles and
apparel branch.
Concrete GOB action is planned
--------------
10. In 2005, the GOB has been involved in a joint initiative
with the textiles and apparel associations in Bulgaria on
the development of "The Strategy for the Development of the
Textile Sector - Perspective 2010" (drafted in 2005). Some
key recommendations from the strategy include:
--Drafting and following modern requirements for quality
of the products;
--Introduction of integrated information management
systems;
--Introduction of quality management certificates
(ISO 9002);
--Participation in innovation projects;
--Use of new methods, base products and technologies;
--Creation and development of own trade marks and
designers' collections;
--Creation of marketing departments at the companies;
--Development of clusters;
--New human resources policies and training of new
specialists;
--Better communication within the sector and between the
associations;
--Increase of control of the customs authorities and the
national administration with a view to stop unfair
competitive practices;
--Introduction of a flexible tax system, allowing for re-
investment of the profit in new equipment;
--Consistent trade policy and effective use of trade
defense instruments.
COMMENT: The textiles and apparel industry still plays a
significant role in the Bulgarian economy. For the past 5
years it has been one of the most competitive sectors in
Bulgarian industry and one of the major employers in the
country. Bulgaria's forthcoming EU membership increases the
prospects of local T and A producers to maintain their
competitive position in the EU internal market. However,
the majority of smaller enterprises will be increasingly
exposed to foreign competition produced by trade
liberalization and low-cost imports from China. Only those
companies that incorporate high-technology equipment will
survive. The sector will become more capital intensive, and
further lay-offs are foreseen.
BEYRLE
SIPDIS
SIPDIS
E.O. 12958: N/A
TAGS: ECON ETRD KTEX BU
SUBJECT: BULGARIAN TEXTILES AND APPAREL SECTOR UPDATE
REF: SECSTATE 138090
1. SUMMARY The abolition of import quotas for Asian
producers from 1 January 2005 has had no adverse effect on
Bulgaria's textiles and apparel production and export
capacity. The sector experienced an increase in new
investment and technology, which supported higher labor
productivity and wages. Both production and exports
continued to rise, helping local producers maintain a strong
position in the EU--Bulgaria's traditional export market.
Nevertheless, the abolition of the quotas introduced
stronger international competition to the industry, with a
subsequent decrease in employment. The GOB adheres to its
international commitments, including initiatives aimed at
significant reduction or elimination of tariffs, but will
adopt a number of strategic measures to equip local industry
with effective tools against rising global competition. END
SUMMARY
The information below was gathered from the Bulgarian
Association of Apparel and Textile Producers and Exporters;
The Association of Companies in the Light Industry and the
National Statistics Institute.
2. Requested statistics
--------------
--Total industrial production in USD value
Total industrial production grew 7.3 percent year-on-year in
2005. The gross value added (GVA) of industry in 2005 was
estimated at USD 7 billion. In the first half of 2006,
industrial production increased 8.9 percent year-on-year;
and GVA of industry was USD 4 billion.
--Indices of textiles and apparel production in USD value
Combined textiles and apparel production continued to grow
in 2005 despite the removal of trade barriers on January 1.
Total textiles and apparel production increased 5.3 percent
in 2005. However, the index of production of textiles in
December 2005 decreased to 203.8 (2000=100) compared to 205
in December 2004. The index of apparel production grew from
196 to 200.3 (December 2004/December 2005). This shows that
in 2005 the industry's production growth succeeded in
maintaining its production activity. In June 2006, the
index of the production of textiles stood at 102.7 compared
to June 2005, and 248.1 compared to June 2000. In
comparison with the first half of 2005, the index of
production of apparel, including leather, was 114.1 greater,
and 216.4 greater compared to June 2000.
--Textiles/Apparel share of host country's imports and
exports
Total imports of T and A in Bulgaria (USD 1.7 billion)
contributed 10.1 percent to the total volume of imports in
2005. The overall imports of apparel and textiles were an
estimated USD 920 million in the first half of 2006,
comprising 9.2 percent of the total imports as of the first
half of 2006.
The T and A sector continued to be export-oriented in 2005.
The total T and A exports (USD 2.1 billion) contributed 17.9
percent to the Bulgarian total exports in 2005. Textiles
and apparel exports (USD 1.1 billion) represented 15.5
percent of Bulgaria's total exports as of the first half of
2006. T and A exports continued to decrease over the last
two and a half years as a share to the economy total,
estimated at 17.9 percent in 2005 and 21.1 percent in 2004.
A total of 86 per cent of Bulgarian apparel and textiles
exports is for the European Union, while the industry's
total EU exports constitute a third of Bulgaria's total EU
exports.
--Exports in textiles and apparel to the US
Exports to the US decreased drastically by 37 percent to USD
63 million in 2005. The negative trend has continued in
2006, and as of first half 2006 exports to the US are down
by 16 percent. Presently the US is the fourth biggest
textiles export market of Bulgaria, behind the EU, Turkey
and Romania.
--Total manufacturing employment
Total manufacturing employment (processing industry) in 2005
was 622,757 people.
--Total apparel and textiles employment
Total apparel and textiles employment in 2005 was 177,155
people, which was 7 percent less than in 2004. The number
SOFIA 00001464 002 OF 003
of employed in the production of apparel decreased by 3
percent, and by 21 percent in the textiles industry. The
overall trend of employment growth in the sector over the
last few years was interrupted in 2005. The decrease in
employment in this sector is largely due to the rise in
labor productivity and the lack of skilled people who wish
to work in the sector, according to the Bulgarian
Association of Apparel and Textiles Producers and Exporters
(BAATPE). Competition from low-cost imports has also
accelerated the process.
New investment and technology bring higher labor
-------------- ---
productivity and wages
--------------
3. The sector has seen an increase in new investment and
technology, which boosted overall labor productivity in
2005. This has also led to the introduction of a more
highly-skilled, leaner labor force in the industry. Wages
in the sector have subsequently increased 10 percent in
2005. According to the National Statistics Institute (NSI),
the average wage in the sector in 2005 was 205.6 Bulgarian
leva (USD 134) per month. Actual wages in 2005 were
probably somewhat higher due to the practice of paying
additional wages in cash to avoid taxes. The expectations
are for a 10 percent rise of wages in the sector in 2006.
Sales prices and volumes increase
--------------
4. Sales prices in the sector increased by 4.3 percent in
2005. The index of T and A sales on the domestic market
increased from 161 (December 2004) to 215.7 (December 2005).
With legal import growth declining (1 percent for textiles
and 6 percent for apparel) in 2005, the share of domestic T
and A producers to the sales total increased in 2005. In
the first half of 2006, sales revenue from textiles and
apparel, including leather, rose 10.2 percent. BAATPE
estimate that revenues from the sale of apparel and textiles
will continue to rise in 2006, given also the increased
number of orders from abroad.
5. There is no data for 2005 and 2006 showing outflow of
foreign investors from the sector. This is largely
explained by the competitive advantages of the Bulgarian
industry and the attractive profit/expenses ratio.
Competitive edge includes:
-- Long-lasting traditions in textiles and apparel
manufacturing;
-- Good quality at reasonable prices;
-- Short timetable for implementation of the orders;
-- Highly skilled workforce;
-- Proximity to Europe and major fabric producers in the
Euro-Mediterranean zone;
-- No impediments to the import of raw materials.
EU restrictions on Chinese exports benefited Bulgaria . . .
-------------- --------------
6. In June 2005, a Memorandum of Understanding (MoU) between
the EU and China was signed, which aimed at limiting
specific categories of Chinese T and A exports to the EU
considered to be the most sensitive to EU industry.
According to analysis of the European Commission and the
GOB, Bulgaria has since increased its exports in all 10
quota categories subject to limitations on China. During
2005, Bulgaria has increased its EU exports in value terms
by 1.1% as well as its export prices, while the volume of
exports has fallen by 3%. There was a 10% increase in
Bulgaria's exports to the EU in value terms in the first
half of 2006 as well.
. . . while US restrictions appear to have had no positive
-------------- --------------
effect
--------------
7. Evidenced by latest trade figures, US restrictions on
Chinese exports, effective through 2008, have produced no
positive effect on Bulgaria's total exports to the US. The
exports to the US decreased both in 2005 and in the first
half of 2006.
Chinese T and A maintain competitive pressure
--------------
8. As a result of new investment and technology policies, as
well as low-paid labor, Chinese T and A producers maintain
lower prices and create competitive pressure on local
industry. Local producers also suffer from a lack of IPR
enforcement by Chinese T and A producers and a high
SOFIA 00001464 003 OF 003
incidence of pirated goods sneaking through border checks.
While textiles imports from China remained within the range
of 3 percent in the first half of 2006, the import of
apparel rose significantly to 6.7 percent of total imports
of apparel, compared to 4 percent in 2005.
GOB adheres to EU, WTO tariff reduction/elimination
-------------- -------------- policies
--------------
9. Current GOB policies involve adhesion to international
commitments and effective use of liberal trade mechanisms.
The GOB supports the EU initiatives aiming at significant
reduction or elimination of tariffs and/or non-tariff
barriers in the context of bilateral negotiations or through
WTO consultation mechanisms. The GOB is also involved in
addressing IPR problems, rules of origin, eco-labeling, etc.
Currently, the GOB, in cooperation with business
associations from the sector, is creating a set of measures
aimed at improving the competitiveness of the textiles and
apparel branch.
Concrete GOB action is planned
--------------
10. In 2005, the GOB has been involved in a joint initiative
with the textiles and apparel associations in Bulgaria on
the development of "The Strategy for the Development of the
Textile Sector - Perspective 2010" (drafted in 2005). Some
key recommendations from the strategy include:
--Drafting and following modern requirements for quality
of the products;
--Introduction of integrated information management
systems;
--Introduction of quality management certificates
(ISO 9002);
--Participation in innovation projects;
--Use of new methods, base products and technologies;
--Creation and development of own trade marks and
designers' collections;
--Creation of marketing departments at the companies;
--Development of clusters;
--New human resources policies and training of new
specialists;
--Better communication within the sector and between the
associations;
--Increase of control of the customs authorities and the
national administration with a view to stop unfair
competitive practices;
--Introduction of a flexible tax system, allowing for re-
investment of the profit in new equipment;
--Consistent trade policy and effective use of trade
defense instruments.
COMMENT: The textiles and apparel industry still plays a
significant role in the Bulgarian economy. For the past 5
years it has been one of the most competitive sectors in
Bulgarian industry and one of the major employers in the
country. Bulgaria's forthcoming EU membership increases the
prospects of local T and A producers to maintain their
competitive position in the EU internal market. However,
the majority of smaller enterprises will be increasingly
exposed to foreign competition produced by trade
liberalization and low-cost imports from China. Only those
companies that incorporate high-technology equipment will
survive. The sector will become more capital intensive, and
further lay-offs are foreseen.
BEYRLE