Identifier
Created
Classification
Origin
06TBILISI2668
2006-10-04 12:50:00
UNCLASSIFIED
Embassy Tbilisi
Cable title:  

GEORGIA TEXTILES AND APPAREL SECTOR:UPDATED

Tags:  EIND ETRD GG 
pdf how-to read a cable
VZCZCXRO9462
RR RUEHAST
DE RUEHSI #2668/01 2771250
ZNR UUUUU ZZH
R 041250Z OCT 06
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC 4258
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
UNCLAS SECTION 01 OF 02 TBILISI 002668 

SIPDIS

SIPDIS

STATE FOR EUR/CARC AND EB/TPP/ABT:TLERSTEN
COMMERCE FOR ITA/OTEXA:MDANDREA
STATE PASS USTR FOR ABIOLA HEYLIGER

E.O. 12958: N/A
TAGS: EIND ETRD GG
SUBJECT: GEORGIA TEXTILES AND APPAREL SECTOR:UPDATED
STATISTICS AND PROJECTION OF FUTURE COMPETITIVENESS

REF: A. STATE 138090


B. TBILISI 2128

TBILISI 00002668 001.3 OF 002


UNCLAS SECTION 01 OF 02 TBILISI 002668

SIPDIS

SIPDIS

STATE FOR EUR/CARC AND EB/TPP/ABT:TLERSTEN
COMMERCE FOR ITA/OTEXA:MDANDREA
STATE PASS USTR FOR ABIOLA HEYLIGER

E.O. 12958: N/A
TAGS: EIND ETRD GG
SUBJECT: GEORGIA TEXTILES AND APPAREL SECTOR:UPDATED
STATISTICS AND PROJECTION OF FUTURE COMPETITIVENESS

REF: A. STATE 138090


B. TBILISI 2128

TBILISI 00002668 001.3 OF 002



1. Pursuant to Ref A Embassy Tbilisi provides the following
statistics and information regarding the textile sector in
Georgia.


2. Statistics (2005 data):

Total industrial production (USD thousands): 1,158,267
Total textiles and apparel production (USD thousands): 7,745
Textile/apparel share of Georgian imports: 2.6%
Textile apparel share of Georgian exports: 1.0%
Exports in textiles and apparel to the United States
(USD thousands): 74 (Georgian Statistics Office figure)
(USD thousands): 550 (U.S. Census figure)
Total industrial employment, including mining 83,497 (2006:
82598)
Total textiles and total apparel employment 2,024 (2006: 2420)


3. Post interviewed Georgian Ministry of Trade officials and
Davit Jinjaradze, Financial Director of Georgia's largest
textile manufacturer, Batumitex, to obtain the following
information.


4. Q. Are host country producers receiving lower prices due
to heightened international competition? Have manufacturers
received more, less, or the same number of orders as in years
past? Have foreign investors, particularly Asian investors,
closed factories or otherwise pulled out of local production?



A. Textile production in Georgia, like manufacturing of all
products, was devastated by the economic dislocation caused
by the dissolution of the Soviet Union in 1991. The Georgian
Department of Statistics lists 129 producers of textiles.
Many of these may not be functioning or do not export from
Georgia. One company, Batumitex, was established in 2001 by
Greenoak, Ltd. the Danish-owned port operator in Batumi.
Greenoak has since sold part of the business to Low Profile,
a Turkish company. Batumitex sews 100,000 garments a month,
destined for sale in Marks and Spencer stores in Europe. As
everywhere, prices of textiles and apparel produced in
Georgia are probably lower than they would otherwise be
because of competition from China and other countries of the
Far East. However, prospects for the industry in Georgia

seem to be improving because of political and economic
changes in Georgia resulting in lower taxes and tariffs, more
reliable availability of electricity and other utilities, and
increasing wages in Turkey. According to Batumitex and the
Turkish Consul in Batumi, two new textile factories employing
1000 people each are planned for Adjara, financed by Turkish
investment (Ref B). We are not aware of any Asian investors
in textile production, and have not seen any reports that
Asian investors have closed factories or pulled out of the
Georgian market. Batumitex and other textile producers are
able to import their inputs duty free so long as they are
re-exported.


5. Q. Have U.S. and EU restrictions on certain exports of
textiles and apparel from China, effective through 2008,
affected export prospects for host country manufacturers?


A. Exports of textiles from Georgia to the United States are
negligible, so it is difficult to gauge the effect of
restrictions on Chinese exports. More important are EU
limits on exports from Turkey. Turkish investors in Batumi
are seeking to take advantage of unused EU quotas for
Georgian textile exports.


6. Q. Has the host government implemented, or is it
considering implementing, safeguards or other measures to
reduce growth of imports of Chinese textile and apparel
products into the host country?


A. The GOG is not contemplating safeguards or other measures
to reduce growth of imports of Chinese textile and apparel
products. In fact, duties on imports of textiles, along with
many other manufactured products, were reduced by a new
customs law that took effect on September 1, 2006. Textile
tariffs were reduced from 12% to 5%.


7. Q. Has increased global competition affected local labor
conditions by causing employers to reduce wages, seek
flexibility from government required minimum wages, or
adversely affected union organizing?

TBILISI 00002668 002.3 OF 002




A. So far as is known, increased global competition has not
affected local labor conditions by causing Georgian employers
to reduce wages. The monthly wage in the private sector in
Georgia has slowly increased since 2000, but at the end of
2005 it was only about $100, which according to our research
is similar to the average wage reported in China. Batumitex
pays its workers about $150 per month. A Tbilisi producer of
socks for the domestic market told us he pays his workers
about $235 per month. There is no minimum wage in Georgia
for non-government workers from which employers might seek
flexibility. Unions are not strong anywhere in Georgia.


8. Q. Has the host government or private industry taken
action to increase the country's competitiveness, such as
improving infrastructure, reducing bureaucratic requirements,
developing the textiles (fabric production) industry, moving
to higher value-added goods, or identifying niche markets?
Does post think that the host government or private
industry's strategy will be successful?


A. The GoG has taken dramatic steps to improve the ease of
doing business generally and improve the competitiveness of
Georgian industry. The World Bank has named Georgia the top
reformer in the world in 2007. The government is working to
improve roads, is opening a new airport in Batumi, has
reduced bureaucratic requirements and licensing, reduced
taxes, enacted extremely liberal laws regulating employment,
attacked corruption among customs and immigration officials
at the borders, and intends to completely eliminate import
duties by 2008. None of this has been done specifically to
benefit textile producers, but it can be expected to increase
the attractiveness of Georgia as a destination for such
investment.


9. Q. If your host government is a partner in a free trade
agreement or a beneficiary of a preference program such as
AGOA, CBTPA, CAFTA or ATPDEA, will this be sufficient for the
country to remain competitive?


A. Georgia has a free trade relationship with the countries
of the former Soviet Union. So far, Russia has not imposed
restrictions on imports of Georgian industrial goods and
textiles and apparel, as it has on agricultural products,
wine and mineral waters, but tensions with Russia are always
a drag on economic development in Georgia. Georgia has not
yet been able to capitalize on the free trade relationship to
benefit its textile industry, but the potential exists.
Greater opportunities than those in Russia and the CIS
probably lie in the European Union market. Factories located
in Georgia have an advantage over Chinese competitors in that
shipping times to the European market are less and the lead
time for production of seasonal styles is therefore reduced.
According to Batumitex, a truck can complete a trip from
Batumi to Milan or Frankfurt in 6-8 days. and New York is 25
days away by ship. Georgia is one of only two CIS countries
and 15 countries in the world that have GSP access to the
European Union market, under which textiles are not duty free
but receive a reduced tariff. The EU has been reluctant to
enter into negotiations for free trade with Georgia, but
since the suspension of the Doha round has begun to express
more interest in such an idea.


10. In sum, Georgia has some potential, for the most part
unrealized, for attracting textile manufacturing. Georgia's
marketing efforts are fairly rudimentary at this point, but
the favorable publicity generated by the World Bank's ease of
doing business survey may prompt some manufacturers to take a
second look at the idea of locating factories in Georgia,
despite increasing competition from China.
TEFFT