Identifier
Created
Classification
Origin
07SOFIA1184
2007-10-03 06:35:00
UNCLASSIFIED
Embassy Sofia
Cable title:  

BULGARIAN TEXTILES AND APPAREL INDUSTRY UPDATE

Tags:  ECON ETRD KTEX BU 
pdf how-to read a cable
VZCZCXRO4965
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSF #1184/01 2760635
ZNR UUUUU ZZH
R 030635Z OCT 07
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC 4365
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
UNCLAS SECTION 01 OF 02 SOFIA 001184 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD KTEX BU
SUBJECT: BULGARIAN TEXTILES AND APPAREL INDUSTRY UPDATE

REF: SECSTATE 114799

UNCLAS SECTION 01 OF 02 SOFIA 001184

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD KTEX BU
SUBJECT: BULGARIAN TEXTILES AND APPAREL INDUSTRY UPDATE

REF: SECSTATE 114799


1. The following is an overview of the Bulgarian textiles and
apparel industry, keyed to items listed in reftel.
This information was gathered from the Bulgarian Association of
Apparel and Textile Producers and Exporters, the National Statistics
Institute, the Ministry of Economy and Energy (MoEE),the Bulgarian
National Bank, and the Agency for Economic Analyses and Forecasts.


2. REQUIRED STATISTICS:

Total industrial production in USD: Total industrial production grew
8.3 percent year-on-year in 2006. Industrial gross value added (GVA)
in 2006 was estimated at 7.4 Billion leva or USD 4.7 billion.
Industrial gross value added growth in Q2/2007 was 8.8 percent over
Q2/2006. (In 2006, one lev equaled 1.56 USD).

Total textiles and apparel production:
Combined textiles and apparel production continued to grow in 2006.
GVA of the industry in 2006 was 1.1 billion leva (USD 705 Million).
Textiles and apparel gross value added growth in Q2/2007 was 6.8
percent year-on-year (over Q2/2006.)

Textiles/Apparel share of host country's imports and exports: Total
imports of textile and apparel in Bulgaria grew 7.5 percent
year-on-year, reaching 1.5 billion euro, or USD 1.8 Billion, in 2006.
Textiles and Apparel imports contributed 8.7 percent to the total
volume of imports in 2006. The industry continued to be
export-oriented in 2006. The total textiles and apparel exports grew
7 percent year-on-year in 2006, reaching 1.8 billion euro, or USD 2.3
billion. Industry exports made up 16.5 percent of total exports in

2006. Despite last year's growth, textile and apparel exports
continued to decrease as a share of the total economy over the last
three years (17.9 percent in 2005 and 21.1 percent in 2004).
Germany, Greece, Italy, and France were the top export markets in

2006. Outside the EU, Turkey remains a major market for Bulgarian
textile and apparel production. The Bulgarian textiles and apparel
industry had a positive trade balance of nearly USD 500 million in

2006.

Exports in textiles and apparel to the United States: Exports of
textile and apparel to the United States decreased to USD 50 million
in 2006 (from USD 63 million in 2005). Exports of ready-made apparel
-- Bulgaria's major apparel export to the United States -- decreased

28 percent to USD 26.5 million in 2006.

Total manufacturing employment: Total manufacturing employment
(processing industry) in 2006 was 670,972 people.

Total apparel and textiles employment: Total apparel and textiles
employment in 2006 was 167,880 people, which was 0.7 percent less
than in 2005. However, the National Statistics Institute is likely
to correct this data, reducing the number of employed. Due to the
lack of skilled workers, employment in the industry will continue to
decline, according to the Bulgarian Association of Apparel and
Textiles Producers and Exporters (BAATPE). Currently, there is an
outflow of textiles and apparel workers from Bulgaria, mainly to
Romania, where higher wages are being paid. Some local companies
have also started to move to lower labor cost regions.

Additional Data
--------------


3. The average annual wage in the industry in 2006 was USD 1,970, up
11 percent year-on-year, according to BAATPE. This was the highest
growth in the last 7 years. Actual wages were probably somewhat
higher due to the practice of paying additional wages in cash to
avoid taxes. The industry has seen relatively light investment
activity, with only USD 20 million Foreign Direct Investment (FDI)
recorded on its balance sheet in 2006, according to central bank
data. Due to lack of new investment and technology, local industry
is unable to add much value to its production. Nevertheless, new
investments are increasing overall production capacity and labor
productivity, which is bringing up average salaries in the industry.
MoEE had no data on any outflow of foreign investment in the industry
over the past year.


4. Relatively stable domestic demand is pushing up sales prices.
The sales price of apparel rose 5.5 percent year-on-year in June 2007
(as part of the Consumer Price Index),while the sales price of
textiles grew only 1.7 percent. Growth in consumer prices of apparel
was 4.1 percent year-on-year (December 2006 over December 2005).
Growth in consumer prices of textiles was .4 percent year-on-year
(December 2006 over December 2005.) Sales volumes also continued to
rise as a result of expanding exports to the EU. The sales index for
textiles grew 252.3 (2000=100),while the sales of apparel index
stood at 215.9 in 2006. Compared with the index in December 2006,
which stood at 321.6, the sales-of-textiles index in June 2007 has
decreased, while the sales-of-apparel index has increased (193.8 in
December 2006). The construction of large selling centers (malls) in
bigger cities is expected to push domestic demand for textiles and
apparel even higher


SOFIA 00001184 002 OF 002



5. There are approximately 2,000, predominantly small and
medium-sized companies in the industry. Facing global competition,
these companies retain their competitive edge by delivering
short-term, quick-response orders to their outside customers,
offering high-quality production at competitive prices. The
proximity to key suppliers of quality textile material (Italy and
Turkey) is another advantage for the Bulgarian textiles and apparel
industry. In addition, customs delays and duties on intra-EU trade
were eliminated after Bulgaria's accession to the EU on January 1,

2007.


6. In June 2005, the EU and China signed a Memorandum of
Understanding which limits specific categories -- considered most
sensitive for the EU industry -- of Chinese textiles and apparel
exports to the EU by the end of 2007. In 2006, in five of these ten
categories there was a decline of Bulgarian exports to the EU market,
including sweaters, male trousers, blouses, dresses, and kitchen
tablecloths. The reported reduction ranged from between 10 and 28
percent, according to MoEE data.


7. Evidenced by latest trade figures, U.S. restrictions on Chinese
exports, effective through 2008, have produced no positive effect on
Bulgaria's total exports to the United States. Exports to the U.S.
market continued to decrease in 2006.


8. Bulgaria adheres to international commitments and effective use
of liberal trade mechanisms. The GOB supports EU initiatives aimed
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 and issues related to rules of origin and eco-labeling.


9. The textiles and apparel industry still plays a significant role
in the Bulgarian economy. For the past 6 years it has been one of
the most competitive industries in Bulgarian industry and one of the
major employers in the country. Bulgaria's EU membership increases
the prospects of local textiles and apparel producers to maintain
their competitive position in the EU internal market. At the same
time, smaller enterprises are increasingly exposed to foreign
competition produced by trade liberalization and low-cost imports
from China. Local industry will retain its competitive edge only if
it can attract new investment and introduce new technology.

BEYRLE