The textile industry has been experiencing severe problems in recent years, with major textile factories either shutting down or incurring huge losses.
A majority of textile factories are currently operating at only about 50% of their capacities, according to the industry experts, who point out that the sector lacks support from the government.
In an interview with Eghtesad News, head of Iran Textile Exporters and Manufacturers Association, Saeed Hosseinzadeh, reviewed the underlying causes of the prevailing downswing in the textile sector.
“The sector started to plunge into recession about two years ago,” says the official, adding that sizable damage has been inflicted on textile factories, particularly those with higher costs and a larger number of employees.
Shortage of Liquidity
Late in June, a board member at Iran’s Association of Textile Industries, Shervin Badamchi, said a number of yarn and textile manufacturing units were shutting production during the month of Ramadan–the Muslim holy month of fasting occurring this year from June 18 to July 17–due to shortage of liquidity.
“It is unclear whether these units will reopen again as shortage of liquidity could push many factories to bankruptcy,” said the official.
According to Hosseinzadeh, over the past years, business owners attempting to draw monetary support from banks have faced closed doors, as contractionary policies adopted by banks prevented them from providing factories with adequate funds.
The Biggest Threat
Hosseinzadeh refereed to smuggling as the “biggest threat to the domestic textile industry,” noting that the excessive supply of foreign clothing in the Iranian market has caused a shift in consumers’ inclination toward foreign products.
This is while deputy minister of industries, mining and trade, Mojtaba Khosrotaj, had said earlier in May that some contraband clothing do not even meet the quality standards set by the government.
Based on data provided by the ministry, each year about $2 billion worth of apparel are smuggled into the country.
Hosseinzadeh pointed out that while the government has failed to adopt policies to combat smuggling effectively, certain governmental regulations even work in favor of contraband apparel and against domestic products.
“For instance,” he said, “while the government regulates domestic apparel market and sets a maximum cap on prices, no such restrictions are imposed on the prices of foreign products. Therefore, retailers are more inclined to sell imported clothes.”
The expert warned that the sector could face a shortage of skilled workers in the coming years, as more and more manufacturers are forced to either stop production or turn to imports for more profitability. This would result in laying off experienced workers and failing to train new workforce.
