Economy, Business And Markets

Textile Industry Spins Tales of Woe

Textile Industry Spins Tales of WoeTextile Industry Spins Tales of Woe

The textile industry’s spinning wheels have long driven the developing countries’ economies forward, as the industry accounts for a significant share of the GDP and total exports of various emerging economies such as China, Vietnam, India and Bangladesh.

Despite a solid background dating back to the 1920s, Iran’s textile industry, and especially the apparel production sector, is currently not faring so well.

In the face of challenges such as rampant smuggling, slow industrialization and high production costs, the industry is barely able to meet a fraction of domestic demand, let alone make a mark in exports, Donya-e-Eqtesad reported.

According to experts, the global textile industry’s annual trade stands at $1.3 trillion, while Iran, which produces only $64 million worth of textiles per year, has a less than 0.2% share of the total.

According to Chairman of Tehran Wholesalers Textile Union Amir Qadiminejad, the main issue hindering the domestic textile industry is the relentless, rampant import of fabrics and garments that leave no breathing space for local manufacturers.

“The textile industry’s total annual trade value stands at $9 billion, 30% of which are domestically produced and the rest is imported, with legal imports accounting for only 7% of this figure,” he said.

The highest amount of imports originates from China, followed by Turkey, Taiwan and the Philippines.

Qadiminejad believes China and Turkey are currently the “number one enemy” of Iran’s textile industry, stressing that the first step toward helping the domestic industry is to exempt it from value-added tax.

“The best possible way to prevent a crisis and even more unemployment is to exempt the textile industry from value-added tax, as it would considerably reduce the financial pressure on manufacturers amid the current unfavorable economic conditions,” he said.

“Turkey’s success in the textile industry is due to its government’s financial support for manufacturers, including tax exemption.”

Domestic textile producers are also facing numerous difficulties in getting the much-needed financial backing.

“In order to get a loan of more than $16,000, banks require documents such as the purchase invoice to go through the process,” said Qadiminejad.

“The invoice must be first approved by the Ministry of Industries, Mining and Trade, which in turn requires paying a sum as taxes and duties. Coupled with the higher than 25% bank interest rate, it is clear that loans are not the answer to manufacturers’ financial issues.”

Alireza Haeri, former chairman of the Association of Iran Textile Industries, believes one of the issues hampering growth is that the textile industry, especially the apparel manufacturing sector, is not yet “completely industrialized” and most of the work is done in workshops.

Haeri noted that the lack of industrialization not only leads to low, uncompetitive output, but also means that the industry is powerless to compete with prominent foreign brands entering the country.

“The domestic textile industry is currently unable to meet domestic demand, while clothing exports account for about 60% of total exports of countries such as Bangladesh, India and Pakistan,” he said.

According to the former official, raising the import tariffs on foreign clothing and fabrics is not the solution to the industry’s woes, as “clothing import tariffs were up to 200% during the past two years, but the demand for foreign products is still considerably high.”

Haeri added that competition with foreign brands will not go away and that the only viable solution is to reduce production costs and improve quality.

“The textile industry is Iran’s most privatized industry,” said technical assistant of the association, Kazem Amid.

He referred to “disorganized” privatization of Iran’s textile factories as the main reason behind the bankruptcy of many prominent manufacturing facilities.

“Several large textile factories, which were operational before the 1979 Islamic Revolution, such as the Mazandaran Textile Factory that used to export clothing to the Soviet Union, were put out of business after they were handed over to investors with no experience in the industry,” he said.

Amid added that rapid changes in the management and workforce of these factories effectively halted production for years and they are no longer usable because these factories and their equipment are dilapidated.

“Relaunching these factories is currently highly uneconomical,” he said, adding that they should be shut down and new, modern plants must be set up with proper planning and management.

On Saturday, it was reported that the Association of Italian Textile Machinery Manufacturers is planning to accompany an Italian trade mission to Tehran late November.

“Now is the time to return to investing our energies on the Iranian market in order to recover lost time starting with the business mission in late November,” said ACIMIT President Raffaella Carabelli, referring to the prospective lifting of western sanctions against Iran following the July 14 nuclear agreement between the country and world powers, which will see the opening up of a market that has been under siege for years.