On January 1st, 2005, Romania celebrates 10 years since quotas on the textile and clothing global trade were lifted. Maybe this formula in the WTO terminology does not tell you very much today. To put it in other words – 10 years since price competitive clothing from China were free to flood the EU market, the first and actually the only market of the Romanian textiles industry.
At that time, there were big questions regarding what would happen with the flagship of our exports, since Romania was seen as Europe’s tailor shop. As tailors, we just manufactured items at the client’s request, with the client’s material. This was our label – we handled cheap work, we were labor exporters. Mainly, this was all about the so-called lohn production, or technically speaking – outward processing trade.
So there seemed to be a real ‘’threat’’ – what if the major European fashion houses will take the Chinese way to find tailors that are even cheaper than Romanians, exporting to them the raw materials, patterns, design and then re-importing the processed made-up garments?
Still at the beginning
A headline at that time was rather optimistic: ‘’Is this the beginning of the end of the lohn production and the beginning of a production under own label?’’. Good news: after ten years, the lohn production is not dead. Actually, we started being good in lohn even in the automotive sector, which has become the new flagship of our exports (the value of textile and garment exports in 2013 is almost the level from 2004, but the share is drastically reduced, since the total exports are more than double today compared to 10 years ago).
However, the bad news is we are still at the beginning of an ‘’own label’’ production. The website of FEPAIUS (the Romanian Federation of the Employers from Textiles & Leathers) is still inviting us to ‘’buy a 100% Romanian product and you preserve one job in Romania’’. This could be a good slogan if we were able to know what exactly a 100% Romanian product is. Take a product from, let us say ZARA, or any other big fashion house: this product could be 100% made in Romania, not made by Romania – but, frankly speaking, this is not the client’s problem.
From the over 100 members, FEPAIUS could not bring more than 30 participants for neither of the European fashion fairs in 2014. So, we could say that 30% of the production has a Romanian label and is ‘’more Romanian’’ (in many cases, the fibers and other raw materials have to be imported, in order to maintain a west-style quality.
Regarding leather, things are even more dramatic: ‘’skin of animals slaughtered in Romania is exported and then re-imported as tanning material, at much higher prices’’, according to a study about the reindustrialization process published by the Ministry of Economy.
A sector with a poor fiber
Nevertheless, if we look at the over 7,000 companies in the textile & leather industry, statistics show a weak sector, with a poor ‘’fiber’’. At the European level, according to Eurostat, 2010 data, we are behind the Italians regarding how many people are working to make clothing (155,500, or almost 15% from the Europeans involved in this field) and leather items (57,800, or 14% in EU-27). Regarding textile production, we are no longer leaders, but are actually barely at the same level with small countries, like the Czech Republic (28,000), but well behind Poland, not to mention Italy or Germany.
In fact, we can call ourselves ‘’leaders’’ only regarding … the lowest value added per employee, which is almost 4 times less then EU-27 average. It is interesting to note that, from an investor’s point of view, the added value per EUR 1 labor cost is greater in a Romanian clothing factory (EUR 1.41) than in a French factory (EUR 1.17), but significantly lower than in the UK (EUR 1.97) or in Belgium (EUR 1.78).
Anyway, after the 2005 shock, in 2007-2008 (according to the above mentioned official study), there was a significant increase in the Romanian exports based on the original products / labels, but, after 2010, when the meltdown became the new normal, the industry has taken back its old habit – the lohn is strong again.
There are few heroes which resist ‘’temptation’’. Romanians knew about strong brands like Secuiana, specialized in men trousers (a brand born before 1990) or Jolidon for lingerie (built up after 1990, in Cluj-Napoca, by a local entrepreneur). Jolidon is quite an active player on the international market, and now Secuiana is also discovering the advantages of export under own label.
In the first nine months of 2014, Secuiana reached a turnover of about EUR 5 milion, due to the increase in over 8% of exports. The company expects to end the year with a total turnover of approximately EUR 6.4 million, up 5% from last year.
“Developments in the first three quarters were due to exports, which increased by 8%, while the domestic sales decreased compared to last year”, declared Dobra Laszlo, General Manager Secuiana for ZF Transilvania.
At the same time, in 2013, Jolidon exported its original products to over 50 markets worldwide and, for the first time, the share of exports surpassed the domestic market share regarding the total turnover. Moreover, the Romanian producer has recently entered the markets in Japan and India.