Affected by sluggish demand from Italy, Chamber representatives say companies are expected to cut jobs, and that their progress depends on the signing of contracts with new partners from Germany and France
TIRANA, Jan. 16 – Overwhelmingly dependant on demand from crisis-hit hit top trade partner Italy, the destination of 50 percent of total Albanian exports and 85 percent of garment and footwear products, the fa谮 industry expects 2013 to be more difficult in terms of manufacturing and employment.
Representatives of the National Chamber of Garment Producers expect demand for Albanian textile products to further deteriorate in 2013 as Italy remains in recession and problems with payments of bills in time deteriorate.
“We expect a very difficult year, which was noticed in the closing months of 2012. The companies have considerably reduced orders while others have temporarily suspended contracts,” says Lindita Legisi, the President of the National Chamber of Garment Producers.
Chamber representatives say companies are expected to cut jobs, and that their progress depends on the signing of contracts with new partners from Germany and France.
Data show some 470 textile companies operate in Albania currently employing around 60,000 people compared to 100,000 just before the onset of the global financial crisis. The garment and footwear sector, one of the top employers and exporters in the past few years, continues suffering crisis impacts as demand from top EU partners falls. INSTAT data show textile and footwear exports failed to recover, shrinking by 4 percent to 57 billion lek for the first eleven months of 2012. Italy ranks the top destination with 49 billion lek, around 86 percent of total exports, followed by Germany with 2.6 billion lek or 4.6 percent and Greece with 2.1 billion lek or 3.7 percent in January-November 2012.
The garment and footwear industry now accounts for 30 percent of total exports, having dropped to the second most important group of exports.
Minerals and fuels are the only products keeping crisis-hit Albanian exports growing at a moderate pace during this year. At a time when the garment and footwear industry, until recently the top exporting industry, and the ‘construction material and metals’ are suffering a shrink in external demand, a 30 percent increase in sales of “minerals, fuels and electricity” in the first eleven months of 2012 kept Albanian exports growing by a moderate 8 percent.
Under the new fiscal package approved by Parliament, the 20 percent VAT on imported machinery and equipment has been lifted only for investments of Lek 50 mln (Euro 351,000) or more. However, the garment and footwear industry, the country’s top exporter, which this year has been suffering crisis impacts from lower demand by crisis hit EU partners Italy and Greece, will have VAT on machinery imports removed for all kinds of purchases, Prime Minister Berisha has pledged.
Ways out
Gjergji Gjika, the head of the garment and footwear producers, known as the fa谮 industry, says it’s high time Albanian producers joined in a consortium, a practice also known in regional countries, in order to offer a full package of products to foreign partners.
“When grouped, Albanian companies can lobby big firms even expensive brands because they become more competitive not only in quality, speed, but also offer a full package of garments. Albanian companies must produce an autonomous product with a full cycle for European markets but even for the pan-Albanian market and beyond, competing with the advantages of operational cost, quick transportation to EU and the efficiency of integrated production, Gjika tells local media. Today, Albanian companies find it almost impossible to sign contracts with multinational quality enterprises which demand a full cycle of products from hats to shoes.
The creation of the Albanian brand and an aggressive marketing campaign are two of the solutions Gjika suggests to increase the competitiveness of Albanian products in EU markets.
The association’s executive says he has already started negotiations with fa谮 representatives to create a cluster which would benefit all companies. Something similar has also been done in neighbouring Macedonia where a logistics center has been established dealing with orders coming from foreign partners.
What producers mostly fear is a deterioration of situation in Italy which is the destination for the overwhelming majority for the majority 85 percent of Albanian garment and footwear exports. The poor demand could mostly hit small enterprises with little investments specialized in only one cycle of work. Only 10 percent of the companies are reported to be able to carry a full cycle of works.
Diversification of markets, considering that the majority 80 percent of these products go to Italy and the remaining share mainly to Germany and Greece is another concern for textile producers.
“We request the assistance of specialized institutions such as the Investment Promotion Agency (AIDA) or the Economy Ministry to influence on diversifying our market. We should target German and French markets more,” textile producers have earlier said.
INSTAT data show the fa谮 industry, producing garment and footwear products with imported raw material, continued remaining the top export performer in 2011 also thanks to Arab spring turmoil and the removal of customs fees. The garment and footwear exports rose by 15 percent to around 64 billion lek (Euro 450 million) in 2011. Starting from January 2013 garment and footwear producers will face extra labour costs as minimum monthly wages increase by 5 percent to 21,000 lek.
The garment and footwear industry quickly overcame the 2009 crisis when exports dropped by 8 percent because of lower demand from its traditional trading partners, especially neighboring Greece, which were severely affected by the global crisis. Several manufacturing factories in southern Albania exporting to Greece closed down or suspended work. INSTAT data show exports of this group grew by 13 percent year-on-year in 2010.
