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BackgroundSMEs in Turkey... SMEs in Turkey constitute by far the largest sector of the economy. The statistical information on Turkey ’s SME sector is relatively fragmentary and few time series are available. However, some data provide a snapshot of its relative place in the overall economy. According to the most recent estimates, the SME sector, including services, accounted in 2000 for: 99.8% of the total number of According to SIS data, on 1 January 2001 there were around 210,000 SMEs (1-250 workers) in the sector. Manufacturing sector SMEs are broken down across industries as follows: metallic goods: 26.1%, textiles, clothing and leather goods: 25.6%, wood and furniture: 24.3%, food and drink: 12.7%, paper: 3.9%, other sectors: 7.4%. The OECD report cites insufficient know-how and low level of technology and access to finance as the fundamental weaknesses of the sector. The backbone of the Turkish economy…The Turkish textile and clothing industry has been the backbone of the Turkish economy since the beginning of the 1980s. Trade liberalisation and export-led policies stimulated textile and clothing production and export, and besides low labour costs, skilled workforce, cheap raw materials (including home-grown cotton), and high flexibility of the mills assisted the sector’s substantial growth. The continents of Asia and Europe are connected to each other by Turkey and this brings advantages in terms of freight costs and delivery times compared to many competitors. In 2004, Turkey ’s textile and clothing exports reached an all-time high volume of $17.6 billion, which implied an increase of 16.4% on a year on year basis. However, the share of T/C sector in Turkey ’s overall exports declined to 28%, as shown in the following figure (according to the SIS). The performance of the T/C sector according to the ITKIB’s reports was satisfactory. The share of the EU25 in Turkey ’s clothing exports was 74%, with Germany (28%), England (15.5%) and France (7.4%) as the leading buyers. In textiles, the share of EU25 in Turkey ’s textile exports was 44.5%, with Italy (11.1%), Germany (6.6%) and England (4.6%) as the main importers.
The European Union is the major traditional market for Turkish textile and clothing sector with Turkey being the 2nd leading clothing supplier to the EU in 2003, with a market share of 11.6% and the 2nd leading supplier in textile of the EU with a current market share of 4.8%. Knitted clothing is the most important product group when we talk about Turkey ’s textile and clothing exports representing 51.4% of export value in clothing. However, with their 34% share, the importance of the woven clothing products is not to be underestimated as well. Global T/C Sector and Turkey …With the abolition of Agreement on Textile and Clothing, and after more than 4 decades of import quotas, the textile and clothing sector has become subject to the general rules of the General Agreement on Tariffs and Trade from 1 January, 2005. Table 1 Integration of Textile and Clothing to GATT
Source WTO
According to WTO stats world trade in textile and clothing reached USD 395 billion in 2003 as opposed to USD 96 billion in 1980 and USD 352 in 2000. As of end of 2003, following the EU China was the 2nd leading exporter of the world both in textiles and clothing. According to a report commissioned by the WTO Turkey’s share in the EU market will decrease from 13% to 12% in textiles, and from 9% to 6% in clothing. Turkey ’s decreasing share will mainly be covered by China and India. The same report predicts that China will command 50% of the US market in the post ATC era. The Turkish T/C sector is well aware of the increased competition, and has been formulating policies in coordination with relevant governmental authorities. The main principle of the strategies developed by the Under Secretariat of Foreign Trade is to diversify export markets according to the geographical location of Turkey and having regard to regional developments in World Trade. The UFT also develops polices with the participation of the T/C sector representatives under the “Exports Strategic Plan 2004 – 2006” in order to increase the competitiveness of the sector during the post MFA period. A need for paradigm shift …In this respect, the textile industry needs to change its strategy to remain competitive, and defend its market share or even expand it in the global markets. The main topic of this strategy should be to focus on developing fashion trends and internationally renowned trademarks. The industry will have to change its strategies from cheap labour costs and (low) quality segment to high quality segments, improve speed of delivery, excel on domestic branding – labels experience, flexibility, state-of-the-art technology and know-how. Usually, easier said than done, this new strategy calls for significant reprioritisation efforts and a change in the paradigms. The textile and clothing sector is characterised by a high percentage of SMEs, which are experiencing difficulties in raising debt capital. In addition, SMEs have limited financial resources to develop their own R&D. The family-dominated nature of the management, no matter how big or diversified the firms are, is another distinguishing feature of Turkish firms. Companies have a rather hierarchical structure, and personal trust is often more relied on than professionalism. SMEs will have to invest to obtain standards like ISO 9000, ISO 14000, CE-labelling, Buyer Compliance, and quality and environment qualifications to keep up with the competition and have to (re)promote and (re)position themselves in existing markets and new countries. A change in distribution and supply chain is also possible for SMEs. An important factor will be that the SMEs understand the compliance issues as demanded by the major international buying organisations covering health and safety and social responsibility requirements. Turkey has made little progress in transposing the acquis in the field of air quality, waste management, water quality, environment, industrial pollution and risk management. Companies extract largely uncontrolled important amounts of groundwater (textiles consumes 350.000 m³ water/day). Waste water treatment facilities are in place (75%) but due to cost reduction measures, these are often not operational (direct emission to surface water). The textile industry needs to focus more on environmental pollution, the efficiency (use of less water) and effectiveness (less pollution). The adoption of environmental standards and Eco-labelling are important factors to stay competitive. In order to maintain their competitive advantage, SMEs have to invest in environmental standards. Furthermore, 50% of machinery in the Turkish textile industry is older than 5 years and there is an urgent need for modernisation. Employees are not qualified enough to operate modern machinery and there is a similar urgent need for vocational training and more market research for SMEs to know their competitors and stay up-to-date with market developments. EIB funds may be used and also there is the potential to use the Leonardo Project run by the EC. What is a Cluster?When an industry has thus chosen a locality for itself, it is likely to stay there a long time; so great are the advantages which people following the same skilled trade get from near neighbourhood to one another. The mysteries of trade become no mysteries; but as it were in the air, and children learn many of them unconsciously. Alfred Marshall (Principles of Economics - Macmillan 1890) Clusters are therefore not new. Michael Porter’s definition brings this statement into a modern context. Cluster may be defined as: Geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions (for example, universities, standards agencies, and trade associations) in particular fields that compete but also co-operate [Michael Porter ‘Clusters and the new economics of competition’, Harvard Business Review, November/December 1998] An industry cluster is therefore a regional concentration of
competing,
complementary and interdependent firms that create wealth. These clusters
form “value chains” that are the fundamental units of competition in the
modern, globalise economies. Clusters in a region develop over time and stem
from the region’s economic foundations, its existing companies and local These programmes are all based on bringing about greater collaboration between firms in a regional industry cluster and between the clustering, firms and their regional economic foundations – regional universities and other regional skill producing and R&D undertaking bodies, regional business incubators and technology and science parks, regional seed capital financing arrangements, regional physical, transport, information and communication infrastructure, the region’s tax and regulatory environment and the quality of the region’s lifestyle. In recent times, the emphasis in these programmes has swung towards enhancing each region’s innovative capability. More information on Textile Clusters in Italy and UK can be found at following addresses: Educational Institutions, Universities, Schools, and in particular Fashion Institutes will be important in developing the capabilities and professionalism of companies in the Turkish Fashion and Textile Cluster. The cluster methodology is a medium to increase the international competitiveness of SMEs in the Textile and Clothing sector. 1 OECD, Small and Medium-Sized Enterprises In Turkey “Issues And Policies”, 2004 |
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enterprises, 76.7% of total employment, 38% of capital investment, 26.5% of value added, roughly 10% of exports and 5% of bank credit. 1 
