Export development as a new challenge for the Ukrainian textile and clothing industry: Employers’ Group contribution

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The Ukrainian economy is facing major challenges. Industry is no exception. The textile and clothing industry is one of the main industrial sectors, employing around 90 000 people.

Ukrainian industry was highly dependent on sales in the local market and sales to Russia, but both these sales destinations have drastically diminished in both volume and value for various reasons. Only around 10% of the sector’s total output is exported, according to the Ukrainian Textile and Clothing Industry Association, UKRLEGPROM.

Textile and clothing companies in Ukraine need basic export development skills, as does the state on the macroeconomic policy level. There are no national tools available to help Ukrainian companies manage exports. Institutional bodies are also more reactive (for example, fighting cheap and, in most cases, illegal imports of clothing goods from China and other countries) than proactive (for example, training companies to develop their entrepreneurial skills or seek possible business clients abroad).

The EESC actively contributes to development processes in Ukraine, by participating in the work of the EU-Ukraine Civil Society Platform (CSP). This is one of the bodies set up under the association agreement between the EU and Ukraine. It enables civil society organisations on both sides to monitor the implementation process from their point of view, and helps them prepare their recommendations to the relevant authorities.

The EESC Employers Group brings together entrepreneurs and representatives of business associations working in the EU clothing and textile sector. In this regard, group I contributed to the first clothing and textile industry forum - LegPromExport - held in Kharkiv on 11 October 2018. Kharkiv is Ukraine’s second largest city, with a population of around 1.5 million. Its proximity to the conflict zone means that the economic slowdown has had a major impact on it. Kharkiv is also the textile capital of Ukraine, with a large part of the sector based in the city and its surroundings.

At the forum, Madi Sharma and Linas Lasiauskas, representing the EESC's Group I, shared their expertise with Ukrainian companies on how to develop national and company export policies and how to develop entrepreneurship in the fast-changing fashion industry. The EESC presented the EU business approach and an overview of the EU-28 textile and clothing sector, along with insights from different EU Member States into developing exports in this sector.

The EU textile and clothing sector is a key European manufacturing sector, made up of 177 700 companies, of which 99% are SMEs, producing textiles and clothing primarily in Europe and integrated into the global value chains. It is also the world’s second largest exporter of textile and clothing products, generating an EUR 171 billion turnover and employing 1.7 million people. The sector accounts for a 3% share of value added and a 6% share of employment in total manufacturing in the EU (Source: The European Clothing and Textile Confederation EURATEX).

The EU-28 was Ukraine’s main trading partner in 2017. In that year, its total share in Ukraine’s world trade was 41.6% (EUR 33 276 million). Ukraine was the EU-28’s 23rd largest import partner (0.9% of total imports outside the EU) and 22nd largest export partner (1.0% of total exports outside the EU).

Clothing product imports to the EU-28 from Ukraine amounted to EUR 349 million in 2017. They made up 2.1% of total EU-28 clothing imports and increased by 8.8% in 2017 compared to 2016. Textiles imports to the EU-28 from Ukraine amounted to EUR 91 million in 2017. They made up 0.5% of total EU-28 clothing imports and increased by 18.0 % in 2017 compared to 2016.

Clothing exports from the EU-28 from Ukraine amounted to EUR 421 million in 2017. They made up 2.1% of total EU-28 clothing exports and increased by 15.7 % in 2017 compared to 2016. Textiles exports reached EUR 552 million in 2017 and increased by 14.6 % compared to 2016. (Source:  IMF, European Commission, Directorate-General for Trade, Eurostat).

However, most Ukrainian companies still do not export ready-made products, but only services: clothing companies are working on the cut, make, trim (CMT) model with their EU-28 partners. CMT is a cooperation method in which all manual labour processes are outsourced, with only procurement, design and logistics done by the client. According to Eurostat, imports from the EU of pre-made woven fabrics to Ukraine increased significantly in 2017:  +7.8% in value and +10.3% in volume.

 

Linas Lasiauskas

Member of the Employers Group of the European Economic and Social Committee (EESC)