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Turkish Industry on Edge as Elections Loom

With Turkey’s presidential elections less than a month away, business owners and manufacturers that have been hoping for an end to spiraling inflation, an energy shortage, the lira’s alarming depreciation and a host of other economic issues, are feeling anxiety.

Still reeling in the aftermath of two earthquakes that rocked the country and neighboring Syria in early February, Turkey’s textile industry has been focused on restoring production and getting back on track. 

The election—scheduled for May 14—comes at a critical time. Economic decline has become dangerously precipitous for the country, faced with geopolitical and regional challenges and an apparel and textile industry focused on nearshoring that has been going through a transformation.  

According to analysts, president Recep Tayyip Erdoğan’s populist policies to keep interest rates low have had the worst possible impact on inflation, which skyrocketed more than 85 percent last year, the highest in more than two decades. Meanwhile, the lira slumped to a mere tenth of its previous value against the U.S. dollar. After a 20-year stint, Erdoğan is determined to keep his position in power, and promises that inflation will come down to less than 25 percent by the end of 2023 if he is re-elected. Meanwhile, opposition candidate Kemal Kilicdaroglu has been building hope with promises of reversing present policies, and restoring economic equilibrium.

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Despite the many hardships, Turkey has kept its spot among the top 10 apparel and textile exporters in the world, according to statistical data. The industry accounts for 6.7 percent of the gross domestic product, and 12.8 percent of total exportsemploying more than 1.2 million people.  

In the past two years, the industry has seen growth despite the pandemic, as nearshoring gained steam. In 2022, Turkey exported $32.5 billion of textile and apparel. While most other countries exporting apparel to Europe showed a decline in the 2020 to 2022 period, Turkey increased by 16.6 percent.

More than 60 percent of its apparel exports were to the European Union in 2022, and another 10 percent to other European countries.  

However, the decline seen in the past six months has been a cause for concern, as export numbers have been showing the fallout. Apparel exports from Turkey slid from $1.92 billion in September 2022 to $1.58 billion in February 2023.

Manufacturers in Istanbul told Sourcing Journal that there is a feeling of paralysis until the election results are known. Facing the tough measures taken to control inflation and accommodating the 100 percent wage increase announced by the government has been a challenge. There have also been whispers about the possibility of another increase before the election, as labor and workers have been struggling to cope, unable to keep pace with the level of inflation. 

The severe devastation in the wake of the double earthquake also continues to impact on the industry. 

More than 50,000 people lost their lives, and the cities that were affected in Southeastern Turkey are home to a large part of the local textile industry. 

More than 33 percent of textile exports and approximately 2.5 percent of apparel exports comes from this region, according to industry estimates. 

While the World Bank estimated the cost of rebuilding to be $34.2 billion, an appraisal by other economists projected that it would cost three times as much. 

The textile and apparel industry has put a renewed focus on working together, and has leaned on global partners in terms of donating money to help, as well as to allow extra time for product delivery. 

Mehmet Kaya, board member of the İstanbul Apparel Exporters Association, known as IHKIB, is clear that the needs of the industry should be understood better. “We’re not looking for charity,” he told Sourcing Journal. “We really need help in building up and preparing better for the future. The investment from global brands and retailers should be made from that perspective.”

Another way of helping would be to give Turkey some special advantages, he said. “After the flood disaster last year, the US started the ‘preferential import’ application with Pakistan. We should also take initiatives in the US for a similar practice for at least two years,” Kaya said. 

Getting workers back to the region as it is rebuilt has become a focus.

“Many members of the families moved to the Western part of Turkey….We want them to come back to their own cities, and to encourage this immigration back. That’s why TGSD started a pilot project in Adiyaman, for 315 containers—to make a container city and accommodations for those who work in the industrial zone to help them return to their native cities,” Sanem Dikmen, co-chair, Turkish Clothing Manufacturers’ Association (TGSD) told Sourcing Journal.

Local manufacturers all came together following the earthquake. On Feb. 27 they brought in buyers and global company representatives to have discussions and share information on the situation.

It wasn’t a one-time initiative.

In late March, a follow-up meeting brought together the industry, as well as  sourcing buyers and representatives from many of the top brands, including Inditex, H&M, Tommy Hilfiger, Calvin Klein, Superdry, Tesco, Ralph Lauren, Tom Tailor, Varner and Puma, among others.

“We can see the questions and suggestions directed to us at the meeting as a sign of a return to normalcyBrands that purchase ready-made clothing for a total of $10 billion annually from Turkey want to continue with us after the earthquake. However, our competitiveness has been weakened as we have difficulty in keeping prices due to high costs,” said Ramazan Kaya, president, TGSD.

“After the earthquake, our textile and apparel industries showed great solidarity. We expect the same solidarity and support from our business partners. We will recover production together,” said Ahmet Öksüz, President, İTHİB. “Currently, the production wheels are back at 50 percent. However, in order for us to fully return to the past, our greatest need is to protect employment in earthquake zones. In this context, in order to start the reverse migration movement, the urgent shelter needs of our employees in the region should be met and they should be supported with additional incentives,” he added.

However, it is clear that what transpires on the government level will have a huge effect, and the upcoming elections hold the key.

“There are the elections and the people and don’t know what’s going to happen next and are trying to keep the situation stable and take actions accordingly, instead of going up and down,” said a buyer representative at the meeting, who asked not to be named. “There are some question marks for the future, but after the election there will be clarity,” she said. 

Having attended both the meetings with the manufacturers and buyers, she said that while the discussions focused on the effects of the earthquake, exports to Europe and ways to streamline and manage production, “it was much more than that.” It was about looking at the longer-term ahead and the possible solutions.

“It’s an Important time for Turkey as a country, and for the industry. Turkish people are hard working, the proximity to Europe is very important, and both sides are working together to get past the struggle,” she said.