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An outlook for the Russian textile industry at ICAC's conference

17
Jun '10
An international conference under the theme: “Textile Industry and National Strategies for Sustaining Global Competitiveness” was held on May 18, 2010 in Moscow, Russia. The Ministry of Economic Development of the Russian Federation, the Secretariat of the ICAC and the Russian Cotton Association organized the conference. Representatives of the Ministry of Industry and Trade, Russian Union of Textile and Light Industry Businessmen, and representatives of the textile and cotton industries from Russia, Central Asia and other countries participated in the conference.

The conference focused on strategies for sustaining competitiveness of the cotton textile and garment industries, the role of government support to the industry and an outlook for the Russian textile industry.

According to participants, the biggest constraint faced by Russian mills is the tight credit needed to modernize equipment. Textile companies often do not have enough collateral to qualify for commercial loans to update machinery. Textile companies would like government quarantines to facilitate credit for purposes of modernization in order to improve competitiveness. Russian mills would also like government support for training of textile workers, as qualified labor becomes scarce and mills do not have enough facilities and resources to undertake training programs.

Factors that are negatively affecting the Russian textile industry include trade protection, duties on exports, illegal imports, unfair competition by importers because of smuggling and false documentation in order to evade tariffs. Yarn imports from Turkmenistan and Uzbekistan are rising, and both governments are supporting their textile industries with subsidized cotton and new equipment. Cotton yarn from Turkmenistan sells in Russia at prices lower than the cost of cotton delivered to Russian mills.

An estimated 30% of net domestic textile consumption is produced in Russia and 70% is imported, and an estimated 45% of imported textiles and apparel are smuggled. Total Russian textile market value is estimated at $7-$10 billion. Most Russian mills are producing for domestic markets, and the share of military orders, including uniforms and heavy canvas, remains high. Military procurement is expected to sustain domestic production in the future. However, military purchases are not stable affecting mills' use of capacities. Exports of textiles from Russia were expanding into Europe during the 2000s, aided by a weaker ruble, but are declining currently because of contracting textile demand in Europe. There are still substantial cut & sew operations in Russia, and textile companies from Europe are looking for opportunities for joint ventures in the production and retail sale of textiles and apparel in Russia.

Russian imports of cotton originate mostly from Uzbekistan, Tajikistan and Turkmenistan. Mill use in Russia declined in 2009 and was estimated at 190,000 tons, down from 240,000 tons in 2008. Uzbekistan accounted for only 23% of cotton imports in 2009 and Kazakhstan is now the largest supplier to Russia. The decline in the ruble may reduce imports of yarn and could lead to higher cotton mill use in the future.


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