Georgia, a country located at the crossroads of Eastern Europe and Western Asia, boasts a rich history in the textile and apparel industry. Over the years, it has emerged as a hub for textile production, attracting international brands and investors. In this article, we will delve into the history, production, market analysis, and growth potential of Georgia’s textile and apparel sector.
History of Textile and Apparel in Georgia
The roots of Georgia’s textile and apparel industry date back to its days as a Soviet Republic. Even during that era, the country stood out as a developed region in textile and apparel manufacturing compared to its counterparts. This historical foundation laid the groundwork for the industry’s growth in subsequent years.
The textile products produced in Georgia encompass both natural and synthetic fibers. Georgia’s strong tradition in silk manufacturing and ample wool production opportunities position the country favorably in these sectors.
Apparel is an industry with concrete export potential for Georgia, building on four comparative advantages:
1. Low labor and energy costs
2. Qualification and skills of workers and management in the industry
3. Favorable Business Environment
4. Logistics and transport network
Production in Georgia: A Testament to Skilled Labor
One of the key factors contributing to the success of Georgia’s textile and apparel sector is its abundance of young and skilled labor. The efficiency of labor has a significant impact on the overall productivity and profits of any organization. Georgia’s labor force has been instrumental in fulfilling the market demand and driving continuous growth.
Georgia’s low cost of production, absence of minimum wage regulations, political stability, and strong legal framework create a favorable environment for textile investments. The World Bank’s Doing Business Survey has recognized the country for its ease of hiring and firing, making it an attractive destination for investors.
Government Support for the Georgian Textile Industry:
The Georgian government plays a pivotal role in supporting and nurturing the growth of the textile industry in the country. Recognizing the industry’s potential to contribute to economic development, the government has implemented various policies and initiatives to foster its expansion. These efforts encompass financial incentives, infrastructural development, and regulatory frameworks that encourage investment and innovation in the sector.
Cooperation between Türkiye and Georgia in the Textile Industry
Georgia’s reputation for producing high-quality textiles has attracted investments from neighboring countries, particularly Turkey. Turkish firms view Georgia as an export base that provides access to markets like the European Union, the Commonwealth of Independent States (CIS), and the United States. This collaboration has brought significant investments into Georgia’s textile industry.
Close ties between Georgia and Türkiye have fostered collaboration in various sectors, including textiles. Türkiye’s robust textile industry has provided valuable insights and support to its Georgian counterparts. This partnership has facilitated knowledge exchange, technology transfer, and joint ventures, strengthening the textile ecosystem in both nations.
Market Analysis: Textile Exports and Imports
Georgia benefits from its Generalized System of Preferences (GSP+) status with the European Union, allowing duty-free exports of apparel and textile products to the EU market. The country’s free trade agreements with CIS countries, including Russia and Turkey, further contribute to its textile exports. Moreover, Georgia’s strategic location makes it an ideal transit point for textile exports to various regions.
The Government of Georgia (GoG) has established advantageous trade agreements to ensure that producers in Georgia have preferential market access to key export markets, such as the EU and Turkey. Specifically, Georgia has free trade agreements with several countries representing about 900 million people’s market. This includes a FTA with Turkey and CIS countries, a DCFTA (Deep and Comprehensive Free Trade Agreement) with the EU, and GSP with the US, Norway, Switzerland, Canada, and Japan. Finally, Georgia has been a member of the WTO since 2000.
The primary market for sales by the subsidiaries of Turkish firms producing apparel in Georgia is Turkey, with all sales directed to the parent company for subsequent distribution. The key brands produced by these firms are Puma, Nike, Lotto, Zara, Marks & Spencer, Tommy Hilfiger, Erima, Adidas, Ted Baker, Howes & Curtis
The main three distribution networks that the Georgian producers are working with (aside of the big Turkish ones) are: Government, the German buyer Lebek and the French-Italian brand Moncler. In the first line orders for the GoG are military, police, security & uniforms. In terms of export, currently producing for Moncler and Lebek mainly. One produces for Zara, Waikiki and Gina Laura as well. Local designers produce for Georgian customers, but some are focused on export to CIS, EU and US markets.
Market Size and Capacity
Description of Georgia’s Apparel Market
During the fact-finding mission in Georgia, the consultants conducted over twenty stakeholder interviews in six days, including twelve apparel factories (ten Georgian factories and the two largest Turkish-owned factories). The primary respondents were Georgian entrepreneurs, who own and operate their production sites and want to extend their size of their facilities and workforce by around 750 employees in total. Two of these factories have finalize the planning stage for constructing new buildings, with a total workforce of 300.
Currently the apparel industry is comprised of approximately 200 enterprises, with the majority being micro- enterprises, which have a workforce between 5-10 employees each. In total the apparel industry employs about 6,536 people. The main players of the industry can be divided into two categories: Georgian producers and Turkish-owned producers. The seven largest companies are Georgian-based subsidiaries of Turkish companies. These Turkish apparel producers should be analysed independently of other Georgian companies, as their business model is significantly different from the rest of the industry (e.g., since they receive orders directly from, and are fully dependent on, their Turkish parent companies). In addition, these companies demonstrate minimum involvement with other players in the Georgian industry;
In terms of investments made, the largest is Adjara Textile, which has over 2,100 employees. Specifically, it employs over 1,100 employees in Batumi and another 1,000 employees in Kobuleti. During the interview with Adjara Textile’s representatives, they confirmed that they produce apparel for brands like Nike and Puma and belong to the Miltex Group with has over 20 factories throughout Turkey, which allows the receipt of order from international buyers in Istanbul and production in Georgia. Adjara Textile intends to open a third factory in Poti with an additional 1,500 employees; however, company representatives stated that they are having difficulties in hiring employees.
Geoteks, the Italian-Georgian joint venture, actually employs 180 employees and works exclusively for Moncler in Italy, and will have a total of 700 employees in 2017. Company representatives claimed that they have substantial opportunity to expand production within their current facility, where an additional 520 positions could be added. In addition to their current contracts, they are eager to receive additional orders from international brands.
Currently all apparel producers in Georgia are at the CMT (Cut, Make, Trim) stage. It is noteworthy, that two major buyers for the local producers use Outward-Processing Trade (OPT) practice (i.e., buyers export fabrics, or parts of garments, to be further processed in a third country, which are then re-imported and then sold as finished garments in an EU country).
Realizing Potential: Georgia’s Shift in Perception
Georgia’s status as a small country has evolved, and it is now recognized as a major trade target. The country’s openness to Foreign Direct Investment in textile and apparel, coupled with its adherence to technical standards set by the EU and other trading partners, has led to the sector’s overall growth.
Georgia’s journey in the textile and apparel industry is marked by historical significance, skilled labor, and strategic collaborations with international brands. The country’s remarkable progress in the sector showcases its potential for continued growth and success on the global stage.