Lithuania makers face increasing competition
Lithuania is one of the leading economies of the newly acceded EU member countries - with a textile and apparel industry to match. The sector is the country's second largest manufacturing industry and the top employer, and its geographical location, relatively low paid and well-trained workforce are attracting EU customers including Chargeurs, H&M, Zara, Laura Ashley and Next. By Alex Gray.
Since the late 1990s Lithuanian exports have been growing at some 7.4 per cent annually. Low and stable inflation was one of the main success stories of the country's economic policy between 1997 and 2002 - falling from 8.8 per cent in 1997 to some 1.4 per cent in 2002.
Although Lithuania only became a member of the EC in May of this year, the economy has been operating under market conditions for the past decade.
The Lithuanian textile and clothing industry is the second largest manufacturing industry in the country and is the largest in terms of numbers employed. It is recognised as one of its most developed manufacturing industries and successfully competes in EU markets.
Textile and clothing producers export the majority of their production (around 80 per cent) with the remaining 20 per cent being sold in the home market. In 2003, though, the domestic market grew by a further 15 per cent.
|Structure of textile and apparel industry sales, € million|
|Manufacture of textiles|
|Total sales of production||Domestic sales %||18.9||16||15.1||18.7|
|Manufacture of wearing apparel; dressing & dyeing of fur|
|Total sales of production||Domestic sales %||6.8||9.8||8.3||18.9|
|Source: Lithuanian Department of Statistics 2004|
Based on 2004 data the value of exported textile and apparel production amounted to 19.5 per cent of all Lithuania's exports . The main textile and apparel export markets are Germany, Denmark and the UK.
In 2003 domestic sources of investment in both textiles and apparel were 46 per cent higher than investment rates in 1995. €29.7 million was allocated for capital investment, from domestic sources in 2003.
One reason for Lithuania's high inward investment is its geographical location on the eastern coast of the Baltic Sea, neighbouring Poland, the Russian Federation, Latvia and Belarus and within close proximity to its more modern EU neighbours. Other advantages include a relatively low paid (at least compared to other EU countries) and well-trained workforce.
In 2003, inward investment in the Lithuanian textile sector was around €89.7 million with just three countries providing nearly half of that investment: Germany (22.8 per cent), the UK (13.5 per cent) and Denmark (12.3 per cent).
Around €28.6 million was invested in the production of ready-to-wear apparel, and the dressing and dyeing of fur, with again the three main investing countries being the UK (5.3 per cent), Germany (4.3 per cent) and Denmark (3.2 per cent).
The textile and clothing industry encompasses the manufacture of textiles, ready-to-wear, and the dressing and dyeing of fur.
Manufacture of major products in the textile
and apparel industry 2000-2003
|Flax fibre (thousand tonnes)||4.7||6.3||3.7||6.4|
|Woven Fabrics (million m²)||108.6||96.3||92.4||92.6|
|Knitwear (million units)||45.4||47.9||46.6||47.1|
|Of which: Knitted outerwear (million units)||24.7||26.6||27.4||28.4|
|Pantyhose, socks & stockings (million pairs)||38.3||57.2||77.6||52.8|
|Overcoats, coats & half length coats (thousand units)||664||922||786||596|
|Jackets & blazers (thousand units)||267||288||334||360|
|Suits (thousand units)||540||440||362||315|
|Trousers (mens/womens) (thousand units)||11666||12776||12325||12144|
|Men's/boys shirts (thousand units)||1994||2265||2181||1698|
|Dresses (thousand units)||1300||1006||886||688|
|Womens/girls blouses (thousand units)||4564||5814||6518||6156|
|Source: Lithuanian Apparel & Textile Association|
In 2003 the textile industry employed some 16,000 people in 334 enterprises. Over half of these firms are small, employing less than 50 people; around a further 30 per cent are medium sized, employing between 50 and 199 people; and the remaining 13 per cent are considered large, employing over 200 people. Average monthly gross earnings per employee in the textile sector were €291.
Total textile production in 2003 amounted to €328.7 million, a fall of some 17 per cent on 2002. Textile production has shown a continuing decrease year-on-year since 2001, which can be explained by the relocation of some production facilities to the lower cost countries of Belarus, Ukraine and Russia.
In 2003 exports of textiles amounted to €296.3 million, a decrease of some 6 per cent on 2002. By the end of the first quarter of 2004 textile and textile product exports were worth some €296,223 million and comprised 13.2 per cent of Lithuanian exports, a fall of some 2 per cent on 2003.
The apparel industry in 2003 employed some 32,000 people in 852 firms. Approximately 52 per cent of these firms are small, employing less than 50 people; 37 per cent are medium sized, employing between 50 and 199 people; and the remainder, some 11 per cent are large, employing over 200 people. Average monthly gross earnings per employee in the apparel sector were €244.3.
Ready-to-wear and the dressing and dyeing of fur generated €567 million in 2003 and the output of the apparel industry was 7 per cent higher than in 2002. In 2003 the domestic market amounted to €78.9 million.
Exports of apparel in the same period came to €588.5 million, a decrease of some 4 per cent on 2002. Apparel and clothing accessories generated some €138.814 million and made up 6.2 per cent of all exports.
The main exports of both textiles and apparel in 2003 were woven and knitted fabrics (62 per cent); household textiles (8 per cent); and wool, manmade fibres and flax (5 per cent respectively).
The UK was the main export market (18.6 per cent) for textiles and apparel, with Germany, which was the main market in 2001 and 2002, following with an 18.2 per cent share.
Breakdown of textile and apparel exports
by country 2001-2003 (%)
|Source: Lithuanian Apparel & Textile Industry Association 2004|
The textile and apparel industry has benefited from the government's policy of privatisation over the last decade and the encouragement it has given to foreign firms to invest.
As a result many companies are now equipped with modern production technology, and have attracted some large EU customers such as Chargeurs, H&M, Zara, Laura Ashley and Next.
Alytaus Tekstile is one of the largest producers of cotton and mixed fabrics in the Baltic States. It was founded in 1969, has over 2,000 employees, and is a joint stock company involved in spinning, weaving and finishing. It also has a sewing shop which produces bed sets, curtains and tablecloths.
Between 1990 and 1998 the firm was modernised and its spinning and weaving equipment was upgraded and a set of finishing equipment for fabric refining was installed. After this upgrade the firm began manufacturing cotton polyester fabrics for outdoor clothes.
The factory is located some 100 km from the capital Vilnius. It produces 40 million metres of yarn per year. Yarn for knitting and weaving is 100 per cent cotton as well as a mixture of cotton with polyester, rayon or flax. It also produces a range of bleached and finished fabrics. All yarn meets the international ÖKO-Tex Standard 100.
The company exports over 80 per cent of its production to the EU, mainly Italy, Germany, Sweden, Finland, Denmark, Belgium and France. About 5 per cent is sold in the Baltic States and 15 per cent domestically.
The Drobe Wool Company, founded in 1920, produces pure and mixed wool fabrics for men's and women's wear as well as knitting yarns. It has a weaving and finishing mill and spinning facilities in Kaunas. It produces about 5 million metres per year using wool tops from Australia, polyester from Germany, Spain and Belarus, and dye and chemicals from Switzerland and Germany. In 2000 the spinning department was upgraded and is now fully modernised.
Drobe employs some 1200 people and its main export markets are Germany, Holland, France and the United Kingdom.
AB Linas manufactures high quality pure linen, half linen, dyed, printed, striped and jacquard fabrics for household textiles and garments.
It comprises four different production areas - spinning, weaving, finishing and sewing - and employs some 1654 people. Linas exports 91.5 per cent of its production (40 per cent going to Sweden) with the remainder serving the domestic market.
|The top textile companies 2003/2004|
|Company||Sales & Services €000||Exports %||No. of employees||Activity/products|
|1st to 3rd Quarter||1st to 3rd Quarter|
|Alytaus Tekstile UAB||23,431||27,225||85||2505||Manufacture of fabrics, yarn and sewn articles|
|Drobe UAB||n/a||n/a||n/a||1200||Manufactureof woollen, knit fabrics and sewn articles|
|Linas UAB||13751||14695||89||1654||Manufacture of linen fabrics and sewn articles|
|Vernitas UAB||10081||10827||n/a||770||Manufacture of knitting yarn|
|Liteksa UAB||11267||10085||n/a||344||Manufacture of woollen fabrics and yarn|
|Audejas UAB||14250||9166||80||260||Manufacture of fabrics for furniture|
|Linu Audiniai UAB||6253||4085||89||806||Manufacture of linen fabrics and sewing|
|Siulas UAB||4316||5548||93||539||Manufacture of fabrics, yarn oflinen and cotton|
|Vilnika Ltd||9015||5928||n/a||508||Manufacture of textile articles|
|Trinyciai UAB||5019||4831||63||250||Manufacture of cotton and mixed yarn|
|Pakaita UAB||3180||3277||n/a||114||Manufacture of knit fabrics|
Source Lithuanian Apparel and Textile Industry Association 2004
|Top Apparel Companies|
|Company||Sales & Services EUR thou.||Exports %||No. of employees||Activity/products|
|1st to 3rd Quarter||1st to 3rd Quarter|
|Utenos Trikotazas UAB||28,688||28,205||88||1295||manufacture and sale of knitwear and other clothing|
|Edmundas & Co (ECG)||28,441||21,108||97||334||manufacture of clothing|
|Lelija UAB||14,595||14,440||90||3308||manufacture and sale of clothing|
|Audimas UAB||15,200||13,163||80||667||manufacture and sale of sports and leisure wear|
|Satrija UAB||8,115||5,127||69||736||manufacture and sale of clothing|
|Dainava UAB||4,003||5,199||97||1048||manufacture of clothing|
|Fedora UAB||6,339||2,461||n/a||39||manufacture of clothing|
|Visatex UAB||5,548||3588||n/a||970||manufacture of suits|
|Trys Sezonai UAB||3,468||2786||95||258||manufacture and sale of clothing|
|Kauno Baltija UAB||4,080||2989||n/a||802||manufacture of clothing|
|Sparta UAB||3,344||3529||58||380||manufacture of socks, knitwear|
|E.Walters Baltic UAB||3,206||2802||n/a||554||manufacture of pants|
|Vilkma UAB||3,179||3475||97||430||manufacture of clothing|
|Dobilas UAB||3,041||3652||95||600||manufacture of clothing|
|Zemkalnija UAB||2,925||2789||95||640||manufacture of women's clothing|
|Verpstas AB||2,850||2393||95||530||manufacture of knitwear|
Source Lithuanian Apparel and Textile Industry Association
Many apparel manufacturers produce clothing ranges for firms such as Next, Laura Ashley, H&M, Nike and C&A as well as household fabrics for Ikea. The crisis in the former Soviet Union made producers turn towards the EU to establish new markets for their products.
Large sized companies have begun to establish sub-contracting arrangements with small and medium sized firms, enabling them to respond rapidly to new orders. Many firms have also, in order to compete more successfully, had their production certified according to ISO standards.
However, increasing competition combined with the new work opportunities for young Lithuanians in the European Community is already producing a labour shortage within all sectors of the Lithuanian economy.
Concerns among businesses surrounding a possible 'brain drain' appear to be well founded. According to recent research by TNS Gallup, employees' loyalty is believed to have declined because employers have traditionally done little to encourage staff retention. EU accession and opportunities for legal employment in foreign countries are presumed to add to employees' disaffection.
According to the Lithuanian Confederation of Business Employers (LCBE), accession to the EU will lead to a further decline in employee loyalty as individuals will gain new opportunities for changing jobs and wage differentials between the old and the new EU will remain for some time. The LCBE argues that employers will need to start offering the same benefits as foreign investment companies in Lithuania, such as regular salary increases, training or company cars.
Further, though Lithuania will benefit as whole economically by becoming a member of the EU, it will also open up its textile and clothing industry to increased competition.
Like other members of the EU the removal of international quotas has also removed one of its major competitive advantages.
By Alex Gray.
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