Ten years ago, Romania was merely one of a dozen central and east European countries vying for European subcontracting orders. Today, its garment exports to the EU exceed those of all other CEECs, including Poland, which was eastern Europe's top exporter until 1998. The revival of its clothing industry can partly be attributed to the shift from CMT to FOB exports writes Jozef De Coster.

In 2001, Romania's total exports of garments to the EU amounted to €3.3 billion (28 per cent more than in 2000). In comparison, Poland's exports were worth €1.9 billion and Hungary's stood at €1.1 billion. Romanian garment exports are likely to continue rising at a lively pace during the coming years.

The WTO's International Trade Statistics for the period 1990-2001 give a good idea of the speed of Romania's ascension as a leading clothing exporter. Between 1990 and 2001, Romania's clothing exports increased by an average of 20 per cent a year (from US$363 million in 1990 to US$2,774 million in 2001). The share of clothing exports in Romania's total merchandise exports soared from 7.3 per cent in 1990 to 24.4 per cent in 2001.

A 20 per cent annual export growth over a period of 11 years is no mean feat! During the same period (1990-2001), Chinese clothing exports achieved an average annual growth of 'only' 13 per cent, and Indonesian clothing exports of 10 per cent. In fact, among the world players only Mexico (thanks to the NAFTA-effect) and Bangladesh (Trade Preferences) did better than Romania with an average growth in clothing exports over the period 1990-2001 of 27 per cent and 21 per cent per annum respectively.

How could Romania not only outperform the four Visegrad countries (Poland, Czech Republic, Hungary, Slovak Republic) but also the Baltic countries, its neighbouring countries Bulgaria and Moldavia, and the former Soviet Republics of Belarus and Ukraine?

As far as the Visegrad countries are concerned, the answer is simple: they have become too expensive! The German consulting company SECO Sector Consulting (Frankfurt) provides an interesting comparison of 2002 average CMT subcontracting prices in 31 major clothing exporting countries.

Dietmar Stiel, economist and director of SECO Sector Consulting (which has had a Romanian subsidiary - Avanz Management - since 1994), explains. "A number of subcontractors still survive in EU countries like Germany and Italy, and they negotiate on average CMT minute prices of €0.62 and €0.60 respectively. That's a lot more than their colleagues demand in Spain (€0.48), Portugal (€0.42) and Greece (€0.38).

"However, even the Greek minute prices are four times higher than those in Romania (€0.09). Romanian subcontracting prices are also easily beating those in Slovakia (€0.14 per minute), Poland (€0.16), Hungary and the Czech Republic (both at €0.18)."

So why don't Ukraine and Belarus, with their average minute prices of only €0.06, attract more CMT orders than Romania?

Collective Romanian clothing stand
Well, this is only a matter of time according to Dietmar Stiel. The star speaker at the first Congress of the South East European and Romanian Garment and Textile Industry (Bucharest, 21-22 November 2002), Stiel warned the mainly Romanian audience that, no doubt a cheaper country, probably Ukraine, will topple Romania as the East European CMT leader within maybe five or six years.

That's why, in Stiel's opinion, Romanian CMT specialists should urgently start expanding the range of services they can offer and targeting new types of customers in the EU.

He encouraged them not to remain addicted to CMT, working hard for low prices to the benefit of foreign (mainly EU) manufacturers and converters. The latter won't hesitate to drop Romania as soon as somewhere like Ukraine can offer more satisfying basic conditions (law and order, communication and road infrastructure, a better developed local material supply network) together with lower CMT prices.

On the catwalk at Modexpo
Thus Romanian CMT specialists should learn how to develop basic collections as well as source and pre-finance materials if they are to meet the challenge of supplying clothing to large retailers, specialised clothing chains and other customers who are more interested in buying garments and services than mere production minutes.

From CMT to ready-to-sell
Among the CEECs, Romania is not only the biggest OPT/subcontracting clothing exporter to the EU, but also the biggest FOB exporter. In 2001, so-called 'full imports' (not OPT-imports) of woven garments amounted to €941 million, while knitted garments came to €334 million.

Fashion from ModaTim
Some former Romanian CMT exporters have already come a long way from simple CM (Cutting, Making) for industrial customers and are now offering ready-to-sell collections to EU retailers or wholesalers. Some have even developed their own brands.

A good example of a company that has successfully upgraded from a subcontractor to a fashion exporter (and even manufactures its own collection, 'Chic & Cher') is ModaTim, from Timisoara in Western Romania.

Ovidiu Sandor, president and CEO of ModaTim (1,100 employees), says: "Today we are business partners of companies such as Harrods, Dries Van Noten, and Eugen Klein, but during the early nineties ModTim was one of the many Romanian cost-oriented 'Lohn' manufacturers. We have continually upgraded our status by taking responsibility - an attitude which is still rare in post-communist Romania - and by investing huge efforts in service: quality assurance, sampling, grading, first pattern, logistics and sourcing of materials."

ModaTim garments
Unfortunately, two other attitudes which are typical for Romania and other 'countries in transition' are bureaucracy and corruption. Foreign investors and contractors as well as Romanian manufacturers themselves all have stories to tell about amusing Catch-22 situations.

FOB export success
The increasing FOB export success of Romania is an important development, with interesting consequences for local and foreign suppliers of materials and services.

Wolfgang Limbert, coordinator of the German IBD/GTZ program for the Romanian textile and clothing industry, points out that some 450 material suppliers and service providers, with an average of 30 employees each, currently operate in the Romanian market.

The Modexpo showground
A key player is Coats Romania, which in 2001 invested US$1.3 million in a sewing thread production and distribution unit in Odorheia Secuiesc, in central Romania. Coats Romania is currently building a second factory; production start-up is scheduled for May 2003.

Several other foreign suppliers of clothing materials, such as members of the German group 'Global Textile Center' cherish production plants close to Coats' factories.

The Romanian clothing industry is also rapidly embracing CAD-CAM. According to Oldrich Matela, Gerber Technology's sales manager for Eastern Europe, some 300 CAD systems and 120 automatic cutters are presently installed in Romania. Lectra is the market leader, Gerber the runner-up.

Leading players

Mr Dietmar Stiel, director, Seco
Sector Consulting
In 1990, the Romanian textile and clothing industry employed 672,000 people, of which 258,000 worked in the clothing sector. Since then, total employment has been halved, while the proportion of textile to garment jobs has been reversed. Now, the clothing industry is the main employer providing 285,000 jobs against less than 100,000 in the textile industry.

The flourishing Romanian clothing industry (4,700 companies) has been completely privatised. In the textile industry (2,200 companies), the State is still a major shareholder in a few big companies which struggle with losses and non-viable structures. An interesting initiative is underway to revive the traditional Romanian linen and hemp industry with German help; optimists estimate that the project could generate 80,000 jobs.

There are a number of ways to get in contact with the leading players in Romania.

Mr Ovidiu Sandor, president and
CEO, ModaTim
Bucharest stages an annual exhibition 'Modexpo' (ready-made clothing, fabrics and accessories), organised by Romexpo. However, as this fair mainly attracts domestic buyers, most of the exhibitors are medium-sized companies which focus on the Romanian market (though a few big exporters such as Confex International and Romanoexport do attend).

A handy tool for finding details about leading players in the Romanian textile and clothing industry is the directory recently published by the German development organisation IBD/GTZ. It lists nearly 800 companies.

The absolute top player in the Romanian clothing industry is the German manufacturer/retailer Steilmann (employing around 16,000 employees in Romania). Other heavyweights are Braiconf and Ikos Conf, which both boast 3,400 employees. Braiconf is a supplier to mainly Italian (Benetton, Stefanel) and German companies (Seidenstrick, Katt). Ikos Conf sells to companies like Bäumler and Gardeur.

Mr Wolfgang Limbert
Plenty of Romanian clothing companies employ more than 2,000 people. Although most of them only manufacture for European (especially German, Italian and English) customers, a few also export to the USA (Confex International, Novatex, Iasitex, Confectii Barlad).

Various types of foreign companies source clothing from Romania: prestigious brands like Versace and Pierre Cardin, specialised retailers such as H&M, C&A, Peek & Cloppenburg, mail order companies including La Redoute, Quelle, Neckerman, big chains like Metro and Carrefour, and of course a lot of European manufacturers and converters who have delocalised production to Eastern Europe.

Siha stand
Romania is especially strong as an exporter of woven fabric garments to EU countries (more than €1.6 billion in 2001). As an exporter of knitted garments to the EU (nearly €480 million in 2001), Romania also surpasses all other East European countries.

However, according to a study carried out by IBD/GTZ, other East European exporting countries beat Romania in various segments (cotton lingerie, cotton underwear, nightwear and T-shirts).

In the Romanian textile industry, most of the former giants have been split up into smaller entities in the context of privatisation. However, Fibrexnylon SA in Neamt still employs 3,300 people and the polyester producer Terom in Iasi has 2,378 workers.

By Jozef De Coster.