EU newcomer with textile skills

The 17 post-communist years in Bulgaria have been characterised by the creation of numerous small and medium-sized companies in the clothing industry. Most of them were founded by the managers of the former combines, others by international investors. The context has changed again with Bulgaria's membership of the European Union.

02.02.2007 - The clothing and textile industry is one of Bulgaria's growth sectors and it contributes greatly to the country's export income. Between 1999 and 2004 this sector grew by 20.4%. 31% of the industrial workforce was employed in it in 2004. They created 7.6% of total industrial production. In the first half year of 2006, textile and clothing exports accounted for 15.5% of total exports and 27.6% of Bulgaria's exports to the EU. At the same time the domestic market grew by 10% compared with the previous year.

After the fall of the communist bloc, many specialists of the middle management level in Bulgaria too were forced to become entrepreneurs without having had any marketing or company management training whatsoever up to that point.

Brand suppliers and subcontract producers

Numerous firms are still suffering as a result of this today, keeping themselves afloat with second or third-hand subcontract work, in other words as suppliers to other, larger subcontract manufacturers. Others, however - often coming from different sectors and with trading experience or those who were already supplying major West European customers before the fall of communism - have succeeded in establishing their own brands. At least in the domestic market, frequently with their own shops or franchise concepts. Examples are Kolev & Kolev with children's shoes, Daks with handbags, Battibaleno, Capasca, Etere, Max Danieli, Nia&Dorado, Toni and Markam with ladies' or men's fashion.

But these concepts only work in the larger cities with tourism such as Sofia, Varna and Plovdiv. These cities draw people with their attractive town centres and shopping centres are being created there. So these companies are beginning to export to Romania, Hungary and Russia. The mentality of the consumers in the former "brother states" is familiar and links have been maintained. On the other hand it is still difficult today to export Bulgarian brands to the EU. However, with joint stands at fashion exhibitions e.g. at CPD, Dusseldorf (D), CIFF, Copenhagen (DK), Ispo, Munich (D), and CPM, Moscow (RUS), they are beginning to record growing success, explains Valia Dankova, the Managing Director of BAATPE (Bulgarian Association of Apparel and Textile Producers and Exporters), Sofia. And presence at the annual BGate exhibition in Sofia, which as a sector cross-section exhibition presents everything from clothing via fabrics to garment manufacturing machines, is seen as a door-opener for exports.

Whereas ambitious brand manufacturers, which often also offer subcontract manufacture as a basic business, show at the exhibitions, the pure subcontract producers refrain from taking part in exhibitions. Valia Dankova explains why these firms are not represented either at Global Fashion, Dusseldorf, or at Fatex, Paris (F), or at BGate either: "For one thing they must not promote the products that are produced by subcontract, and for another they get their orders via a different route." The different routes referred to are recommendations and contacts through associations or sewing machine, accessory and fabric sellers.

Many of the clothing companies are also currently faced with the problem that employees are leaving the country to take better-paid jobs in Western Europe. The result of this is that they have to switch from two-shift operation to a single shift. So capacity is drastically cut and large volumes of items for West European customers including those who want to move their production back from China to Europe cannot be produced.

Support is still needed

Despite the economic support programme, which is being implemented until 2007 by the Bulgarian state and the Gesellschaft fьr Technische Zusammenarbeit (GTZ, Association for Technical Cooperation), Eschborn (D), SIPPO (CH) and other organisations, programmes of economic support are still needed even after entry into the EU. Valia Dankova and her colleague Todor Bozveliev from LFFHI (Association of Leatherworking Industries), Sofia, agree that many company bosses have still not recognised the urgent need for their own training in the areas of marketing, operational organisation and technology. And the former training centres have mostly disappeared and the remaining ones teach in an outdated fashion, lacking modern equipment. So the sector associations are now attempting both to create new professional training and education centres mainly funded by private enterprise and to build a textile institute to remedy this lack. The fact that they are hoping for support from the EU and international support, which has been available to date, is not difficult to understand. No programme of support for the textile, clothing and shoe industry is likely to be provided by the Bulgarian government in the foreseeable future. However there are general support programmes for small and medium-sized enterprises (SMEs), for exhibition participation abroad and for investment in IT systems.

Export growth by 120% from 2000 to 2006

Despite the difficult conditions, Bulgaria was able to grow its exports by 120% in the period from 2000 to 2006, whereas Romania's and the Ukraine's export figures have stagnated, reports Petja Miluscheva, a spokesperson in the GTZ office, Sofia. Everyone is expecting the costs of pure labour subcontract and full subcontract to increase because of limited capacity and price rises in the energy sector. Opportunities for improvement are hoped for from productivity improvements - here there are estimated reserves of 30 to 40% - high quality, proximity to the West European market and flexibility in the production of small runs.

According to official statistics, in the first half year of 2006, 86% (+10% versus prior year) of exports were delivered to the EU, whereas exports to Turkey and the USA fell by 3 and 16% respectively. Italy (+22%), Spain (+27%) and Germany (+13%) in particular imported more than before from Bulgaria. In 2005, knitwear worth EUR 610m, including almost half of this to Greece, and finished woven products worth EUR 809m, including about a quarter to Germany, were exported. Imports were mainly of raw materials and textiles for further processing.

Claudia Ollenhauer-Ries

Business in Bulgaria

Recommendations are of course a tried and tested method of making contacts where subcontract orders are concerned. But there are other resources in the capital Sofia: the sector associations BAATPE (Bulgarian Association of Apparel and Textile Producers and Exporters) and BATEC (Bulgarian Association of Textile and Clothing), the Ministry of Light Industry, the German-Bulgarian Chamber of Commerce and also the Fashion Floor International (see p. 14). For shoes and leather goods LFFHI (the sector association for leather, fur, footwear and haberdashery industries in Bulgaria) is the right address. cor

Bulgaria and its clothing and textile industry

Area 110,912 km2

Population 7.8m

Overall unemployment about 11.5%

Employees in the clothing industry 155,000

Proportion of national industrial production 7.5%

Proportion of Bulgaria's total export volume 23.4%

Proportion of Bulgaria's total import volume 12.4%

Total number of textile businesses about 710

Total number of clothing firms about 910

Other important export products:

Mineral oil products

Agricultural products

Raw materials

Metal products

Investment products

Leather products

Claudia Ollenhauer-Reis - Texttile network - Germany