Lithuanian Apparel and Textile
Industry Association
Development Trends of the Lithuanian
Textiles and Clothing Industry
2004
CONTENT
1. / Overview of the Lithuanian Clothing and Textiles Sector / 31.1. / The Lithuanian Clothing and Textiles Sector / 3
1.2. / Direct Foreign Investments in the Clothing and Textiles Sector / 6
1.3. / Foreign Trade in the Clothing and Textiles Sector / 8
1.4. / Qualitative Analysis of Trends in the Lithuanian Clothing and Textiles Sector / 12
1. Overview of the Lithuanian Clothing and Textiles Sector
1.1 The Lithuanian Clothing and Textiles Sector
In 2004, the Lithuanian textiles and clothing industry became an integral part of the EU textiles and clothing sector. The textiles and clothing industry with its long-time national traditions has shown its advantages in independent Lithuania and has occupied the dominant position in the economical structure of the state. By the number of workers, the Lithuanian textiles and clothing industry is considered the manufacturing sector number one and sector number two by the quantity of manufactured and sold production.
1. Over 80 percent of small and medium scale businesses of the manufacturing sector and only 15 - 20 percent of large scale ones belong to the textiles and clothing industry.
2. It is one of the industries creating high added-value, which makes 15.2 of the total added-value of the national industry (GNP).
3. Manufacturing in the textiles and clothing industry is labour-intensive. Such production makes 16 percent of the value of the total manufacturing industry production and ensures the high level of employment: Workers of the sector make 26 percent of all employees in the industry.
4. Enterprises of the textile and clothing industry employ 41 thousand women (80 percent of all individuals employed in this branch of industry).
5. This sector is one of the major national exporters and produces about 15 percent of the total national export with positive trade balance.
6. The average load of productive capacity of enterprises in the textiles and clothing sector makes 67.5 percent and in some enterprises, it exceeds 90 percent (the EU average is 80.7 percent).
Chart 1. Number of employees in sectors of the textiles and clothing industry
Chart 2. Number of enterprises (excluding sole proprietorships) in sectors of the textiles and clothing industry
Source: Lithuanian Statistics Department
Analysis of work of the Lithuanian textiles and clothing industry shows positive trends in most enterprises. Manufacturing of major types of production, namely, fabrics, knitwear, sewing, and footwear, has increased significantly. Enterprises have achieved such results by exploiting effectively strategical fortes of the textiles and clothing industry: i.e. qualified capacity of managers and employees in order to use competently human potentials, flexibility in order to respond immediately to changes of clients’ needs, experience in order to ensure quality of a product for an ultimate user, as well as acquired contacts with eastern and western markets. During 2000 – 2004, manufacturing of the major types of production changed in accordance with orders of the clients.
Table 1. Manufacturing of the major types of production of the textiles and clothing industry in the years 2000 – 2004
Production
/ Year2000 / 2001 / 2002 / 2003 / 2004 *
Flax, in thousands of tones / 4,7 / 6,3 / 3,7 / 6,6 / 20,2
Fabrics, in millions of square meters / 108,6 / 96,3 / 92,4 / 92 / 79,4
Wool / 10,9 / 18 / 17,4 / 20,9 / 21,3
Cotton / 52,6 / 43,8 / 41,4 / 30,5 / 20,8
Linen / 17,8 / 13,5 / 15 / 15,1 / 15,6
Synthetic / 17,7 / 10,1 / 8,5 / 13,9 / 19,1
Knitwear, in millions of pieces / 45,4 / 47,9 / 46,6 / 46,2 / 47,9
Out of them: outerwear, in millions of pieces / 24,7 / 26,6 / 27,4 / 27,9 / 32,7
Tights, hose, socks, and other articles, in millions of pairs / 38,3 / 57,2 / 77,6 / 51,3 / 44,7
Coats, half-length coats, and topcoats, in thousands of pieces / 664 / 922 / 786 / 572 / 944
Jackets, in thousands of pieces / 267 / 288 / 334 / 354 / 312
Jackets and jumpers, in thousands / 2435 / 2633 / 3045 / 2949 / 3290
Suits, in thousands of pieces / 540 / 440 / 362 / 315 / 409
Trousers (including for women), in thousands of pieces / 11666 / 12776 / 12325 / 11898 / 12110
Men’s and boys’ shirts, in thousands of pieces / 1994 / 2265 / 2181 / 1630 / 1673
Dresses, in thousands of pieces / 1300 / 1006 / 886 / 677 / 955
Women’s and girls’ shirts, in thousands of pieces / 4564 / 5814 / 6518 / 6049 / 7172
Skirts and culottes, in thousands / 3033 / 2822 / 2521 / 2043 / 2677
Footwear (excluding gumboots and felt boots), in millions of pairs / 1,14 / 1,28 / 1,10 / 0,9 / 1,2
*Forecast
Source: Lithuanian Statistics Department
1.2 Direct Foreign Investments in the Clothing and Textiles Sector
In order not to lose its competitiveness, the national textiles and clothing industry is forced to accommodate continuously to constant changes. Liberalization of trading in textiles and clothing started with January 1, 2005 and opening of global markets tend to form the unfavourable environment. Use of material and direct investments is one of the most important factors for increase of textiles and clothing manufacturing, productive capacity, and competitiveness. Under the data of January 1, 2004, 417 million LTL have been invested into production of the textiles and clothing sector. As compared to a respective period in 2001, within four years direct investments increased: by 17.7 million LTL (21.4 percent) in production of sewing and furriery, by 11.6 million LTL (tenfold) in production of leather; however, by 13.7 percent they decreased in textiles. Direct foreign investments are accumulated in 110 companies. 247 million LTL (59.2 percent) go to companies in Kaunas region, 55 million LTL (13.3 percent) go to companies in Vilnius region, and 50.4 million LTL (12 percent) go to companies in Alytus region. 64.6 million LTL (15.5 percent of all direct foreign investments) went to companies in regions of other cities. The largest investors are business partners in Germany, United Kingdom, Denmark, Italy, and Belgium. New flows of the foreign capital would increase expansion of export.
105 million LTL of own financial sources of material investments into the textiles and clothing industry are used. Within preceding year, they decreased by 41 million LTL. We, however, anticipate that in 2004 they will increase, as increase of material investments is required for enhancement of products’ competitiveness and development of export. The textiles and clothing sector must orient towards greater complexity of the ultimate product, which selling requires more labour and skill. Thus, demand of such products will be greater and it will be more difficult for competitors to eliminate them from business.
Chart 3. Major foreign investments in the clothing and textiles sector in 2003
Source: Lithuanian Statistics Department, Foreign investments in 2003
1.3 Foreign Trade in the Textiles and Clothing Sector
The textiles and clothing industry is one of most exporting sectors of the Lithuanian economy. Constant positive balance of the foreign trade signifies economical stability of this industrial sector.
Goods for over 3 billion LTL constitute annual export. Recently, growth rates have slowed down since macro-economical circumstances had effect to each enterprise. Drop in the Dollar’s rate of exchange, Lithuania’s accession to the European Union, cancellation of the Free Trade Agreement with Ukraine had a great negative impact to exporters. Export of clothing constituted 2 billion LTL what made the largest part (63 percent) of the total export of textiles and clothing. Balance of the foreign trade was positive (611 million LTL).
In 2003, national textile and clothing companies exported to the European Union goods for 2.7 billion LTL. In comparison to the year 2002, export has decreased by 4 percent. Export to the EU countries makes about 83.8 percent of the total export of textiles and clothing production. Import from the EU countries constituted 1.6 billion LTL what was by 48 million LTL less than in 2002. The major business partners are United Kingdom, Germany, Demark, Sweden, Italy, Belgium, and France.
Export to United Kingdom significantly increased has outstripped Germany, a long-term leader of export. Recently, export of production to United Kingdom constituted 576 million LTL and made 17.9 percent of the total export of textiles and clothing. Export of goods to Germany constituted respectively 548 million LTL and made 17 percent. Export of textiles and clothing to the Commonwealth of Independent States made 114 million LTL. As compared to the year 2002, export decreased by one fourth.
Chart 4. Structure of the Lithuanian export in the years 2000 and 2003 (millions LTL)
Source: Lithuanian Statistics Department, Foreign trade, 2003
The major criteria of successful export by the Lithuanian textiles and clothing industry sector to foreign markets:
- Geographical situation and availability to access the markets;
- Effective exploitation and improvement of available opportunities (competence of employees, engineering, and technologies);
- Flexible response to demand fluctuations and ability to foreseen them;
- Compliance of product quality with global standards;
- Low profit tax.
Table 2. Structure of the Lithuanian textiles export/import ( % ) by countries in 2003
COUNTRY / EXPORT ( % ) / IMPORT2000 / 2003 / 2000 / 2003
Germany / 19,1 / 17,0 / 15,6 / 12,7
United Kingdom / 11,6 / 17,9 / 9,6 / 10,4
Denmark / 13,7 / 11,4 / 11,5 / 6,6
Sweden / 9,9 / 9,4 / 4,2 / 2,6
Italy / 7,7 / 8,1 / 6,8 / 11,1
Belgium / 4,4 / 6,0 / 6,3 / 5,2
France / 3,6 / 3,8 / 4,3 / 4,5
Netherlands / 3,6 / 4,0 / 3,8 / 5,8
Russia / 2,7 / 2,1 / 3,1 / 1,3
Spain / 2,5 / 2,6 / 1,2 / 2,9
Latvia / 3,0 / 2,1 / 3,2 / 1,1
Poland / 3,3 / 2,2 / 3,1 / 4,7
Norway / 1,4 / 2,2 / 0,7 / 1,3
Finland / 1,8 / 2,4 / 1,1 / 0,5
United States of America / 4,1 / 2,1 / 2,0 / 1,3
Estonia / 1,2 / 1,3 / 1,0 / 1,4
Ireland / 1,0 / 0,7 / 1,8 / 0,5
Ukraine / 0,6 / 0,6 / 1,9 / 1,8
Japan / 0,3 / 0,3 / 0,5 / 0,2
Belarus / 1,3 / 0,7 / 3,4 / 1,7
Czech Republic / 0,4 / 0,3 / 1,1 / 1,2
Switzerland / 0,2 / 0,3 / 0,4 / 0,3
Hungary / 0,4 / 0,2 / 0,5 / 0,5
Austria / 0,9 / 0,2 / 1,3 / 0,6
Source: Lithuanian Statistics Department, Foreign trade in 2000 and 2003
Most of the Lithuanian import is constituted of raw produce and materials, which make 70 percent of the total import of the textiles and clothing industry. Import includes cotton, flax, and various textile sorts of yarns, great amounts of chemical fibres and of chemical elementary threads as well as raw leather. In 2003, import of goods constituted 2.6 billiard LTL. In comparison to the year 2002, import has not changed.
As we see from the abovementioned, the Lithuanian textiles and clothing industry is the largest exporter to the EU, therefore, all changes in global trade inevitably will have impact to our national producers. Cancellation of the Agreement on Trade in Textiles and Clothing (ATC), which up to now by import quotas and tariffs has been regulating trade among the WTO members, is of greatest concern. Following 2005, all WTO members will be able to engage in import without restrictions.
On October 29, 2003, in its appeal to the European Council, European Parliament, European Social and Economy Committee, and to the Committee of Regions regarding the future of the EU textiles and clothing sector after admission of new member, the European Commission argues that third countries should also open their markets to the EU textiles and clothing. To our knowledge, this opinion is supported by the European Parliament, which has also recommended applying reciprocity criteria.
A very important step has been taken: It is for the first time acknowledged in a so high level that the EU textiles are especially important and that its future is endangered. The European Commission concedes that this sector is very violable not only in the old members of the EU, but also in the new ones, (it may cause a chain reaction).
Table 3. Results of activities of the Lithuanian and EU companies
Indexes / Lithuanian companies / EU companiesProfitability, in percentage / 5,25 / 7,03
Return of used property, in percentage / 4,02 / 32,32
Return of property, in percentage / 8,6 / 13,04
Added-value, LTL / 1814572 / 3486651
Sales for one employee, LTL / 10182 / 80448
Added-value for one employee, LTL / 4522 / 44337
MTP expenses, percentage from sales / 1,18 / 0,73
MTP expenses, percentage from profit / 12,5 / 16,8
Employees with higher education, in percentage / 13,4 / 9,9
Expenses for training of one employee, LTL / 62 / 868
Source: Lithuanian Statistics Department