Apparel, the biggest export industry in Turkey and a major source of
employment, delivers physical output at productivity rates within reach of
Italy's. Trade liberalization starting in the '80s pushed the industry ahead.
The next leap forward will be to make "Made in Turkey" a major source of
value-added premium.
Global Trends Favor Turkey
Turkey's apparel industry has benefited significantly from global trends. Apparel industry players are particularly migratory and gravitate to countries that offer cheap labor, which Turkey can supply. Proximity to major markets bolstered growth - Turkey is now the leading non-EU apparel exporter to the EU. Finally, after the collapse of the Soviet Union and the resulting trade liberalization in ex-Soviet and Central and Eastern European countries, demand from these markets has boosted Turkish exports.
Low End vs. High End
Turkey excels at the lower end of the apparel value chain: clothing assembly (sewing) and original manufacturing (replicating a given sample product). At this level, Turkey is competitive, indexing at 70 - 80 percent of the productivity rate of Italian clothing manufacturers.
The major profits, however, come at the upper end of the apparel value chain, in original design (ODM) and original brand manufacturing (OBM). In these segments, brand equity value - both generic (country of origin) and specific - accounts for an enormous portion of value-added.
So, the less skilled an operator is beyond handcrafts, the less value it captures in the global value chain. In this respect, Turkish productivity numbers particularly suffer relative to Italy's. The value Turkey adds to a product in assembly and OEM manufacture is much lower than what is added in Italy via ODM and OBM. And, of the extra Italian value-added, a large portion is generic "Made In Italy" value.
"Made In Turkey" Productivity
To capture maximum value, the Turkish apparel industry now needs to move beyond its base. It needs to establish that "Made in Turkey" offers superior benefits. This direction is hotly debated in Turkish apparel circles and there is no consensus. However, the question policymakers and industry participants alike have to grapple with is whether there is a role for government. There are compelling international examples on both sides of the argument.
If Turkey can continue
to improve its core productivity and make inroads into the creation of further
added value, the apparel industry could create upto 1 million new
jobs. Launch this chapter (PDF - 508 KB)
