Conquering Russia with home textile

Muhammad Farooq Afzal

The 24th Federal Fair for Home Textiles and Apparel fabrics was organised by "TEXTILEXPO", RUSSIA from March 22-25, 2005 in Russia, Moscow at All Russian Exhibition Centre covering 35,000 net square meters hosting Russian buyers.
First edition of Federal Fair for textiles was organised in the year 1993 with the participation of 1500 companies and this year 2500 companies from 40 countries exhibited at the 24th Federal Fair for Home Textiles and Apparel fabrics. About 70,000 traders, retailers and wholesalers from 12 CIS states, 14 East European and 80 Regions of Russia visited the exhibition.
This year home textile goods were presented by Pakistan's top home textile exporters in a fashion show to the Russian buyers and attracted great attention at the Exhibition in which Pakistani companies are interested the most after Heimtextil Exhibition in Germany.
WHY RUSSIA?
With its population of 145,1 million people and its annual purchasing power of 700 billion dollars, the Russian Federation is a market of great importance...
This massive population, together with the neighboring countries, forms a potential market of great importance for the Home Textile sector, as it does for many others. At the moment, Turkey holds a 70 per cent share of the market of home textile imports from Russia. Further, 30 per cent of products sold to Europe pass again from Europe into Russia.
Every day about 30 transport trucks filled with home textiles from the Laleli market pass through Moscow Customs. Huge retail market chains such as IKEA, Metro, Ashan, Ramstores, Magellan, United Colours of Benneton and the like are trying to increase their share of this market.... Metro aims to have 100 stores in the years 2004-2005 whereas Ramstores of Turkey is planning to build 50 new stores in the next two years in different cities of Russia. These numbers demonstrate how much of a potential propulsive force the Russian Federation is for our country.
With the restructuring following the 1998 crisis in Russia, the national economy has started to strengthen, and needs arising from that restructuring have opened the country's import channels. Be it construction and mass housing in newly settled areas, be it the need for hardware materials in houses, offices and hotels rising with the increase in construction of business centers, be it the increase in furniture manufacturing within Russia, or be it the recent expansion of the home textile sector in Russia, there is much evidence of a steady growth, increasing the purchasing power of the Russian government, which has recovered following the crisis.
Construction in Russia has recently started advancing rapidly. The development of residential areas and the foundation of new workplaces have been carried out by importing construction and home requirements from abroad, in the name of accelerating the national economy.
The Russian Federation has a great demand these days for home textiles from abroad, and shows an increase in imports of such products. The products most in demand in Russia include curtains, upholstery fabrics, towels and bathrobes, lacework, tablecloths, bed sheets and blankets, carpets and flooring.
In conclusion, the activity in the markets of furniture and hardware for Russia's new residential areas, mass housing, business centers, houses, offices and hotels is a sign that home textile products will manage to find a large-scale market in this country.
The market for apparel, furniture, and other textile consumer goods is developing rapidly. For the past three years, local consumption of consumer goods has steadily increased. By early 2003, consumer goods prices will reach levels surpassing those just before Russia's 1998 financial crisis. This will present significant opportunities for Pakistani firms.
Various surveys show that the textile market is very receptive to high-quality products imported from Western countries. Nevertheless, low quality and inexpensive Asian products maintain a considerable presence in the market (close to 70 per cent).
Competition is stiff with many Asian suppliers operating in Russia. China, India and Turkey and other Asian countries continue to hold larger market share. However, Customs statistics do not readily provide information on the country of origin for textiles arriving from Europe. For example, the majority of US textiles enter Northwest Russia via Scandinavia, but statistics are not available through official channels.
European and Asian manufacturers continue supplying traditional materials such as wool blends or synthetics. There is also a growing interest in "techno" materials, which are currently fashionable for young consumers.
The distribution system has improved in recent years. Nevertheless, many famous foreign companies prefer to have direct business relations with local apparel manufacturers to ensure long-term and regular orders.
Twenty-five per cent of the textile trade is concentrated in Moscow, Moscow region, and St. Petersburg. Pakistani companies should expand into the regions where a large number of end-users are based.
The keys to success for Pakistan:
The keys to success for Pakistani textile exporters are:- a flexible pricing policy, barter options, aggressive promotion of new products, a continuous presence, direct contacts with end-users, cooperation with reputable and knowledgeable local distributors, expansion into regional markets with a wide product range.
The best prospects for Pakistani textile suppliers in the next three years will be in new "high-tech" product lines for all textile categories, but especially those for upholstery and adolescent fashions.
Pakistan's Share:
Direct Pakistani imports are very small. Pakistan-made fabrics primarily enter Russia via Dubai, Turkey, Poland and other East European countries. Consequently, Pakistani fabrics are not reflected in official statistics. Several indirect importers of Pakistani products are based in Moscow and distribute Apparel fabrics, Silk Fabrics, Cotton fabrics, woolen fabrics, flax fabrics for interior decoration and home textiles, fabrics for bed linen and bed items, fabrics for table linen and kitchen items and upholstery fabrics.
The above analysis proves that after the 1998 financial crisis in Russia, the national economy has started to strengthen, which had resulted in enhancement of living standards as well as in increasing the purchasing power of the Russian people.
After the 1998 crisis the whole world focused its attention on the Russian consumer goods market. The major exporters of consumer goods were China, India, Turkey, Korea, Taiwan, Italy, Poland and some West European countries. Unfortunately the public and private sectors of Pakistan due to reasons unknown were not able to capitalise the opportunities in Russian market.
There is need to find out the reasons, which are hampering our exports in this vast land of opportunities. After having several visits to Russia and exchange of views with the Russian and Pakistani representatives of trade bodies, I came to the conclusion that there are 4 major reasons which are hampering our exports to Russia. These are:
- Lack of awareness regarding the Russian consumer's goods market.
- Non-supporting attitude of EPB towards participation in consumer exhibitions in Russia especially in textile exhibitions.
- Non availability of warehouse facilities in Moscow.
- Non availability of a Pakistani Bank in Moscow.
After indication of the reasons it is imperative to find out the solutions in removing the barriers in trade with Russia. Basing on my experience in the Russian market and exchange of views with Russian counterparts, I would like to suggest the following to the Ministry of Textile/ EPB, for the promotion of exports in Russian Federation.
Establishment of Pakistani warehouse in Moscow
In RF and CIS trading is usually done through warehouses, therefore it is important for our Government to provide our exporters with trade infrastructure facilities. This means that first of all we have to open a trade centre then purchase warehouses, lease display centers and spaces in supermarkets and through them started selling the goods directly to the wholesale and retail markets of RF as well to the other states of CIS. China, India, Turkey and Iran are trading in billions of dollars in these markets on the basis of strategy mentioned above.
Subsidy to Textile Exporters to Participate in Textile Exhibitions in Russia
Russia import textiles and garments worth over 17 billion dollars, therefore, if Pakistani textile and garment exporters participated in the textile exhibitions in Moscow twice a year, then there was no doubt of capturing this market and then exporting textile products to Russia worth 500 million dollars annually. To achieve this goal a large participation in textile exhibitions is imperative. This can only be achieved if the Ministry of textile provide subsidy to the exporters for participation in exhibitions on permanent basis.
We have the potential and competitive edge to take over the 17-billion dollar market of the textile, bed linen and garments which, at present, is with India, China and Turkey."
"For rapid penetration in Russian market, we must follow Turkey's strategy, which through continuous participation in the textile exhibitions had captured a huge share of the market.
Russia is importing Pakistani textiles items in millions of dollars through Turkey, Italy and Poland. In the recent 24th Textile fair, Moscow in March 2005 the importers from Russia and East European countries were very impressed by the capacity building of Pakistani textile sector and expressed their interest in directly purchasing from Pakistan rather than from Turkey, Italy and Poland. In this regard they exchanged views with me and suggested having direct contact with Pakistani exporters through exhibitions.
Establishment of a Pakistani Bank in Moscow:
The establishment of a Pakistani Bank in Moscow is a need of the hour to safeguard the interests of Pakistani traders. As the reliability of Russian Banks are not recognised internationally therefore the Pakistani Bank will also assist in opening of LC on behalf of the Russian importer in favour of the exporters from Pakistan.
Beside the issue of exports to Russia there is another issue which needs to be considered seriously by the Textile/Commerce Ministries and that is sharp decline of our textile made-ups exports after quota phase-out. It should not be surprising to see that national textile exports, initially showing respectable growth rate of 13 per cent in the beginning of the year, had plummeted to one per cent average by the end of February 2005.
The top textile exporters have expressed their deep concern that in post quota regime Pakistan's textile exports are reeling under exorbitant anti-dumping barriers in EU, and non-tariff barriers (NTB) in USA. Anti-dumping duty, coupled with GSP concession withdrawal by European Union, totaling 25 per cent, is the biggest obstacle in exports to EU. Pakistan's exporters are confronted with a handicap of 25 per cent in price of quotations compared to India, China, Sri Lanka and Bangladesh.
The access to American market has been repeatedly denied to Pakistan's exporters. American industry lobbies have been very active in pulling strings at concerned quarters against demolishing non-duty barriers against Pakistan's textiles.
Taking into consideration the above scenario, it is imperative in the best interest of our textile exports to search for the new markets where the above mentioned trade barriers are not existing. The Russia and CIS states are the emerging markets which have already stepped on the path of free market economic system. The important thing to note in these states is that their Governments had lifted un-necessary trade barriers in order to accelerate the pace of economic development and to bring their economy up to the level of developed states.
CONCLUSION
1. Textile Import of Russia is 17 billion dollars.
2. Major textiles exporters to Russia are: India, China, Turkey, Bangladesh, Thailand, Serbia & Poland etc.
3. Russia is importing Pakistani textile items in millions of dollars through Turkey, Italy and Poland.
4. Pakistan can capture the share of these countries through direct export to Russia.
5. Most of the firms who took part in previous exhibitions are now exporting directly.
6. Due to direct export the textile exports to Russia increases:
a) Cotton fabrics: From 0.148 million dollars to 5.676 million dollars
(Showing a rise of 5.528 million dollars),
b) Bedwear: From 0.181 million dollars to 3.162 million dollars.
(Showing a rise of 2.981 million dollars),

7. Why to focus on Russian Market:
In quota-free regime Pakistan is facing 25.1 per cent anti-dumping duty coupled with GSP concession withdrawal in EU and non-tariff barriers (NTB) i.e. safety, security, environment and labor laws etc, in USA which will restrict our abilities to export in these markets.
Fortunately the laws of anti-dumping and NTB dose not exist in Russia.
Pakistan can increase its textile exports to Russia up to 500 million dollars from current 20.3 million dollars a year if a solid strategy and due facilities are provided by the Textile Ministry/EPB to the businessmen and the exporters.