Cablegate: Textiles and Apparel Sector: Croatia

VZCZCXYZ0001
RR RUEHWEB

DE RUEHVB #0907 2711210
ZNR UUUUU ZZH
R 281210Z SEP 07
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC 8191
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS ZAGREB 000907

SIPDIS

SIPDIS

DEPARTMENT FOR EEB/TPP/ABT Gary A. Clement
DEPARTMENT PASS TO USTR Carolyn Miller
COMMERCE FOR TA/OTEXA Maria D'Andrea

E.O. 12958: N/A
TAGS: ECON ETRD KTEX HR

SUBJECT: TEXTILES AND APPAREL SECTOR: CROATIA

REF: STATE 114799

1. In response to reftel, the following are the main sector data for
the Croatian textiles and apparel industry. According to information
from the Croatian Chamber of Economy and Central Bureau of
Statistics:

-- Total industrial production- sale value: (2005 - most recent
official data available): $19.8 billion
-- Total textile production- sale value: (2005 - most recent
official data available); $800 million
-- Textile/apparel share of Croatian imports: for 2006 was 3.7
percent, for January-July 2007 was 3.9 percent
-- Textile/apparel share of Croatian exports: for 2006 was 6.6
percent, for January-July 2007 was 6.2 percent
-- Exports in textiles and apparel to the US: (2005- most recent
official data available) $3.24 million
-- Total manufacturing employment (2006): 248,775
-- Total textiles and total apparel employment (2006): 35,141

2. According to the Croatian Chamber of Commerce, Croatian
manufacturers reduced prices up to 50 percent due to international
competition in 2005, but there have been no drastic cuts since. On
average, manufacturers have had the same number of orders in recent
years, with seasonal fluctuations and fluctuations according to
design and fabric. There are no Asian investors among foreign
investors in the Croatian textile sector. The three largest
investors are Benetton (Italy), Calzedonia (Italy), and Boxmark
(Austria). There have been incidents of company closures and
investors pulling out of local production and, due to increasing
competition, more are expected. According to Mirjana
Gambiroza-Jukic, head of the Textiles Production and Processing
Department at the Croatian Chamber of Economy, dated technology and
greater demands for complicated apparel design have also negatively
affected domestic producers. Some have organized their production by
moving sewing and pressing to other countries in the region.

3. EU measures restricting imports of textiles and apparel from
China have helped Croatian manufacturers. Croatia has not
unilaterally implemented any restrictions on imports from China.
However, according to Gambiroza-Jukic, the apparel industry does not
export a substantial amount because of strict EU rules of origin for
textiles. Gambiroza-Jukic added that once Croatia joins the EU, the
rules of origin will serve as a benefit for the industry.

4. Croatia's textile industry has been under severe pressure because
of dislocations resulting from the transition to a market economy as
well as the growing role of Chinese production. Employment in the
textile sector has been decreasing for several years. Experts in the
field hope the recently drafted Textile Development Strategy will
help maintain employment, but they do not expect an increase.

5. In an effort to improve the situation, the GoC offers incentives
including non-repayable financial support for environmental
protection and incentives for worker training. While the volume of
textile manufacturing is decreasing overall, some Croatian companies
are attempting to find a niche in design by producing goods with
higher added value and are exporting brands that are popular in the
region and EU.

6. The GoC recently drafted the Textile Development Strategy in an
effort to strengthen the position of the textile industry in the
country. Given the industry's decline over recent years, however,
Post does not expect the strategy to result in serious advances.

7. Free trade agreements between Croatia and other countries have
helped Croatia, but have not been enough to create new export
opportunities for the textile industry.

8. As with many sectors of the Croatian economy, the textile
industry lags behind foreign competition. Companies need to make
substantial investments in manufacturing technology and equipment to
survive in the near term. The industry's long-term prospects remain
uncertain.

Bradtke

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