- On 01/03/2020
- business in russia, export to russia, russian market, textile, textile market, textile market russia
Overview and industry development prospects.
ANALYSIS OF THE SITUATION IN THE INDUSTRY
In the largest economy in the world, China (PPP GDP of $ 21.2 trillion for 2016), light industry accounted for 21%. This is only 2% less than income from agriculture, and half of the total share of the country’s manufacturing industry. Light industry also occupies a significant share of GDP in the economies of countries such as Portugal – 22%, Italy – 12%, Germany – 6%, USA – 4%. Given the size of the economies of these countries, it can be argued that light industry makes a significant contribution to GDP and the total employment of the working population. In order to reach economic indicators that allow successful competition in the global market, Russian light industry needs to significantly increase production.
In general, the Russian market for light industry products is estimated at 4 trillion. rub. according to the latest statistics. In terms of volume, the light industry market ranks second after the food industry in the economy of our country. However, it is worth noting that domestic brands occupy only 19 … 21% of this market, (approximately 12 out of 60 billion dollars). At present, the export / import ratio of the light industry is estimated at $ 1.1 billion to 13.5 billion. The industry’s profitability is kept at a stable low level of 2 … 3%. According to the results of 10 months of 2018, the production of textile products in Russia increased by 4.2%, clothing production – by 5.7%. In general, over the past three years there has been a steady positive trend in the industry, with an average growth of 4%. According to the results of 9 months of 2018, the export of Russian light industry products amounted to 1.1 billion dollars, by the end of the year its volume may reach 1.4 billion dollars, which in percentage terms is an increase in exports by 7.7% compared to 2017 g. He informed the deputy head of the Ministry of Industry and Trade at the V All-Russian Forum of Light Industry. Entering foreign markets and strengthening their positions on them are tasks of paramount importance for the industry, which are necessary to increase the export volume of light industry products by almost 2 times by 2024, that is, to $ 2.3 billion . The textile industry was singled out by the President of the Russian Federation among promising sectors for import substitution. However, it is worth noting that import substitution processes have affected the textile industry to a lesser extent than, for example, agriculture. The potential of the industry is estimated at 80% of the domestic market, in which case the increase in domestic production would be $ 36 billion, which is accompanied by the creation of new jobs, as well as tax revenues to budgets of all levels. If we turn to history, before the revolution, Russia was the world’s largest producer of flax (about 80% of the global volume) and the main supplier of finished linen to Europe. However, after the collapse of the USSR, the volume of production in the textile industry decreased by 5 times.
Over the past ten years, the industry has experienced a recession, and now about a third of enterprises remain unprofitable. The Ministry of Economic Development of the Russian Federation characterizes the situation in light industry as “not very favorable.” The share of Russian light industry from 11.9% in 1990 collapsed to 1% and only recently barely reached 1.5% of GDP. In recent years, in our country there has been a decrease in the number of operating enterprises from 16 thousand to 14.8 thousand, and the profitability of the sewing and textile industries in 2012-2018. remains low. Among the main problems of the industry are the following: – technical backwardness (more than half of the equipment in Russian factories over twenty years old); – shortage of qualified specialists (the number of workers in the industry over the past seven to eight years has decreased from 400 thousand to 270 thousand); – dependence on imports of raw materials. The main direction for the development of the industry is government procurement. Today, part of the industries works in this system, producing uniforms for law enforcement agencies and departments, with up to 80% of products being made from Russian fabrics. Another direction may be orders of municipal and regional authorities, as well as products for natural monopolies. There is also every opportunity for this, says Andrei Razbrodin: “Today, more than 50% of the country’s sewing enterprises work for sewing workwear, annually producing more than 66 million pieces of bed linen, as well as other products for hospitals, rest homes, boarding houses and other institutions.” Based on the data of the Institute of Economics and Crisis Management, Russian textile enterprises occupy the last place in using innovative technologies in their production. The diagram shows that Russia (7.4%) in terms of the share of textile and clothing enterprises using technological innovations is significantly inferior to countries such as Germany (78.4%), Belgium (63.2%), France (58 ,5%). Experts believe that the production of technical textiles and “smart fabrics” can become a real driver for the development of the industry in modern conditions. While in developed countries, the share of domestic industrial technical textiles in the total consumption reaches 80%, and in developing ones it exceeds 50%, in Russia it is still produced about 15% of the country’s consumption. Significant investments in the modernization of the industry are necessary for the transition to high-tech, innovative products. A more than tenfold reduction in industry over the previous 25 years has led not only to a decrease in production, but also to a significant technological lag in the industry. The production of means of production, that is, the range of equipment needed by the industry, has almost completely ceased to exist , , . As of 2016, the share of machines with a service life of up to 10 years was 37%; from 11 to 20 years – 24%; more than 20 years – 39%. For comparison, the average term of use of equipment in world practice today ranges from fifteen to a maximum of eighteen years. Obsolescence of the production park becomes apparent. Industrial enterprises do not undertake the development and organization of production of machine tools for light industry due to the lack of mass demand for them due to the insignificant size of the industry. The Russian industry does not offer competitive equipment, and imported equipment is expensive. Also, there is no own production of related accessories (from threads to rivets, zippers and buttons). Significant investment resources are required to modernize the industry. Bank lending is available to enterprises working under state orders, having a significant amount of tangible assets or collateral. Another significant problem in obtaining loans is that banks are reluctant to take highly specialized machines and equipment as collateral, which greatly lose their value in bankruptcy proceedings (the last stage of bankruptcy of an enterprise), that is, they are low-liquid assets. Lending periods available to small and medium-sized businesses are also low and averaging 2.5 … 3 years for revolving loans and 5 … 7 years for investment. Other sources of financing are practically inaccessible to small and medium enterprises due to the underdeveloped capital market in our country. Thus, it is obvious that the light industry, taking into account its specifics, is experiencing significant difficulties in attracting financial resources to invest in its innovative development , . According to statistics, the mid-price segment in the textile industry market (which includes sales of clothing, footwear) suffered the most from the 2014-2016 crisis, its share decreased significantly and amounted to about a quarter of the market in monetary terms. In 2016, sales in the middle segment amounted to 573.9 billion rubles. Modern trends, digitalization of the economy “shift” the classic macro
DATA OF THE FEDERAL SERVICE OF STATE STATISTICS
According to the data of the Federal State Statistics Service, from 2007 to 2015 There is a stable trend of revenue growth in the industry. Since data on sales volumes in physical terms are not available, it is not possible to conclude whether revenue is increasing only due to higher prices, or whether sales volumes in units of products are also growing. At the same time, the indicators of gross margin and profitability of sales are also growing. A particularly sharp increase occurred in 2015. This data is somewhat at variance with data from independent sources.
Accounts receivable (in 2015 + 67% versus 2007) and accounts payable (in 2015 + 101% versus 2007) increased significantly, which indicates problems in settlements with customers and suppliers. High accounts receivable may indicate a working capital deficit that can be covered by loans. The dynamics of the ratio of borrowed to own funds confirms this conclusion: the ratio of borrowed to own funds increased from 3.66 times in 2007 to 5.62 times in 2015.
The light industry of the USSR covered all stages of production – from the production (cultivation) of raw materials to the manufacture of garments. Today, domestic light industry is experiencing serious difficulties, primarily due to the lack of competitiveness of products at a price – Asian countries that use cheap labor offer significantly cheaper products. At the same time, the quality of Russian fabrics is often significantly higher. The share of domestic products today is no more than 30% of the market. More precisely, it is almost impossible to determine the quantity due to the presence of “gray” imports. According to experts, the only competitive segment is the production of workwear, supported by government orders.
At the same time, Russian manufacturers are experiencing a shortage of capital for the development and modernization of enterprises. Demand in connection with the crisis state of the economy is significantly reduced. Indices of consumer sentiment and entrepreneurial confidence have reached record lows in the past two years. The worst forecasts are related to the textile and clothing industries.
The course towards import substitution raises some hopes, however, most enterprises are not ready for it because of the lack of sufficient production capacities, and also because of the high share of the imported component in production – from raw materials to equipment. Amid the weakening ruble, this is becoming critical for the industry.
Some experts do not see the point in placing a full production cycle in Russia and urge to repeat world practice, in particular, the development of textile imports from China, as well as the placement of sewing manufactures there.
Nevertheless, the Government of the Russian Federation plans to develop programs for the development and subsidization of the industry. In particular, there is a draft program for the development of light industry until 2025, according to which the share of Russian products should increase from 25% to 50%. Analysis conducted as part of the development of this program. shows that the segment with the production of synthetic fibers, which can be based on an existing petrochemical complex, has the greatest potential. This will give a 2.5 times greater effect than the development of natural textile production.
Based on the analysis, 4 main strategic directions for the development of light industry were identified. one of which relates directly to the textile industry: “the creation in Russia of production of chemical (synthetic and artificial) fibers with an export orientation, primarily due to the development of polyester and viscose fibers and yarns. Reorientation of mass textile production to synthetic materials (including both textiles for garment products and technical textiles). The cumulative effect of the direction is 0.19% of GDP, and 0.12% of them is the effect of the development of the technical textile segment. ”
In this case, the advantage of Russia is its geographical proximity to the main markets for the sale of polyester fibers – the CIS countries, China, Turkey, etc. The CIS countries have the greatest export potential – 60-70 thousand tons of exports from the Russian Federation by 2025 and Europe – 100-150 thousand tons. The production of polyester fibers in Russia can reach 950 thousand tons, which will provide 80% of domestic demand.
Another promising material is rayon, which is a cheaper alternative to cotton. Raw materials for viscose, cellulose, are produced in Russia in sufficient quantities. The export potential of viscose is great. The volume of viscose fibers and threads produced in Russia can reach up to 600 thousand tons, providing up to 80% of local consumption and exporting up to 400 thousand tons to the CIS countries, Europe, Turkey, Africa.
The main demand for synthetic fabrics in the domestic and foreign markets can provide technical textiles. The global market for technical textiles is estimated at 130 billion dollars and is growing annually by an average of 3%. The volume of the Russian technical textile market in 2012 was estimated in physical terms at 320 thousand tons, and in monetary terms – at 77 billion rubles.
Technical textiles have many uses: in clothing, agriculture, furniture manufacturing, industry, construction, etc. The state plans to develop a number of measures to especially support the segment and protect it from external influences.
Despite the positive data from Rosstat, the textile industry in Russia is in decline due to the low level of competitiveness of products. The market is filled with cheap products from Southeast Asia, most of which is “gray” imports.
Some experts believe that the solution to their current situation is the adoption of the experience of developed countries importing textile products. The Government of the Russian Federation, however, has developed programs to support and develop light industry, including the textile industry, as its integral part. It is planned to develop a specialized segment of polyester fabrics.