Global clothing brands invited to localize their production in Russia

The textile industry in Russia has an ethical tradition and commands respect in the global market . Though the Russian textile industry faced challenges in the nineties, it is now emerging as a competitive industry. The Russian authorities have invited foreign clothing brands to localize their production in Russia, with new factories being offered long-term tax breaks until 2025, Deputy Industry and Trade Minister Viktor Yevtukhov said.

Furthermore, the Industry and Trade Ministry guarantees manufacturers who accept the invitation a share of the market from the state procurement order.

The drive to localize production in Russia may bring down prices for clothes made in Russia. As consumer goods production requires a considerable safety margin in terms of prices. If in terms of quality there are no issues, in terms of costs, we are still running behind Asian competitors, Yevtukhov said.

The Russian, Deputy Industry and Trade Minister Viktor Yevtukhov explained that state support programs currently envisage subsidies for partially recovering the costs of materials, technical upgrades and new investment projects.

Since in the Soviet era Russia had a well-established textile industry, Russia can occupy a certain niche between the expensive European segment and the so-called cheap Asian-made consumer goods.

One of the ways of achieving this goal is by establishing foreign manufacturers’ production facilities in Russia, as is the case with the automotive industry. This is, of course, a task for the future.

During a meetings with the China National Textile and Apparel Council and some leading companies at the Super exhibition in Milan, it turned out that Chinese manufacturers view Russia not only as a distribution market for their goods but are also ready to invest in production in the country.

At Southeast Asia’s biggest fashion event, the Mercedes-Benz China Fashion Week in Beijing, a three-year strategic cooperation was signed between the Russian Chamber of Fashion and the China Fashion Association.

In the mass segment it is important to establish relations with large retail chains and to develop sources of raw materials. As for external markets, there are more prospects there for high-tech Russian goods, such as technical textiles and nonwoven fabrics. At the moment, this market accounts for about 30 percent of the industry’s sales. Furthermore, over the last five years the production of nonwoven fabrics in Russia has increased eightfold, while on the EU market, especially in Germany, technical textiles account for 50 percent of the industry’s growth.

Consumer goods manufacturing in Russia continues to grow despite the economic slowdown. According to the Russian Industry Ministry, in 2013 industrial output in the country grew by almost 5 percent. Furthermore, even in the first nine months of 2014, clothing production in Russia grew by 7 percent, whereas overall economic growth in the same period was just 0.7 percent.

Despite the fact that at the moment most types of synthetic fibers are imported, considerable progress has been made toward establishing domestic production, said Yevtukhov. For instance, there is a large-scale project to produce synthetic fabrics in the town of Shakhty in the Rostov Region. However, he conceded, there is less activity when it comes to establishing new production of fashionable fabrics.

Since Russia is a leading oil and gas producing nation, they stand a good chance of successfully developing the production of synthetic fibers and yarns.

Industry experts suggest that the time could not be any better for foreign investments in the textile sector in Russia. Several major companies are affirmative on prospects in the textile industry in Russia. South Korea plans to invest heavily in textile production facilities in Russia. DuPont has also decided to establish 40 production companies in Russia.