Kyrgyz clothing exports grow 17% in Jan-Oct period; ITC's role acknowledged
Exports by clothing companies in Kyrgyzstan increased by $20 million in the first ten months of 2011, according to figures released by the country’s statistics office earlier this week. This is double last year’s growth rate, a welcome news to a government battling a record trade deficit, with exports barely reaching half of the country’s imports. “This shows the government made the right choice when identifying the clothing sector as a priority sector for exports,” said Gulbarchyn Asanova, who until her retirement last month ran the department in charge of the country’s processing industry at the Ministry of Economic Regulation, and represented the government at the steering committee of local ITC projects.
ITC has played an important role in the sector’s performance in the last two years, its trade promotion project extending to 40 SMEs in the sector. The industry association representing the sector has 600 members. The government does not collect labour statistics that would be granular enough to show the effect of the industry’s growth this year on employment numbers, but anecdotal evidence shows both job creation and wage increases at ITC-supported companies. Both have been made possible by new sales contracts, and quality and productivity improvements at the companies. Primavera, located in the capital Bishkek, has increased its revenues by 30% and its headcount by 20% this year, said owner Olga Kim. Thanks to the introduction of an ITC-supported quality management programme, which awards seamstresses bonuses based on quality, many of Primavera’s 70 workers have seen their pay increase by a quarter since the beginning of the year. Many of them have participated in training courses, which has increased their output, while reducing the number of defects. “We only started tracking defects thanks to the ITC programme,” Kim said. “What you cannot measure, you cannot improve.” A course that taught her how to negotiate with suppliers has pushed down her raw material costs by 10% - increasing her margins and thus funds available for investment.
Across town at Lilastyle finding new buyers and moving up the value chain have been key benefits. Lilastyle, which is manufacturing girls prom dresses for the Russian market, has doubled the unit sales price of its products over the last couple of years, said owner Tatiana Pavelnko. At the ITC project she and her colleagues have learned how to make the most out of participation in industry fairs and how to present their company and products to potential buyers. Pavelnko, who gave up a low-paid teaching job and undusted her grandmother’s sawing machine in the late nineteen nineties to make her first blouse, now employs 50 people. She had attended sales fairs before and had vague ideas about quality management, but it is only thanks to the ITC project that she could implement them. “We knew what to do, but we did not know how,” she said. Many international consultants funded by other technical cooperation projects fly in and out, providing high level advice. In contrast, ITC’s project provides concrete, implementable recommendations and a game plan for the company to follow even after the consultant leaves. ITC also trains local consultants for businesses to work with after the initial project comes to an end. While Lilastyle’s participation in the ITC training was free, and the exhibition attendance partially funded, Pavelnko has subsequently created a training budget and paid the full price for seamstress training. “The benefits clearly outweigh the costs,” said her son Anton, who is helping his mother manage the company.
The textiles and clothing sector represents 7% of the country’s total industrial output and employs around 120,000 people, 70% of them women. It was identified by the government as an industry for trade promotion due to its high potential for exports and so combating the country’s galloping trade deficit. The German technical cooperation agency assisted the company with the creation of a sector strategy in 2008, and what at the time was the Ministry of Industry, Energy and Fuel Resources approached ITC to implement a trade promotion project focusing on the sector. The total budget of the project over three years is $1.84 million, financed by the Swiss Secretariat for Economic Affairs (Seco).
Though only 15 companies are official participants, ITC’s Bishkek field office is working with industry association Legprom to organize seminars open to any of the association’s 600 members, explained Project Consultant Artur Aliev. As a result, about 40 companies benefit from the project directly, while indirect beneficiaries include their subcontractors and suppliers.
The companies have achieved significant improvement in the quality and design of their products, Asanova said. What distinguishes ITC trainings from those organized by other intermediaries is its comprehensive approach and the amount of practical detail offered, she said, from new stitching techniques to skills in preparing a sales presentations and negotiating. “Participants appreciate the details; some of them never focused on their customers before,” she said.
Seamstress training in a week
An element of the project highlighted by several participants was “3G Tailor,” a seamstress training methodology that cuts down by three quarters the amount of time required to train a new employee. In an industry with high turnover rate and the dominance of unskilled labor, 3G Tailor is addressing a key bottleneck, explained Damira Aitykeeva, who heads the Garments Design Department at the Kyrgyz State University of Construction, Transportation and Architecture. Aitykeeva, who has participated in the ITC project as a national consultant on productivity and production, has incorporated into the university curriculum many of the innovative ideas she learned from ITC’s international consultants. This will bring major benefits to the industry in the long run and ensure the sustainability of the project. “What this industry is lacking is competent middle managers,” she said. “Modernizing the curriculum and making students focus more on their future clients will address this issue going forward,” she said.
None of the 15 companies Aitykeeva works with had any organized quality control in place. They did not even measure their defects. Productivity was low as a result, and the quality of the products not suitable for anything but the low end of the export markets. “Many of these companies were founded by people who were not from the industry, but were traders, or even teachers and lawyers,” she explained. As part of the project, Aitykeeva was trained by ITC’s international consultants and has taken over following-up with beneficiary companies. As part of her work at the university, she has added two more companies as clients, and she sends her students as interns to small firms in Kyrgyzstan and Tajikistan.
Tangible benefits notwithstanding, the real result of the project that will ensure long lasting impact has been the change of mind set in the industry, said Asanova. Managers are more conscious of the needs of their clients, and they are more open to share knowledge and exchange ideas with their peers. In a fragmented industry, this is key to competitiveness, she said. “They used to view each other as competitors, rivals,” she said, but have now realized that there is a much larger world out there against whom they are all competing. Information gathered at industry fairs, as well as requests from potential clients are now disseminated to all members of the industry association, Legprom. Asanova concluded: “In a former Soviet country where people are suspicious of each other, this is a major achievement.”
Back at Lilastyle, Pavelnko has big plans for the next few years. She is planning to move the company from its current location at her former family house to an industrial site with three times the floor space. In the volatile economic climate, however, she is treading carefully. If all goes well and sales continue to increase, she will be able to complete construction of the new, 750 square meter plant in two years. As for Kim, her plans are focused on helping some of her middle managers to open up franchise operations, using her techniques, methodologies and sales channels. “I have many plans, but the key is having great employees,” she said “We need to continue to invest in our people.”