Romania'stextiles and garment industry thrived during the Soviet era. It is still apillar of the country's economy and has a fast-growing market. Overallproduction, however, is declining, and workers are harder to come by. In thisbackdrop, China is showing considerable interest in Romania.

Thoughthe Romanian textiles and garment industry isn't an immortal jellyfish, itshould be appreciated for its ability to re-invent itself. Under the communistrule, until the end of Nicolae Ceausescu's dictatorship (1989), Romania hadafter Russia the biggest textiles production capacity in the whole Eastern Blocemploying 800,000 people. Since that time, the industry has considerablyshrunk, achieving a difficult shift from mass production for mainly sovietconsumers to the CMT (cut-make-trim) production of top luxury brands.

Still a Pillar of the Economy

MihaiPasculescu, president of Fepaius, the Employers' Federation of Textile,Garments and Leather Industry, argues that the textiles and clothing industryis still making an important contribution to Romania's economy in terms ofemployment and exports. Statistics show that there are around 9,700 companiesin the industry, of which 5,825 are active in the manufacturing of clothing.

Employmentis gradually decreasing and could by now have dropped under 200,000. Totalexports, which represent about 80 per cent of production, exceed €6 billion andcount for more than 9 per cent of Romania's exports. They are mainly destinedto Germany, the United Kingdom, France and Italy. Romanian manufacturersreportedly make clothes for brands such as Louis Vuitton, Chanel, Dolce &Gabbana, Alison Hayes, Burberry, Armani, Hugo Boss, COS, Massimo Dutti, as wellas Zara, Mango, Next, Dorothy Perkins, Wallis and River Island.

Pasculescuexplains that the primary textiles sector (spinning, weaving, finishing) gotfew opportunities to redirect itself to profitable niche markets due to lack ofcapital and restrictive credit conditions. He says: "If we were toidentify a problem area, it would be the primary sector-while the rectilinearknitting (the garment, footwear and leather goods sector) is a consolidatedarea."

Between2008 and 2013, under the influence of the economic and financial crisis,textiles and clothing companies in Romania experienced a period of decline,losing some of their traditional orders and contracts to Asian competitors. Nowseveral manufacturers, who mainly work for British brands, are afraid thatBrexit could kill them.

Fast-growing fashion market

Accordingto the marketing research organisation MKOR Consulting, fashion consumption inRomania will amount to €2.7 billion in 2019, some 12 per cent more than in2018. This means that since 2014, when fashion consumption stood at €1.39billion, Romanians have doubled their fashion purchases. Clothing represents 75per cent of fashion consumption, shoes and accessories count for the rest. IfMKOR Consulting is correct in its calculations, rapidly increasing imports offashion-from €1.1 billion in 2014 to €2.6 billionin 2019-will represent thisyear 97 per cent of Romanian fashion consumption.

Onlinepurchases of fashion are soaring. According to a report from Digital FashionConsumer Trends, 65 per cent of Romanian consumers bought fashion articlesonline in 2018 for a total amount of €258 million. The five most appreciatedonline shops were those of H&M, Zara, Nike, Fashiondays and eMAG. Incapital Bucharest, it's clear that local clothing retailers are no match forglobal players like Inditex (Zara, Massimo Dutti, Stradivarius), H&M,Mango, Boss, La Perla, Stefanel-who occupy highly visible retail spaces.

In2017, H&M was the leading fashion retailer in Romania, with a turnover of€180 million, followed by Zara with a turnover of €174 million. In Romania'sTop 100 Companies 2018, Zara Bucharest SRL has a high turnover.

According to financialnewspaper Ziarul Financiar, each Zara store in Romania earned a net profitbefore taxes of €550,000-5.5 times higher than similar stores in Germany.

Also,fashion items and other textile articles 'made in China' can easily be found inthe capital of Romania. Dragonul Rosu, the Red Dragon wholesale market inBucharest, is an outlet that offers a vast selection of goods: fashion items,but also furniture, children's toys, Chinese restaurants, etc. From there, animpressive amount of merchandise leaves to all corners of Romania. In an areaof 15,000 sq m, consumers can shop in hundreds of stores. They have 5,000parking lots at their disposal.

Fashion production is declining

Contraryto domestic fashion consumption, Romanian fashion production shows a downwardstrend, according to MKOR Consulting-from €3.9 billion in 2014 to €3.5 billionin 2019. Most of the production is exported, mainly to other EU countries.

Around 85 per cent of the6,355 producers of the fashion industry (as counted by MKOR Consulting) arefinanced with Romanian capital. However, in the 2017 list of largest fashioncompanies in Romania, the foreign firms Formens (French capital), Alison Hayes(British) and Hanes Global Supply Chain (American) occupy the top places. Thelargest Romania-funded fashion company is Pandora Prod (est. turnover in 2019: €38million, 11.5 per cent less than in 2017). Pandora Prod SRL company has beenoperating in the Romanian market since 1994. Its main activity is themanufacture of wearing apparel (according to a not updated Wikipedia text, forretailers and brands like Next, Marks & Spencer, Benetton).

However,wages for workers in Romania's apparel industry are lower than the salariesearned by employees in other industries, according to a joint report issued bythe Romanian National Institute for Statistics and the Romanian Central Bank.The average monthly earnings for a worker employed in the domestic apparelindustry stands at RON 2,280 ($543), compared to the national average wage ofRON 3,770 ($897). Romania's garment sector, which still employs around 180,000people, has been in a flux for the past decade. The 2007-08 financial crisis,competition from Asia, and an onerous tax structure have led to the loss of135,000 jobs in the garment industry over the past 10 years.

Romaniangarment manufacturers remark that they have been hit several times by waves ofworkers quitting and moving to Western Europe in search of better pay. Between2007 and 2015, an estimated 3.4 million Romanians left to work abroad, puttingthe country second after Syria in terms of migration rates, according to theUnited Nations. Andrei Pena, director of the Romanian magazine Dialog Textil,says that in the Italian capital Rome as in some regions in Spain he foundflourishing Romanian communities with their own shops and even their own schools.Since the emigration continues, probably already close to 4 million of them (ona total population of 19.5 million) are now at work in foreign countries. Onlya small part of them have been replaced by workers from Vietnam, India,Bangladesh and other countries.

China strengthening its position

Itwould be exaggerated to say that India shows no interest in Romania. TheVice-President of India, Venkaiah Naidu, visited Romania in September 2019. Hesigned a couple of MoUs and opened the Romania-India Economic Forum organisedby the Bucharest Chamber of Commerce and Industry. However, it can't be derivedfrom articles in local newspapers that during his stay in Romania, he wouldhave discussed textile topics with the Romanian President, the Prime Minister orothers.

Onthe other hand, the Chinese interest in the Romanian textiles and clothingindustry (needing all kinds of materials and machines) and in the Romanianfashion market at consumer level, is clearly visible for all.

FromMay 11-14, 2019, a Chinese delegation led by Sun Ruizhe, president of the ChinaNational Textile and Apparel Council, visited Romania and conducted in-depthtalks with Romanian counterparts. The intention of the visit was "to builda bridge of bilateral cooperation". Sun Ruizhe and Pasculescu signed acooperation agreement between their respective associations.

But,why is Romania of interest not only for the Chinese textile, garment andmachinery industry but as well for the Chinese government? Chinese planners areaware that Romania is located at the intersection of Europe and Asia. Thoughroads and other infrastructure in Romania are in a bad shape, the country isperforming rather well in the field of logistics. In the 2018 Global LogisticsPerformance Index, Romania ranked 50, doing better than neighbouring Bulgaria (57),Ukraine (66), Moldova (113) and Georgia (124).

TheChinese textile associations are aware that Romania could offer interestinginvestment opportunities. The country has an 80-year-old textiles industrybase, many good textile engineers and relatively well-skilled textiles andgarment workers. It also used to have a well-developed flax industry whichcould be revived.

The China-CEEC 16 1 format

FromMay 31 to June 2, the Romanian-Chinese company Holde International SRLorganised the first Holde Textil trade fair at exhibition centre RomExpo inBucharest. Around 80 Chinese manufacturers of fabrics, clothing accessories,decorative accessories, bags, hangers and other connected products presentedtheir products.

Thistrade fair was the first phase of a large-scale project with financing from theChinese government under the initiative '16'. The 16 format, also calledthe China-CEEC (Central and Eastern European Countries) summit, is a Chineseplatform initiated in 2012 to expand cooperation between China and a group of11 EU member states and five Balkan countries.

Thesecond phase is the construction of a permanent showroom in the Ilfov regionwith samples for the Romanian and Bulgarian garment industry. The third phasewill be the creation of a hub in the Free Zone of Giurgiu (Romania) wherestocks of materials, needed by the garment factories in Romania and Bulgaria,will be stored. The goal of the project is to optimise the supply chain ofmainly Chinese materials.

Pasculescupoints out that 90 per cent of the raw materials for the Romanian production ofclothes are imported. Nowadays, companies spend a great deal of time and moneyin choosing and shipping the appropriate fabrics, accessories and decorations,mostly from China.

LaviniaCristea, director of Fepaius, is eager to further examine how Romanianmanufacturers can possibly benefit from the Chinese Belt & Road Initiative.In October 2019, Fepaius participated in a conference dedicated to theinitiative.

Anyway, Romania, which iswell located to offer more easy access to Chinese goods destined to Romania andthe rest of Europe, can hope that Chinese companies will invest in Romania-e.g.to produce textiles goods that bear the "made in Europe" brandbypassing EU protectionism.

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