Armenian textile and knitwear sector

By Hovhannes Atabekyan | December, 2014
 

Industry dynamics

The textile and knitwear sector is an old branch of the Armenian economy with a history rich in traditions. As early as the old ages, Armenia was famous for its production of delicate fabrics and natural carmine dye. High rating of Armenian carpets and their export to foreign countries is documented in records of the ancient and middle age world history. During the Soviet era, a number of large textile and knitwear factories were opened in Armenia. The light industry output comprised around one-third of the economy of Soviet Armenia. The sector also ensured the highest level of employment, i.e., around 115,000 employees (about 25%-30% of the total labor engaged in the Armenian industry sectors). Armenia was one of the largest suppliers of textile and nitwear products in the Soviet economy. In the post-independence period, similar to other branches of the national economy, a decline by around 60%-70% was observed in the textile and knitwear sector. From the late 1990s the sector revived both due to foreign orders (primarily, provision of textile sewing services) and growth in manufacturing of own production (mainly knitwear).

There are 2 main types of manufacturers in the textile and knitwear sector of Armenia: providers of sewing services to foreign companies and manufacturers of own production. Foreign companies that place orders to Armenian companies are mainly famous European brands, particularly, from Italy and Germany. This is done via ‘temporary import’ customs regime in Armenia which is an important facilitator for getting such foreign orders.  The prevailing portion of own production is consumed in the domestic market.  This production is made of mainly knitwear items and hosiery.

Around two-thirds of the production volume (in value terms) are provided by 8 relatively large producers located mainly in Yerevan and Vanadzor. In the 2003-2013 period, up to 85% of Armenia’s textile and knitwear exports had been attained by outsourcing. This mainly includes coats, raincoats, jackets and similar products exported to Italy and outwear exported to Germany.

The key contributing factors for decline in outsourcing throughout 2005-2010 include the appreciation of the Armenian dram and the continuously increasing labor compensation. The sector export recorded sharp decline in 2010 due to global economic crisis and, in that context, the high degree of diversification of Armenian exports of the sector (outsourced orders from Italy).  Read full article.