By Polina Kovalevskaya
Tolling (orders using imported raw materials provided by clients) began in the early 1990s, taking over from tradition orders from the USSR Ministry of Defence: providing a vital lifeline for post-Soviet enterprises. In 2005, more than 30 Bellegprom factories were fulfilling 80 percent of orders using raw materials provided by clients. Profits were modest but the orders kept such enterprises working, providing employment. However, volumes were not great and, despite the prestige of working for Armani and Adidas, goods were largely destined for sale abroad, rather than being oriented to the home market.
The Director of Bobruisk’s Slavyanka JSC, Teimuraz Bochorishvili, is convinced that it’s vital to produce goods for the domestic market, using just half of an enterprise’s capacity for low-profit international orders. To become too dependent on such contracts is a mistake, which he likens to being ‘drug addicted’. Of course, orders can be useful to keep factories busy during ‘low-season’ periods, when local sales volumes fall. Bobruisk enterprises have previously sewn clothes for such brands as Pierre Cardin, Sonia Rykiel, Hugo Boss, Adidas and Nike but such co-operation has now ceased, as Mr. Bochorishvili explains. He tells us, “Eminent players have gradually left the CIS region in favour of South East Asia — due to cheaper pricing there.”
Most European fashion houses have long sent their designs abroad for mass production, once the initial handmade samples have strutted the catwalks. China is the world leader in this respect, boasting hi-tech factories with modern equipment, low taxes and cheap labour. Belarusian factories can hardly offer a mutually favourable price.
Mr. Bochorishvili admits that fulfilling international brand orders is time consuming (about six months to sew a seasonal collection of 50-100 items). Most of the fabrics and other components are imported from China and Korea and circulating assets remain ‘frozen’ until final delivery. In fact, 80 percent of his factory’s capacity is devoted to such orders: paying salaries and running costs, if not generating great profit. His ideal would be to reduce this to 50 percent, just so that his factory would be covered by any downturn in the home market.
Economists note that companies which focus on external customers can lose their niche, since low-profit orders reduce circulating assets until the enterprise is no longer independent. Ukraine’s light industry is now 85 percent dependent on overseas orders, with local manufacturing unable to compete with cheaper, yet poorer quality, consumer goods. Such firms are compelled to work at 1-2 percent profitability, resulting in modest salaries. Belarus is fortunate enough to have escaped this situation so far and the loss of eminent players may be a blessing in disguise. We have already gained prestige; it may be possible that domestic buyers will soon reap the rewards.
The MT reference:
The following factories have, at various times, sewn items for well-known brands:
Slavyanka JSC (Bobruisk): Pierre Cardin, Sonia Rykiel, Hugo Boss, Adidas, and Nike.
Yuvita LLC (Grodno): Mехх, Promiss, Aust, Мiss Etam, Vogele, Makro, Sting, P&C, E5, Manor, Witteveen, S.Oliver, and Bonita.
Elema JSC (Minsk): Marks & Spencer, BHS, Next, Debenhams, Laura Ashley, and House of Fraser.
Rechitsa Textile JSC (Retchitsa): Armani.
Lona JSC (Kobrin): Adidas and Shani LTD.
