Labor crunch hits textile industry

  • 2007-03-21
  • By TBT staff
RIGA - A rapidly shrinking labor pool and rising wages are forcing more Latvian textile and clothing companies to decline orders or outsource them to neighboring countries, depriving the Baltic state of potential growth, particularly in much needed exports. Guntis Strazds, head of the Latvian Textile and Clothing Industry Association, told The Baltic Times that last year the 130 firms in the group were unable to meet some 20 's 30 percent of potential orders due to a lack of workers.

He said that Latvia's textile and clothing industry exported goods worth some 260 million lats (371 million euros) in 2006, up 8.3 percent year-on-year. Exports absorbed some 80 percent of the industry's aggregate output last year, he added.
The textile and clothing industry accounts for approximately 9 percent of Latvia's industrial output, according to statistics, and has significant growth potential.
However, textile and clothing companies are having to either turn away orders or outsource them to Belarus or Russia because of a dearth of working hands, Strazds said.

"There simply aren't any available workers 's not in Riga, not in the provinces," he said, adding that a new destination will be Ukraine, where many textile operators are searching for potential partners.
The largest exporters in the industry were Lauma, Rita, New Rosme, Mezroze and Aurora Baltika, according to the association.
In the meantime, industry operators are focusing on productivity as a means of surviving. Edijs Eglins, sales director at Lauma Fabrics, said that Lauma's three subsidiaries 's Lauma, Lauma Lingerie and Lauma Fabrics 's are working hard to improve worker effectiveness and productivity, which the entire industry needs to tackle.
"Many textile companies in Latvia have many things to improve [in order] to survive," he said. "They should improve productivity, quality, design and brand."

In addition, adds Eglins, they need to diversity sales. "They should find new markets, as most of their products now go to Russia, and it is risky to have just one market," he said.
Earlier this month the Russian Embassy in Latvia stated that textiles accounted for 6.6 percent of all exports to Russia.
As far as outsourcing, Eglins said that since the start of 2006 Lauma Lingerie will keep domestic production at current levels and outsource all new orders to Belarus and Ukraine. The company began sewing part of its output in those two countries a year ago.
The loss of potential exports is particularly worrisome given the huge disparity in Latvia's trade balance. The Central Bank announced last week that the country's current account deficit for 2006 was 22 percent, the highest in the EU and almost double the 12.5 percent registered in 2005.

Latvians, in other words, are consuming more of what is produced in the rest of the world and exporting less.
Strazds said one silver lining was that exports to the European Union were up some 15 's 20 percent in 2006.