TEXTILE & APPAREL LEATHER & SHOESinvestin.am/textile.pdf · socks-knitting machinery was established. Currently, the company produces a full range of socks and hosiery of dierent

INDUSTRY OVERVIEW

TEXTILE & APPARELLEATHER & SHOES

KEY FACTS

Export of textile & apparel, leather & shoes

grew 2.7 timesbetween 2014

and 2017

Access to a consumer market with more than

1.5 billion people with 0% or reduced

duties

Export opportunities:the majority of EAEU countries are textile

importers

Competitive labor cost of $1.98/hour

Low electricity prices of8 US cent/kWh

High quality standards: 42.5% of Armenian textile &

garments are exported to EU

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TEXTILE & APPARELLEATHER & SHOES

2

EXPORT

£ 6.6% of Armenian total export£ 38.7 % growth of textile & apparel, leather & shoes export in 2017

Ø 40.7% growth of textile export in 2017Ø 19.9% growth of leather & shoes export in 2017

Textile & apparel, leather & shoes export

ANNUAL GROWTH BETWEEN 2015 AND 2017

35-43% 2012 2017 x6GROWTH

Main exported products

Textile and apparel: Suits and coats for men and women, knitted gloves, children clothing, tights and socksLeather and shoes: Leather clothing, suitcase and bags, leather shoes, furry clothing and accessories

Source: Customs Service of RA

ARMENIAN TEXTILE & APPAREL EXPORT DESTINATIONS IN 2017

Hungary

0.2%

0.1%

56.1%

UkraineUSA

0.2%

0.1%

42.5%

GermanyItaly

Russia

15.9%

25.7%

Georgia

0.1%

Czech RepublicFrance

0.4%

0.3%

Spain

42.5% of Armenian textile & apparel are exported to EU

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MANUFACTURING

TEXTILE & APPARELLEATHER & SHOES

2014 2017 x2GROWTH

x1.4GROWTH

2014 2017

Market strengths

Export orientated industry One of the oldest industries in Armenia

World-famous traditional carpet weaving brands Highly competitive market for outsourcing

£ 113 textile & apparel companies, 84 leather & shoes companies£ Modernized traditional folk art appliance in textile and apparel design£ Stylish design studios: internationally qualified designers £ Support and capacity building from international donors to develop and

modernize small and medium-sized enterprises to position Armenian apparel and shoes as high-end designer goods

£ R&D support projects towards apparel and shoe sectors by GIZ, UNIDO, EUNIC, EU4Business

Very competitive and skilled work force Own brands and subcontractors

33.2% 1.1% PRODUCTION GREW IN 2017 SHARE IN TOTAL PRODUCTION

TEXTILE & APPAREL

4

Source: World Bank, Doing Business database

HOURLY ELECTRICITY PRICE IN US CENT/KWH IN 2017 IN ARMENIA COMPARED WITH THOSE OF TOP EXPORTERS

Average 17.5

Armenia’s electricity price in comparison with those of top textile exporting countries is minuscule.

Armenia 8

BelgiumSpain 19.1

China 12.7

India 20.3

Turkey

IndonesiaNetherlands

12.111.1

10.8

Italy 20.2

USA 26.6Germany 25

16.7

Electricity price

Source: The Conference Board & National Bureaus of Labor Statistics*Latest available data

1.2$Armenia

32.3$Germany27.1$Italy

4.1$Turkey*1.1$India*

25.8$USA

4.5$China17.2$Spain

37$34.6$

BelgiumNetherlands

Average 20.4$

Labor cost

Armenian labor cost is 17 times cheaper than the average of world’s top textile & apparel, leather & shoes exporters.

HOURLY COMPENSATION COSTS IN THE MANUFACTURING INDUSTRY IN 2016ARMENIA COMPARED WITH THOSE OF TOP TEXTILE & APPAREL, LEATHER & SHOES EXPORTERS

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INDUSTRY INSIGHT

Interesting information about textile sector

Evidence of Armenian garment-making exists from even further back in history. A 5900 year old skirt fragment found in Armenia is the second oldest garment discovered in the world.

Carpet weaving

The most traditional subsector in textile industry of Armenia is handmade carpet weaving. New fashion Armenian rugs designed with old traditional ornaments have high demand in USA, Russian Federation and Europe.

Supporting project

One of the key supporting projects in the industry is United Nations Industrial Development Organization (UNIDO) Project “Improving Competitiveness of Export-Oriented Industries in Armenia through Modernization and Market Access”.Objective of the project is to contribute to the implementation of the National Strategy for Export-Oriented Industrial Policy and the Strategy for Development of the Textile Industry of Armenia through strengthening productivity, competitiveness and collective export capacities of Armenian manufacturing companies operating in the priority light industries. Main achievements of the UNIDO Project since 2014

£ Sustainable partnerships with the largest retail chains in the region and conclusion of export contracts.

£ Establishment of Export Consortium to organize and promote joint exports, business networking and institutional partnerships between local shoe and garment producers, developers (design, modelling) and exporters.

£ Capacity building workshops and seminars conducted by UNIDO international experts on design and pattern making, etc.

£ Establishment of the representative fashion center of Milan-based “Istituto di Moda Burgo” in Yerevan, launching of pattern-making and fashion illustration courses with Burgo methodology.

£ Way forward: Establishment of the Light Industry Development Cluster Center to serve as an innovative training and service center

Armenian brands’ history

Textile and apparel: Kanaker Garment Factory since 1960, Sarton (subcontractor) since 1990, Arshaluys since 1996, Gloria (subcontractor) since 1997, Melante since 2002, Viva, Danni (Lentex) since 2003, Artsocks (Hello) since 2008,Hellomedical (Hello) since 2011, You&me (Hello) since 2012, Alex Textile since 2015.

Leather and shoes: Ava since 1950, Yeghvard since 1986, Sali since 1991, Armos since 1992, LKR since 2001, Elma shoes since 2002, SAFIAN since 2007, Simona (Simar) since 2010.

TRADE OPPORTUNITIES

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EAEU (Russia, Kazakhstan, Belarus, Kyrgyzstan) - 0% tari� rates, 183.4 million

FTA with CIS & Georgia - 0% tari� rates, 98 million (EAEU excluded)

FTA with Iran & Vietnam - 0% or reduced tari� rates, 172.9 million GSP (Canada, Japan, Norway,

Switzerland, USA) - 0% or reducedtari� rates, 503.5 million

GSP + (EU & UK) - 0% or reduced tari� rates, 511.8 million

ACCESS TO A 1.5 BILLION CONSUMER MARKET WITH PEOPLE WITH 0% OR REDUCED CUSTOMS DUTIES

There are also on site “one stop” services and custom registrations

£ VAT - 0%£ Profit tax - 0% (only employees’ compensation)£ Property tax - 0% (property includes all tangible real estate property: house, o�ce

building, and property rented to others)£ Corporation income tax - 0% (tax imposed on the net income of the company)£ Customs duty - 0%

Tax exemption in FEZ

Free Economic Zones (FEZ)

“ECOS”FEZ

(since 2018)4321

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GOVERNMENT SUPPORT

Taxes

£ VAT (Value Added Tax) payments’ postponement for up to 3 years for importing equipment and goods within investment programs

£ 0% VAT for more than 230 product groups imported to Armenia£ Up to 30% profit tax reduction for new jobs created within business projects in the

5 reporting years following the year of launch£ Customs duty exemption for materials and equipment/technology imported

from non-EAEU countries that cannot be replaced by materials and equipment/ technology produced by EAEU countries within investment programs

£ Legal entities can construct up to 500 kW Solar Installation to get electro energy for their own needs without License

BUSINESS ENVIRONMENT

OUT OF 190 COUNTRIES

ECONOMIC FREEDOM INDEX 2018

OUT OF 180 COUNTRIES Source: World Bank, Doing Business Database Source: Heritage Foundation Database

Takes 3 days to open a company, 7 days to register property

E�cient e-governance services in place

No restrictions on investment sectors

100% foreign ownership permitted

Five-year investment protection from changes in legislation

Free exchange of foreign currencies and repatriation of profit

Well-regulated banking system

Foreign companies registered in Armenia have the right to buy land

st41STARTING A BUSINESS

th8 REGISTERING

PROPERTY

th14

th44MODERATELY

FREE

75%

INVESTMENTFREEDOM

MOSTLY FREE

DOING BUSINESS 2019

SUCCESS STORIES / GLORIA

SUCCESS STORIES /YERAMAR (SAFIAN)

Lentex LLC was founded in 2003 in Gyumri. While at the first the company only manufactured women's tights under the “Viva” brand, soon after a new department with socks-knitting machinery was established.

Currently, the company produces a full range of socks and hosiery of di�erent colors and sizes both for children and adults. The company meticulously complies with state standards and is appropriately licensed. LENTEX gives a high quality output of more than 100 types of products.The company exports the full range of its products and knitwear to Russia, Georgia, and

rdUnited Arab Emirates. More than 50% of its production is exported to EAEU (51%) and 3 countries (2%).

SUCCESS STORIES / LENTEX

The French-founded company Yeramar has been doing business in Armenia since 2007. It produces luxury leather good and accessories for world-renowned French, Italian and Spanish companies. Being a great success in the European leather goods and accessories market and having highly qualified and professional workers, the company created its own brand SAFIAN that signifies the combination of Armenian culture and true luxury. The name was chosen after the Armenian type of goat leather to highlight the historical link between local fauna and leather production.

The company produces everything leather-y: bags, accessories, wallets, and belts. Yeramar is also planning to create a shoe factory upholding the European quality standards for luxurious goods.

One of the best examples of international contractors is Gloria. It’s a long-lasting business partnership based on mutual trust, high professionalism, and deep-rooted respect. You can find a Moncler jacket with a “Made in Armenia” in the company's main brand store in Milan, Italy. Gloria also has partnerships with many famous brands, such as Dainese (Italy), BP (Germany), Paul H. Kübler Bekleidungswerk GmbH & Co. KG (Germany), London Fog (England), Gerry Weber (Germany), The Amerex Group (USA), etc.

The industry strongly relies on the workforce, as the hands of the workers shape of the final product. There are more than 300 craftsmen, sewers, etc., investing their expertise into the production process. Gloria is always on the lookout for new partnership opportunities.

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5 Mher Mkrtchyan Street, Yerevan 0010, Republic of Armenia Phone: +374 11 597 888

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