Bulgaria's fashions for sale.

Valeria Jekova, Chairwoman of the Bulgarian Association of Apparel and Textile Producers and Exporters (BAATPE) predicts that business will decline by between 15% and 20% in the crucial autumn 2009 and winter 2010 seasons. A big shakeout of the sector is underway, she believes.

But surprisingly, according to Jekova, now may be the right moment for foreign companies to turn to the Bulgarian clothing industry.

For a start, Bulgaria has the lowest clothing production costs in the EU. According to New York-based management consulting firm Kurt Salmon Associates (KSA), the country stacks up well compared to other East European countries.

KSA's Global Sourcing Reference 2009 shows that at 38% less than the cost of production in the UK, Bulgarian-sourced goods also cost less than those made, for example, in Belarus, Albania, Slovakia and Ukraine.

Costs are lower.		Demand spans different cultures.

In contact with foreign investors, Dr Stoyan Stalev, Executive Director of the InvestBulgaria Agency (IBA) (the institute that promotes foreign direct investment to Bulgaria) insists that the country is anything but an insignificant country on the outskirts of Europe.

Stalev says that from its historical perspective (as part of the Ottoman Empire, of Comecon and now of the EU) Bulgaria is able to take advantage of its geographical vantage point to act as a bridge between the EU, Turkey, Russia and Eastern Europe, a grouping with a population of around 800 million.

Additionally, Isabel Kottmann, Regional Manager for French textile solutions company Lectra in Munich, says that from her analysis, some foreign investors are lured to Bulgaria by the possibility of the country receiving EU subventions of between 50% and 100% of costs to underwrite investment.

Indeed, for the seven years to 2007, Bulgarian clothing and textile production had multiplied by over 150%. Foreign investors such as Italian yarn and fabric manufacturer Miroglio and underwear producer Kalcedonia, as well as Turkish knitter Maser Holdings and the UK sewing thread specialist Coats enhanced quality levels and the international spectrum of Bulgaria's clothing industry.

This Bulgarian success story was not even affected by the phasing out of the Multi-Fibre Arrangement in 2005. Of course, the story has been anything but successful more recently.

Clothing trade a pillar industry

Despite the dramatic fall in demand over the past year, Evgeni Angelov, Deputy Minister for the Economy, stressed during BGate that the textile and clothing industries continue to be pillars of the Bulgarian economy. More than 140,000 people directly earn a living from these sectors.

Yet the Bulgarian clothing industry is almost totally dependant on export trades. Some 92% of these exports are destined for European countries, particularly Germany, Italy, Spain and France.

Angelov: clothing is a pillar sector.		Manolova: creating new contacts.

Mariana Manolova, Executive Director of BAATPE, said that Bulgarian manufacturers are now busy creating new contacts with (among others) Russia, the US and Canada. In 2008, the Bulgarian Small and Medium Enterprises Promotion Agency (BSMEPA) organised national fashion stands at CIFF (in Copenhagen), CPM (in Moscow), MAGIC (in Las Vegas) and at Lyon Mode City.

In 2008, Bulgarian exports of clothing amounted to Euros1.2 billion (-1.1%) and those of textiles to Euros478 million (-5.6%). Total exports of the sector thus slightly exceeded Euros1.7 billion, resulting in a positive trade balance.

Flexible production.

Yet from the end of 2008 demand from major European export markets has been falling. In spite of proximity to the European market, Bulgarian exporters are losing out in the unrelenting competition with low-cost Asian manufacturers.

The gap between Bulgarian and Chinese mainland production costs remains intractable. According to KSA's Global Sourcing Reference 2009, the average price per item in Bulgaria is nearly double that on the Chinese mainland. That's put down to the country's inefficient textile supply chain and low productivity, which is around 30% lower than for the EU average.

Yet, Bulgarian producers are very flexible. They mostly deliver small quantities of garments (a few hundred items per order) within about two weeks, if they don't have to source the necessary materials themselves.

Opportunities for investment

Most EU textile and clothing investors tend to see Bulgaria exclusively as a production location for exports to the EU. That would not be the case with Miroglio, which closed two plants this year and is turning towards Turkey as a sourcing base.

From his contact with Hong Kong and Chinese mainland textile investors, Stoyan Stalev of InvestBulgaria has the impression that theirs is a broader, global view compared with their European counterparts.

Stalev sets great hopes on Chinese-Bulgarian business meetings scheduled for this month, when a Chinese multi-sector delegation of around 150 visits Sofia.

Stalev: great hopes for Chinese mainland visit.		Jekova: buy into existing firm.

From her part, Jekova believes the best way to invest is to buy existing clothing factories. Due to the crisis, several Bulgarian owners have suffered financial problems. They mostly possess modern factories with excellent machinery but have not managed to match that with production expertise and marketing.

But Jekova says foreign investors could benefit from the Bulgarian skill set that includes an excellent reputation in segments such as trousers, suits, overcoats and shirts.

Indeed, many international brands, such as Hong Kong-based Esprit, US brands like Levi Strauss & Co, and major players including Diesel, United Colors of Benetton, Triumph, Prada, Vestebene, Zara, Armani and Hugo Boss source clothing from Bulgaria. They can choose from hundreds of Bulgarian cutting, making and trimming specialists, most of them SMEs.

The biggest producers of men's wear are Pirin Tex, a supplier to Hugo Boss and Strellson, along with Votan, which mainly produces for Bäumler and Cerruti. Then there are Dimitrov, Top-Men and Apolon.

Bulgarian producers of women's wear are generally smaller in capacity than the men's wear manufacturers. Heavyweights like Brilliant and Rodina Popovo Ltd are exceptions, while the biggest producers of men's shirts are Riton, Kris and Karina.

Rodina brand pants.		Bulgarian-style garments for hunters.

Brilliant is said to be successful as a cutting, making and trimming producer which has more than manufacturing as an objective. The company has a team of 30 specialists who offer customers additional design services, which are rarely in demand from customers.

There is also Bulgarian producer Veni Style which successfully launched its brand Etere in the country, even though 70% of its turnover comes from cutting, making and trimming, mainly contracted by the Italian Max Mara group.

Other companies which have succeeded in developing brands for the underrated domestic market are Markam, Kensol, Ariston S, Max Danieli, Battibaleno and Capasca.

from special correspondent Jozef De Coster, Sofia