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In discussion paper No 1260, Research Associate Cristina Corado, Vladimir Benacek and Wieslaw Caban discuss the restructuring of the textile and clothing (T&C) industry in two East European countries in a period of foreign recession and domestic transformation to market economies. They compare the structure and the competitiveness of the industry with that of Portugal. At present, the three countries have small domestic markets. The Portuguese T&C industry suffers from the same problems as the overall economy in the Czech Republic and Poland. The study reveals how wide and intensive the problems of transition are. The case studies they discuss illustrate many of these difficulties. Former state-owned enterprises are reorienting sales to Western markets under the pressure of competition from a new and expanding private sector that sells imported products. Trade among former Comecon countries remains difficult in spite of the recent free trade agreement between Visegrád countries. The Czech Republic and Poland currently have a more dualistic market structure than Portugal: very large firms alongside a very fragmented private sector. The authors assess the contribution of the new, private firms in the Czech Republic to find that production and employment in the clothing industry performed quite well, in contrast with the former state-owned sector. The performance of and outlook for former state-owned enterprises are dismal, especially in the textile industry. In clothing, inward-processing trade has helped large firms. Using a simple analytical framework, they show that the former Comecon countries were never as good at buying as the West is now. The changes in domestic demand appear to be the main explanation for the fall in output in the earlier years of economic transformation. In clothing, however, inward-processing operations are dampening the problems of transition. Adjustment and Performance of the Textile and
Clothing Industry in the Czech Republic, Poland and Portugal |