Cablegate: Textiles and Apparel Production: Estonia

VZCZCXYZ0002
RR RUEHWEB

DE RUEHTL #0629 2690515
ZNR UUUUU ZZH
R 260515Z SEP 07
FM AMEMBASSY TALLINN
TO RUEHC/SECSTATE WASHDC 0201
INFO RUCPDOC/USDOC WASHDC
RUEHHE/AMEMBASSY HELSINKI 5228

UNCLAS TALLINN 000629

SIPDIS

DEPARTMENT FOR EEB/TPP/ABT/CLEMENTS
COMMERCE FOR ITA/OTEXA/DANDREA
COMMERCE FOR ITA LEAH MARKOWITZ
STATE PASS USTR FOR CAROYL MILLER
HELSINKI FOR SCO BRIAN MCCLEARY

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD BEXP KTEX EN
SUBJECT: TEXTILES AND APPAREL PRODUCTION: ESTONIA

REF: STATE 114799

1. (U) In response to reftel, the following are the
main sector data for the Estonian textile and apparel
producing industry in 2006:

-- Total industrial production: USD 7.8 billion
-- Total textile and apparel production: USD 458.56
million (5.9% of total industrial output)
-- Share of textiles and apparel in total Estonian
imports: 5.1 percent
-- Share of textiles and apparel in total Estonian
exports: 5.2 percent
-- Estonian exports of textiles and apparel to the
U.S.: 6.72 million USD
-- Total manufacturing employment: about 130,000 people
-- Total textile employment: 8,944 people
-- Apparel employment: 10,468 people

2. (U) Estonian textile industry output increased by 3%
from 2005 to 2006. During the same period, clothing
industry output increased by 6.8%. In 2006, the number
of companies in the textile industry grew 5.9%. In the
clothing industry the number of companies decreased by
13.7% compared to 2005.

3. (U) Due to the steep increase in salary costs (21%
in the 2nd quarter of 2007 over the same period in
2006), some companies which rely on outsourcing in
Estonia had to close down. Companies which have
invested in high technology, product development and
brand recognition, are doing well. Some of those
companies are producing expensive and high quality
products in Estonia and are outsourcing to Asia. At
the same time, the largest textile producer in Estonia,
Swedish-owned Kreenholmi Valdus (owned by the Boras
Wafveri group since 1999) is negotiating a layoff of
800 workers because of a decrease in orders and the
increased cost of labor. A Singaporean company, Baltex
2000, closed their operation in Estonia in 2006 to
develop real estate projects instead.

4. (U) Manufacturers in Estonia are concerned about the
textile and apparel manufacturing sector in Asia
because China and India subsidize their export
industries and therefore have an unfair advantage in
the market.

5. (U) In general, the GOE does not consider the
textile and apparel industry to be a priority sector.
GOE officials generally make few public comments
focused on textile issues. The GOE has not taken any
actions to increase competitiveness in this field.

6. (U) The GOE has programs and financing available
(with EU funds) to counsel and retrain dislocated
workers. As an example, 360 people who were downsized
in June by Kreenholm (para 3) are receiving
psychological counseling and retraining. The program
is scheduled to last 14 months and will cost about USD
1.3 million (of which 0.9 million is from the European
Social Fund.)

PHILLIPS

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