Crisis in the textiles industry

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In late 2002, the Portuguese textiles industry is facing a crisis, with numerous bankruptcies and relocations, and large number of redundancies. Here we examine the findings of a recent study examining the causes of the crisis and highlighting the need for change, and outline the trade unions' views on the industry's problems and prospects.

Regional unemployment statistics released in December 2002, show that unemployment in the Vale do Ave and Beira Interior regions, both centres of the textiles and clothing industries, had risen by 31.5% and 28% respectively in the third quarter of 2002, compared with the same period in 2001. There have been a considerable number of bankruptcies in the sector, along with relocations of production to other countries (PT0207101N). Women are the principal victims, as textiles is a sector with a high level of female employment. In 1998, according to official figures, the industry employed 217,209 workers, of whom 157,613 (73%) were women. A low level of education and skills is another feature of the sector, with 85.1% of the workforce having completed only the second cycle of basic education, and only 0.08% being graduates (1998 figures). A further significant aspect of the industry is the relatively large size of firms. On average, 25.2% of Portuguese companies employ nine workers or fewer, whereas for the textiles sector this figure is 8.3%. Only 9.5% of all Portuguese companies employ from 200 to 499 workers, whilst in textiles this percentage is 19.4%.

Sectoral study

December 2002 saw the publication of a study on the Portuguese textiles sector, examining its strengths and weaknesses. The study highlights the structural nature of the present crisis, which has resulted from problems in adapting to market conditions, and the need to go beyond the present model of low-cost operations and embrace innovation, creativity and marketing, and to offer not only textile products but textile services with professional management. A need is identified for greater cooperation between companies to attain the 'critical mass' necessary to increase competitiveness and face up to foreign competition. The study finds that the companies whose products compete with Portuguese textiles are not from countries in eastern Europe or Asia, but from high-wage countries such as Germany or Denmark, which have set up effective logistics processes.

According to the report, it is up to companies individually to find solutions by: introducing better overall planning and human resource management; being more aggressive in business; increasing their commercial mass (through mergers, acquisitions and alliances) in order to improve exports and turn themselves into industrial service providers; and providing more vocational training. It is not, states the study, up to the textile sector’s representative organisations to assume direct responsibility for company development.

The team which produced the study included members of the industrial associations for the textiles sector, such as the Portuguese Association of Knitwear and Clothing Industries (Associação Portuguesa de Malhas e Vestuário, APIM).

Trade union position

The textile industry accounts for 22% of all industrial companies in Portugal and about 32% of all industrial jobs. According to the Federation of Unions of Textiles, Woollens, Garments, Footwear and Leather Workers of Portugal (Federação dos Sindicatos dos Trabalhadores Têxteis, Lanifícios, Vestuário, Calçados e Peles de Portugal, FESETE), the industry’s economic dynamism is still considerable. FESETE states that economic figures for the textile industry give reason for a fair degree of optimism: investment, gross value-added (representing about 18% of gross value-added for manufacturing industry overall), turnover, the trade balance and productivity have all progressed very significantly in recent years. The increase in productivity between 1996 to 2000 was almost double the national average (approximately 5.4%, compared with 3%). Exports from 1995 to 2000 underwent annual growth of about 4%, representing 25% of Portugal’s total exports, with 90% being destined for the European market. The unions point to the process of relocation, lack of investment and ineffective modernisation as factors in the continued rapid rise in redundancies in the industry.

According to the unions, economic globalisation will lead multinational companies to relocate to countries where they can maximize profits and avoid compliance with environmental and social regulations. In some cases, Portuguese companies have very poor management and organisational capacity, and they continue to have low output and subcontract a large amount of work. However, many companies have restructured and modernised. They produce high-quality goods and are able to compete internationally. Given the economic figures, unions are optimistic about the future.

As indicated by the table below, average pay in the textiles industry is very low and declining by comparison with the overall national average, standing at about two-thirds. Women in the sector earn, on average, less than men, and this gender pay gap has increased over recent years.