EU helps Georgian apparel industry compete on European markets
Tuesday, April 3
Since 1992, Elselema has been producing all types of clothing, with a particular focus on uniforms, outdoor wear, including padded down jackets, as well as casuals and knitted products for men, women and children. It’s a family business which has grown to operate two factories –both employing up to 200 workers – one in Tbilisi, and one in Lanchkhuti to the West of the Georgian capital.
The company is no novice in overseas markets, sourcing fabrics from markets like China and Turkey, and exporting manufactured goods to Italy and Turkey. However, to develop further on the EU export market, Elselema needed to come into line with high European and international social and labour standards – a task that required not only substantial changes to the set-up of the company, but accompanying documentation to meet the demands of an international audit, necessary to receive the certificate which would give the company the green light to develop new partnerships on the European market.
Now, however, the company is confident it can take advantage of these opportunities, with the help of a project funded by the European Union as part of its EU4Business initiative, which is building up a business cluster for the apparel industry in Georgia, and is supporting SMEs to upgrade their standards in the directions needed, and become competitive on the EU market.
The ‘SME Development and DCFTA in Georgia’ project is implemented by GIZ, which began by conducting a comprehensive market research of the apparel sector in Georgia, before approaching businesses in the sector to take part and receive practical assistance through the project – namely support for the implementation of leading European and international industry standards, in the form of the Business Social Compliance Initiative (BSCI – focused on areas such as social responsibility, workplace safety and workforce protection), as well as participation in trade missions to establish contacts in potential EU markets.
“We took the opportunity to participate in the EU-funded project as it provides a chance for further development and making our business more competitive. We have already seen positive outcomes,” said Elguja Mamasakhlisi, the founder of Elselema.
As both the preliminary research and a subsequent trade mission to Germany last September showed, meeting BSCIstandards is among the key requirements of European buyers – a conclusion confirmed by Elselema’s past experience.
“This project is essential for us in order to upgrade to international standards and connect with potential partners in Europe. For various reasons, some SMEs in Georgia are still reluctant to get involved in such projects,” the founder of Elselema said, adding that without support they would struggle to meet the challenges that go with the opportunities in the framework of Georgia’s Deep and Comprehensive Free Trade Area (DCFTA) Agreement with the EU.
“With the help of the EU4Business initiative and GIZ we have already been in Germany and met with our potential partners, we are now negotiating with some of them about price and other technical details. A retail branch of one of the leading German players in the apparel industry has shown interest in Georgia thanks to the project,” Mamasakhlisi said.
Stronger together: creating a business cluster
He has high expectations for cooperation with other apparel companies in Georgia as well, to concentrate and expand the capacities that the local apparel industry can offer. Apart from attracting more buyers, such cooperation could “make it easy for the apparel industry to have a dialogue with the government and introduce legislative amendments that will profit this sector. For a single company such a dialogue with the authorities is mostly fruitless,” says Mamasakhlisi.
It’s a view shared by Mikheil Getia, the head of another clothes manufacturer involved in the project, who argues that apparel industry representatives united in the cluster will be able to lobby far more effectively for the legal amendments they need.
Established in 2016 with Georgian and Danish participation, his apparel company MPT Georgia is quite new on the Georgian market.Though the company’s Danish shareholders have unlocked some European markets, MPT Georgia has also found it difficult to find new EU partners without the BSCI certificate.
He also points to delays in approving a trilateral deal between Georgia, Turkey and the EU, as one of the major challenges for apparelcompanies, which need to import vital materials from Turkey. Agreement on the so-called Euro1 ‘movement certificate’ would enable importers to buy in goods at reduced or zero rate of import duty under trade agreements between the EU and the beneficiary countries.
“The Euro1 certificate was activated between Georgia and the EU in 2014 within the DCFTA, and general consent has also been reached on the trilateral deal with Turkey. With joint efforts in the cluster we can hasten the enforcement of the trilateral agreement, which will lead to significant benefits for the Georgian apparel industry,” Getia said.
But the EU-funded project has also helped Getia’s company in other ways. One serious challenge was the shipment of small loads abroad, as freight companies were mainly interested in largercargos, while usingair service was expensive.
The solution came during last September’s trade mission to Germany: “The project settled the problem as it brought us into contact with a company in Germany that now transports our small loads without any problems,” Getia said.
Support for BSCI audit
But looking ahead, perhaps the most significant contribution of the project is the support from GIZ experts for the BSCI audit.
Getia says the company’s Danish partnership meant it could export to Denmark, and from there to Germany, Great Britain, Norway and Canada. “We were actively looking for new buyers,” he adds, “but without the BSCI certificate, the process was very slow.”
Not only did the project help him to prepare the dozens of mandatory documents for the BSCI audit, it helped to overhaul the way the company was set up, to ensure it met requirements.
MPT Georgia first applied for the BSCI audit in July last year. At the time, the best they could expect was to receive a very low, D level.
“The auditor left behind his recommendations over the work safety and mandatory standards. We have tried to meet the requirements. The EU and GIZ experts completely changed the company set-up and helped us to go through the paperwork. Without their help, it would be impossible for us to prepare all the documents necessary for the repeat audit that is due to take place in April. I have high expectations that now we will receive either an A or B level for the certificate, which will enable us to contact new European buyers freely,” Getia said.
Preparing the BSCI documents was a challenge for another beneficiary, Materia LTD, which was established in 2003, exporting its clothes to the post-Soviet states, the United States, France, and Italy.
"Regarding work safety standards, we were ready for the audit. However, drafting documents for the audit was a big problem for us. Thanks to the EU and GIZ we did the job, and we will soon apply for the audit,” said Lado Giorgadze, the head of the company.
He added the project had also helped him to contact potential buyers in Europe and familiarise himself with European best practice in the field, adding the trade mission to Germany had been “very interesting and fruitful”.
Now, Materia, which also received credit for export-related investment and business advice under a separate EU-funded project, is ready to face the future: “We focus on continuous development – boosting our competitiveness, increasing the quality of our products, taking care of and creating better working conditions for our people. This is what makes our company stand out,” says Giorgadze.
After nine months of intensive work with Georgian producers and international consultants, the four companies taking part in the project – Elselema Ltd., Eurotex LLC, Fashion House Materia Ltd. and MPT Georgia– are now ready to receive BSCI audits.
EU4Business is an EU initiative bringing together all EU programmes assisting SME and private sector development in Georgia. It enables the private sector to take advantage of the opportunities offered by the EU Deep and Comprehensive Free Trade Agreement, which gives Georgia access to a common market of 500 million consumers.