Historical background to the sector
The first textile manufacturing factories were established in Hungary at the beginning of the 18th century. Given the country’s agricultural characteristics they dealt primarily with the processing of cotton, although Hungary was known for the processing of silk as well. At this time the working of flax and hemp cultivated in the country had not moved beyond a cottage industry because foreign competition and the fashion for printed pattern cotton fabrics raised difficulties for these products.
In the early 20th century and again between the two world wars, the Hungarian textile industry underwent major development; this was the period when many factories – later to become famed for their products – were established. Lace-making also developed to a very high level. The nation’s textile industry suffered enormous damage during the Second World War, but recovered relatively quickly after the end of hostilities. Nationalization brought fundamental transformation to the structure of the industry and the management of factories.
However, at the time of the change of system the players involved in this sector lost their traditional markets faster than any other sector. As a consequence of the political and economic changes that occurred in 1989-90, the earlier considerable level of exports to the then Soviet Union collapsed, domestic consumption of home-produced textiles dropped drastically (first and foremost because of import liberalization and high inflation in the early 1990s), which resulted in the bankruptcy of corporations and the rapid downscaling of the textile industry. Former state companies were wound up, with their places being taken by a plethora of small businesses. In the course of privatization the sector lost a huge amount of capital measured both in terms of means of production and in terms of human resources. The privatized and restructured industry began to consolidate towards the end of the 1990s, and then started to grow, even if this growth started off only from a very low level. However, after just a few years import competition began to intensify enormously, a phenomenon that was paralleled by an increasing tendency in the textile trade towards dubious business practices, primarily customs fraud and the avoidance of VAT. Immediately after the turn of the millennium market challenges brought about new forms in quality terms. The global division of labour strengthened, as did the move by manufacturers to relocate their activities to those countries operating with lower costs.
Situation of the sector
The sector is largely made up of small- and medium-size enterprises, although they are also attended by a considerable number of sole proprietorships. The number of registered enterprises approaches 4500, although it is true to say that the number of functioning businesses is somewhat smaller than this. The sector currently employs around 50,000 people, the vast majority female labour.
Companies active in the sector have to struggle not only with problems deriving from the increase in globalization, in effect an increase in competition, but also the domestic economic policy situation also involving a lack of state support. The problem of intensifying competition affects companies operating on the domestic market in the clothing industry sector to the greatest degree. Globalization of the world economy and the opportunity for free trade has resulted in the globalization of production in the textile and clothing industry fields, too. The high labour element in the costs of certain products gave those parts of the world operating with high productivity levels and low wages a definite advantage. The movement towards relocating production to countries of Asia, Oceania, India and South America is a trend apparent in the textile industry worldwide. This process gained pace in 2002 when China joined the World Trade Organization. The lowering of barriers in the quota system (2005) protecting the textile markets of the developed countries resulted in fundamental changes. This factor combined with the extremely unfavourable wage relations evident in the domestic textile industry impact negatively on the further development of the Hungarian textile industry. The level of contributions imposed on labour is a drag on the development of the sector; it places huge social burdens on enterprises due primarily to the large number of female employees in the industry.
Despite the external environment harbouring the abovementioned difficulties and the impacts of the economic crisis, in the past few years enterprises operating in the textile and clothing industry were capable of constantly adapting to the changes.
A large proportion of small- and medium-size enterprises active in the clothing industry are not in direct contact with consumers of their products or users because hourly wage labour activities are extremely widespread within the sector. This tendency has a dual effect: on the one hand it restrains any strengthening of product development and the validation of own created products representing higher added value, while on the other hand the low level of development of own products does not allow any reduction in the proportion of hourly rate manufacture.
The situation of companies manufacturing technical textile products can be said to be good in comparison with the position of manufacturers of clothing products. European companies are the primary competitors in this sector, which also means that the competition is not primarily one based on cost but rather on meeting the demands of users. There are relatively larger, but at least medium-size enterprises involved in the manufacture of technical textile products, and these companies generally have planned R&D strategies, which means that they are able to pursue continuous product development. The sector’s smaller businesses can similarly be listed among innovators, including ready-to-wear companies, who through a process of constant development of products and technologies are able to meet ever changing demands.
The same can be said of Hungarian uniform and protective clothing manufacturing companies. Demand for these product categories is generally made evident through public procurement tenders. Businesses active in this sub-sector are proving themselves increasingly successful not only on the Hungarian market, but on the wider European market, too.
Sub-sectors/technologies/products with potential from an export aspect
work and protective clothing
home and household textiles
other fashion items
Key target markets
The most important markets are primarily located in the member states of the European Union. Approximately 70% of Hungarian textile and clothing industry business activities take place on European markets. The key partner countries: Germany, Italy, France, Austria, Romania, Russia, Switzerland, Great Britain and Scandinavia.
Export development programmes 2011
In the course of formulating export development programmes we concentrate primarily on the products of manufacturing companies turning out high added value items, demand for which is significant especially on the European market.
The Hungarian Investment and Trade Agency (HITA) is arranging a Hungarian stand at the prestigious A+A 2011 safety, security and health at work trade fair being organized in Düsseldorf between 18-21 October.
In addition, product presentations, business meetings and an international public procurement seminar are also being arranged.
Hungarian clusters and associations
1. Hungarian Society of Textile Technology and Science (TMTE)
TMTE was founded in 1948. Its membership comprises more than 100 member companies and close on 1000 registered specialists and experts.
Range of activities of the cluster: organization of professional events, provision of information, training, adult education within the "EDUTEX" adult training programmes, professional interest representation, publication of specialist journals and professional publications, consumer protection programme, technical, legal consumer protection consultancy with specialists from the association, as well as other services such as partner mediation, experts mediation, databases (sector address and activity listings), technical translations, career guidance, job exchange etc.
2. Pannon Textile Cluster (PanTex)
Pannon Textile Cluster was established in the clothing industry on 13 September 2005, with the following aims: helping ensure the more efficient and profitable work of textile industry and service development specialists and enterprises in the West Transdanubia Region, and creating a professional and infrastructural background, intellectual workshops and channels of communications for members. Establishment, operation of network (cluster) cooperation forms involving experts and enterprises, and their management tasks. At present the cluster has 37 members and this number is growing all the time. As far as regional coverage goes, the vast majority of cluster members are located in the West Transdanubia Region, but as a consequence of the achievements of the cluster more members are joining from outside the region (Békés county, Pest county).
The cluster offers members the following services: market research, trend tracking, career guidance, information service, interest representation, formation of a common website, project generation, benchmarking club, support for innovation, development activities, assistance in structuring supplier partner relations, support in taking part in professional study tours, partner meetings, assistance in participation at exhibitions and fairs, organization of business meetings, publishing of joint professional publications, arranging logistics activities.
3. South Great Plain Regional Cluster
The knitting industry companies participating in the South Great Plain Regional Textile Industry Cluster (founded: 2001) have established their own supplier network, jointly operate a machinery service, coordinate orders in order to distribute capacity, operate a pattern design studio and put forward joint offers of products manufactured by the member enterprises. The cluster places great emphasis on product development. Their latest development is, for example, the application of nanotechnology in order to give their products an antibacterial element. A large majority of the member enterprises are specialized on supplying certain phases of the total work process.
Coordination of the following services takes place within the framework of the network: operation of an outworker network, operation of a knitting and ready-to-wear industry repair and service base, provision of logistics background services, order and capacity mediation, patterning, mediation, promotion of the own models of the member enterprises, organization of participation at exhibitions, fairs, creation and mediation of resources necessary for intra-sectoral technological developments.
1. Association of Hungarian Clothing Manufacturers
The activities of the association encompass promotion of the members and facilitating communications between them.
2. First Hungarian Fashion Designers Federation
The federation is charged with representing the promotion of members via a joint website.
Sector consultant: Nikolett Szász
Telephone: 06/30 460 6357