Capital Compass – Outlook for the Textile Sector | İsmail Gülle

Expectations and Financing Challenges in the Textile Industry: A Vision for the Future with İsmail Gülle

This week on the “Capital Compass” program, we welcomed İsmail Gülle, Chairman of the Board of Directors at Gülle Textile. We had an in-depth conversation about the textile sector’s export performance, the challenges the sector faces, and expectations for the future. Gülle shared his insights on both the current state of the sector and proposed solutions to financing issues.

The Current State and Challenges of the Textile Industry

The textile sector is one of Turkey’s most important export categories. İsmail Gülle notes that the textile industry has made a significant contribution to Turkey for over 50 years. Pointing out that textile and ready-to-wear exports have exceeded $30 billion in total, Gülle emphasizes that the sector has a fragile structure. “As a labor-intensive sector, textiles are struggling to compete, and external factors—particularly global inflation and rising interest rates—are negatively affecting the sector,” said Gülle, adding that exporters have not been able to fully benefit from currency appreciation, which has weakened their competitiveness.

Exporters Under Pressure from Exchange Rates and Inflation

Exchange rate volatility and high inflation are seriously affecting exporters’ profitability. İsmail Gülle noted that exporters are struggling to cover rising costs due to the stability in exchange rates. “The stability of the exchange rate makes it difficult to cope with rising costs. However, despite this, there is no decline in our exports,” said Gülle, emphasizing that exports have not lost momentum even during this challenging period. However, he predicts that significant growth is not expected for 2024, and that the main recovery may not occur until 2025 and beyond.

Financing and Foreign Currency Loans

According to Gülle, one of the biggest challenges for labor-intensive sectors, such as the textile industry, is financing. High interest rates, in particular, make TL loans unattractive, causing companies to turn to foreign currency loans. “Interest rates on TL loans are very high, so it’s understandable that exporters are turning to foreign currency loans,” said Gülle, noting that Eximbank and foreign currency-denominated bank loans are currently the most attractive financing options. However, he also added that long-term loans are limited and that fixed-rate loans may carry risks.

The Importance of Continuing to Invest

Emphasizing that Turkey must continue to attract investment, Gülle states that long-term country loans present a significant opportunity in this regard. “Long-term loans have always been attractive to Turkey. Such loans provide significant support to investors,” says Gülle, noting that continued investment is critical for growth and development in the sector. He also adds that funds provided by institutions such as Eximbank and the World Bank offer significant opportunities for investors.

Maintaining Our Current Position in the Industry and Focusing on 2025

According to İsmail Gülle, 2024 will be a year of maintaining the status quo for the sector. No significant growth is expected due to the economic slowdown and financing difficulties. However, he forecasts that the sector will rebound starting in 2025 as pent-up demand increases worldwide. “Starting in 2025, pent-up demand will come into play, and Turkey will maintain its competitiveness thanks to its strong production infrastructure,” says Gülle, emphasizing that companies need to take more cautious and strategic steps during this period.

Concordat and Labor Issues in the Industry

Gülle, noting that there has been an increase in debt restructuring agreements in the textile sector, states that companies facing financial difficulties in particular have been forced to resort to this option. However, he also points out that this situation does not indicate a major problem across the sector as a whole: “The increase in debt restructuring agreements stems from the sector’s financing difficulties. However, these figures are not very high and are under control.”

In addition, Gülle noted that the sector has also been affected by the EYT (Those Stuck at Retirement Age) regulation, stating that many workers have retired as a result of this regulation, creating a labor shortage in the sector. “There has been a loss of employment, but the sector is taking the necessary steps to manage this challenging process,” he says.

Outlook for the Future

Despite the current challenges facing the sector, Gülle believes the textile industry will continue to be one of Turkey’s strongest industrial sectors. “Our exports are continuing despite everything, and as inflation falls and macroeconomic indicators improve, the sector will return to growth,” says Gülle, expressing his confidence in the sector’s future.