Feasibility Study of Establishing a Garment Factory with Foreign Brands’ Cooperation
Abstract:
Apparel industry has been a matter of interest for investment in developed countries for decades,
due to high rate of employment, direct impact on economy, industry development and also low
financial requirements.
Clothing industry with $423 billion worth of exports exceeds 55% of the world's textiles and
clothing exports, 4% of world’s industrial goods exports and 2.5% of global exports. The country's
apparel exports of about $64 million, represents only 0.02% of the world's apparel exports.
Ministry of Industry, Mine and Trades’ statistics indicate that Iran's most unofficial clothing import
is from China which comprises up to 80 to 90 percent of unofficial import.
One of the best ways to develop this industry is to attract foreign investors and business partners,
which is also facilitated by the Free Zones law and regulations. Therefore, with a combination of
modern technology of developed countries and cheap labor force in the region, a profitable
business will emerge leading to production development and export to neighbor countries.
While domestic manufacture contains 60% of the country’s apparel production, some of the
manufacturing units offer their products with foreign brands.
This project tries to offer a high quality product so that a brand can be created and major market
share can be gained. One of the drawbacks of the apparel market in Iran is the lack of branding
and the integrity of product manufacturing.
The annual cost of clothing for Iran is about $7 billion, about $5.5 billion (79%) of which is either
officially imported or smuggled.
Statistics show a high potential for design and fashion activities. Branding and manufacturing of a
domestic brand can therefore have a good potential in the apparel market to compete with
smuggled and imported goods. The advantages of creating a garment factory are: creating jobs,
reducing goods smuggling, preventing unproductive production and creating competition among
domestic producers (improving the quality of products).
Iran’s Exchange relations with Europe, neighboring with Turkey, accessing a large Geographic
area, the completion of two-year airport construction which has resulted in having transportation
facilities, export terminals, financial services and other transportation facilities have attracted
attentions for investment in this region.
Furthermore, other advantages of investing would be the existing facilities to build greenhouse
complexes, investment in the packaging industries and supplemental processing industries and
regions nonmetals mineral resources. Moreover, the capacity of industrial development based on
the supply chain in neighboring countries, especially turkey, 20-year tax exemption from all
activities and unrestricted partnership with foreign investors, 100% foreign investment, exemption
from customs duties to import raw materials and machinery and government’s guarantee on
foreign investment would all be advantages of investment in this region.
Advantages of Maku Free Zone for apparel production:
-Located on the East-West corridor and proximity to European market (transit highway),
quick, easy and cheap access to European and CIS markets
- Inexpensive work force
- Proximity to Turkey and Azerbaijan
- Locating the largest and most important land customs between Iran and Turkey (Bazargan)
in Maku Free Zone
- Tourists’ passage to Turkey and Europe
- Existence of plains and vast lands for industrial, agricultural, livestock, tourism and
commercial activities
- The existence of proper infrastructure
Maku Free Zone has become an inviting region for investment due to geographical location
(proximity to Turkey and CIS countries) on the East-West corridor and proximity to the European
market, easy and quick access to European and Central Asian markets, connections with Caspian
littoral states, the expansion of Iran-Europe business relations and the high volume of goods
exchange, existence of the largest and most important land customs station of Iran with Turkey
(Bazargan), a 20-year tax exemption for all activities, proper situation for joint ventures,
exemption from customs duties to import raw materials and machinery and full guarantee of
foreign capital by the government according to the law of attracting and protecting foreign
investment.
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