The Collapse of Türkiye's Textile Sector: A Warning for Global Brands and Emerging Market Producers

The Turkish textile industry, once a cornerstone of the country's export-driven economy, is now teetering on the brink of collapse. A confluence of rising costs, currency instability, and aggressive competition from emerging markets has eroded its global competitiveness. For global brands and investors, this crisis serves as a cautionary tale about the fragility of supply chains in an era of shifting economic dynamics.

Cost Competitiveness: A Decade-Long Decline

Türkiye's cost-based competitiveness index for the textile sector has plummeted to 86.15 in Q1 2025, its lowest level in a decadeRising costs gut Türkiye’s competitive edge as trade …^[1]. This decline is driven by soaring input costs: energy prices have surged due to geopolitical volatility, while inflation has pushed the minimum wage up by 20% year-on-yearTurkey’s textile industry struggles amid rising costs, global competition^[2]. Meanwhile, the Turkish lira's depreciation against major currencies—down 18.87% against the Egyptian pound alone in 2025TRY to EGP - Turkish Lira to Egyptian Pound Conversion^[3]—has made Turkish exports less affordable for international buyers.

In contrast, rivals like Bangladesh and Vietnam are capitalizing on lower labor costs and stable exchange rates. Bangladesh, for instance, projects textile exports of $65–70 billion by 2030The Future of the Textile Sector: Bangladesh, Vietnam & Turkey^[4], while Vietnam aims to surpass $60 billionThe Future of the Textile Sector: Bangladesh, Vietnam & Turkey^[4]. These nations offer not only cheaper labor but also strategic access to U.S. and EU markets via trade agreements, further marginalizing Türkiye's position.

Supply Chain Reallocation: The Egypt Shift

The most visible symptom of Türkiye's crisis is the mass relocation of textile production to Egypt. Over 200 Turkish companies, including Denim Rise and 3F Tekstil, have established operations in Egyptian industrial zones like Suez Canal Economic Zone and West KantaraTurkish Textile Companies Moving to Egypt^[5]. These regions offer tax incentives, lower energy costs (up to 40% cheaper than in TürkiyeTurkish Textile Companies Moving to Egypt^[5]), and access to the U.S. market via Egypt's Qualified Industrial Zones (QIZ) agreementTurkish Textile Companies Moving to Egypt^[5].

This shift reflects a broader trend: value-added production (e.g., design and quality control) remains in Türkiye, while labor-intensive manufacturing moves to Egypt. For example, Denim Rise's $8.8 million investment in West Kantara is expected to create 1,000 jobsTurkish Textile Companies Moving to Egypt^[5], illustrating how European brands are leveraging Egypt's cost advantages without sacrificing proximity to European logistics hubs.

Implications for Global Brands and Emerging Markets

The Turkish textile sector's collapse underscores the risks of over-reliance on a single production hub. Global brands that once depended on Türkiye for cost-effective manufacturing are now diversifying their supply chains, often at the expense of local economies. For investors, this signals the need to prioritize resilience over short-term savings—a lesson echoed in the rise of “nearshoring” and regional diversification strategies.

Emerging markets like Egypt, Bangladesh, and Vietnam, meanwhile, are seizing the opportunity. Egypt's QIZ program, for instance, has become a magnet for Turkish firms seeking to bypass U.S. import tariffsTurkish Textile Companies Moving to Egypt^[5]. However, these nations must balance rapid industrialization with labor rights and environmental sustainability to avoid repeating the pitfalls of earlier manufacturing hubs.

Conclusion

Türkiye's textile sector is a microcosm of the challenges facing global manufacturing in the 21st century. As costs rise and supply chains fragment, the survival of traditional hubs depends on policy reforms, innovation, and strategic partnerships. For global brands, the message is clear: adaptability—not cost alone—will define the next era of textile production.