Denizli lies to southwest of the Anatolian peninsula and to the east of the Aegean region, that is a passageway between Central Anatolia and Mediterranean regions. It is surrounded with provinces of Burdur, Isparta and Afyon from the east, with Aydın, Manisa from the west, with Muğla from the south and with Uşak from the north. Geographical location and vicinity of Denizli, transformed it to a attraction center of the neighbourhood and developed commercial activities in the region.
The textile industry, which dates back to ancient times in Denizli formerly carried on by using wool than later on cotton in hand weaving activity. This lasted until the 1950’s as a traditional handcraft, factory production of raw cloth began with the foundation of Sümerbank in 1953 and it’s activation strengthened textile industry in the neighbourhood. Denizli industry made it’s real effort after 1970’s in the Republic era, because between 1970–1980 and subsequent years a large number of weaving plants established. The improvements as a result of accepting a global manner after the 1980’s brought Denizli textile industry to bright points and after 1980 it gained expertness in production of towels and bathrobes.
In Denizli province today, 81% of workers of the large manufacturing industries are employed in the textile sector. Because, 74% of the exports in Denizli has being done by the textile industry and in Türkiye exportation bathrobes with 66% and towels with 69% has been perfomed by Denizli textile firms alone. So, textile industry has an engine position in employment, production and exportation matters of Denizli industry.
Denizli lies on the southwest of the Anatolian peninsula and south of the Aegean Sea. It serves as a pass between the Aegean, the Inner Anatolia and the Mediterranean regions. Neighbouring it are the cities of Burdur, Isparta, Afyon, Aydın, Manisa, Muğla and Uşak (Map I). It’s built on an area of 11,868 km2. Besides it’s center, it has 18 districts, the most populated of them being Acıpayam, Tavas, Çivril, Çal, Sarayköy and Buldan. According to the census 2000, the population of Denizli is 816,250; with more than half of its population living in rural areas.
Map I: Location of Denizli on The Map
Denizli is located in Aegean Region of Turkey, but the climate is not uniformly Aegean throughout the whole province. A terrestrial climate may be felt in the center of the province, because the area is like a pathway from the seaside to inland areas. The inland area is cooler than the seaside because of these climatic differences. The land is open to winds coming from the Aegean Sea, because the mountains are perpendicular to the sea. Winters are rainy or sometimes snowy, but generally mild.
Denizli territory is surrounded with natural boundaries such as; to the east with Teke Mountains that is a succession of the western end of the Taurus chain, to the north with the northern part of the Gediz basin, to the west with South Menderes massive and basin and to the south with dalaman basin, Teke mountains and Güney zones (Yurt Ansiklopedisi, 1982: 2116). Denizli has a rough surface. Low and high plains, plateaus and mountains complete each other. High plains are considered a highland in fact. A large part of the land is higher from the sea. Sarayköy is the closest place to sea level with an altitude of 170 m. Denizli territory doesn’t not considered entirely hilly, because it’s territory is flat only half part is mountainous and rough. Valleys of the province are; the Big Meander and Çürüksu valleys, Edremit Valley (Eşkene Plain) and the Gireniz the Valley. The plains Big Meander or Sarayköy, Denizli and Çürüksu are divided as low and Tavas, Acıpayam, Kaklik and Hanbat, Baklan and Çivril are high plains.
Denizli is not lack of streams in general, it can be said that it is rich. There are some that outstretchs from province and some that run within the province which feed the major rivers (İl İl Büyük Türkiye Ansiklopedisi, 1984: 319). The most important of these rivers are; Big Meander River, Çürüksu Stream, Dalaman (Gireniz) Stream and Akçay Stream. And the most important of the lakes in Denizli which cover an area of 9500 hectare are; Acıgöl (Çardak Lake), Çaltı (Beyler) Lake, Karagöl, Işıklı Lake and the Süleymaniye Lake.
Denizli city was called in history as Ladik, Lazik, Lazkiye and Donuzlu (Toker, 1949: 8). After Moslem conquest this city was called as Lazik and later on took the name Denizli due to the abundance of water (Denizli). Although there are some different ideas at the works of Kâtip Çelebi, Baybars Mansuri and İbn Batuta, Kaşgarlı and Şerafettin Yezdi in this matter (Eskikurt&Kapluhan 2007:618). Denizli was the summer place of Laodicea, which was a famous city in ancient times. This city was built by Seleukos II. Antiokhos in III. century BC. and he named it in behalf of his wife Laodicea. The ruins of this city is located near the Eskihisar village, which is between Denizli and Goncalı stations and 6 km’s north of Denizli.
The foundation of Laodicea on an important main road and it’s having abundant number wealthy people in population made this place from the first century onwards an important banking and financial center. For example, even the famous orator Cicero was stating that he should transfer his bonds in to cash in Laodicea. Besides the rich mines and marbel quarries of the neighbourhood and high quality agricultural products acquired from the fertile soil, the main subject that we want to discuss here is the art of weaving which began 2000 years ago and also exists today (Malay, 1989:295). Actually in Roman period Laodicea name was identified with textile products. Goods produced in this neighbourhood were dispatched to major Aegean coast ports such as Ephesos and Miletos and from there shipped to Greece and Italy. Textile industry which led by Miletus in ancient times, with Roman period has been monopoly of Laodicea and it’s neighbours Hierapolis and Kolossai (Khonai/Honaz). The big fame that the neighbourhood gained was of course as a result of the development in stockbreeding. In Phrygia’s famous, vast pastures too many sheep were breeding and this was encouraging the people to tend to weaving brunch of business.
I.I HISTORICAL BACKGROUND OF TEXTILE INDUSTRY DEVELOPMENT
Artisanal textile production in Denizli began at least 2000 years ago. Beginning from this early period to the Seljuk and Ottoman era, fabric production remained in its artisanal form (Mutluer, 1995: 11-12). Although towards the end of the Ottoman period and during the early Republican period, there were some production units operating in capitalist sense, artisanal form of production was still dominant in Denizli (Pınarcıoğlu, 2000; Erendil, 1998).
The natural thermal waters that gush out near Hierapolis city, used to stabilize textile dyestuffs and the existence of alum for dyestuff in thermal waters abundantly, provided the establishment of too many wool weaving workshop in the city. In the neighbourhood in ancient times, dyeing, felt making and carpet manufacturing were done as secondary occupation besides the textile weaving (Malay, 1989: 295).
In Denizli some regions of the province were not suitable for agricultural production due to their unproductive lands and hilly geographical positions. Especially in mountainous and hilly regions of the province, where the land is not suitable for agricultural production, for many centuries, the economy was unavoidably restricted with the artisanal textile production. According to the first industry census conducted in 1927, there were 1581 establishments in all the sectors in Denizli (Mutluer, 1995: 18, 21). The number of establishments operating in the textile sector was 423 (Pamuk, 1998). It should be noted that majority of the people employed in those establishments were family members. Only 9 establishments had more than 10 workers with a share of 2 per cent in the total textile establishments (Erendil, 1998: 180). In these regions of the province, there developed an important textile production tradition. There are two major sub-districts of Denizli that experienced such an artisanal textile production and developed the traditional historical background of the industry. These were Buldan and Babadağ. Later on Kızılcabölük started to artisanal production of textiles. In these three locations major products of artisanal textiles were original weavings, cotton fabrics, embroidered dotal products and duvet covers. Productions were taking places in the small artisanal workshops of houses. Almost all households were textile producers and they were employing family members which in the long run affected major firm structure of industrial organization in Denizli (Pınarcıoğlu, 2000).
Denizli’s major source of income is textiles, which it imports worldwide. The famous traveler Ibn Batuta, after visiting the city in 1332, described it as “having seven mosques, a market, vineyards and gardens, and never running out of water.” As to the business life in the city, he said, “the cotton cultivated here is of the finest quality and excellent fabrics are made here, with gold or silver embroidery.” (Demir, 1999: 57).
In the last period of the Ottoman Empire, it can be seen that in and around Denizli weaving developed quitely, however the production form in this sector looks like a handcraft that was done with very primitive looms. Generally a member of the families was working with looms. In short, atelier production that needs worker employment was not started yet. An important determination of this period is that some small scaled industrial foundations were operated by foreigners in the neighbourhood of Denizli (Buran, 1999: 62).
Due to the lack of industrial bourgeoisie, in the early years of Turkish Republic, state was heavily involved in industrial development through either establishing state enterprises in different sectors (including textiles) or taking measures to encourage
private sector initiatives (Erendil, 1998). This developmental characteristic of the state was so strong that the fate of regions and people was largely depended on the state. In relation to textile industry, two such developments were experienced during the 1920s and 1930’s: “the Law for Encouragement of Industry” (Teşvik-i Sanayi Kanunu) and cotton yarn factories established by the state. According to ‘the Law for Encouragement of Industry’ which was put into act in 1927, only big establishments with minimum 10 horse power capacity could utilise the incentives (tax exclusions and provision of land) designed for the development of private initiatives. But, none of the textile firms operating in Denizli had enough capacity to be covered by the law (Erendil, 1998: 177; Pamuk, 1998: 9).
During the 1930’s, the state also opened four cotton yarn factories but again none of them was located in Denizli. Two of the factories were established in Bursa and another one from that textile producers in Denizli both cotton yarn was put into operation in Nazilli As it is evident from the above, in the early years of Republican Period, the opportunities available for the transition of Denizli from artisanal form of production to capitalist-modern form of production was very limited. For a long time, textile producers “either worked as subcontractors for the tradesmen who provided the cotton yarn or worked independently by buying the cotton yarn from tradesmen within a credit system and selling their products in the markets in the province center, or in other districts themselves” (Erendil, 1998: 181). It is observed that the first forms of collaborative relations appeared under these circumstances. Indeed, in Denizli the tradition of local collaboration can be traced back to the 1930’s. Beginning from 1930’s, many small textile producers in Denizli with the backing of the state had established cooperatives in order to protect themselves from the tradesmen who sold their fabric or controlled the textile production.
Consequently, at the end of 1930’s, there ware textile cooperatives in Denizli (Mutluer, 1995: 26-27, 96). These cooperatives which provided their members with the cheap cotton-yarn enabled them to enter into the markets previously dominated by the tradesmen (Erendil, 1998: 178; Mutluer, 1995: 26-27). At first glance, the fact that Denizli did not receive important public investments directed towards industrial production can be considered as a negative factor for the economic development of Denizli. But, as Şengün (1998: 94-95) argues, in the 1930’s and 1940’s this situation, giving rise to (textile) cooperatives, helped the formation of an entrepreneurial spirit and collaborative environment in Denizli.
II. World War had further strengthened the creation of dense collaborative relations. As the import of the cotton yarn became more and more difficult due to the war conditions textile producers in Buldan and Babadağ, historically the most important centers of textile production in Denizli, were initially affected from this quite negatively. On the one hand, most of the textile producers in Buldan began to migrate to Istanbul with which they historically had close trade relationships. On the other hand, a small number of producers in Babadağ who produced mainly for Anatolian markets chose to migrate to Denizli province centre and other Anatolian province and district centres (Pınarcıoğlu; 2000). In order to prevent black market conditions caused by the war in cotton yarn provision, in 1941 the state gave the responsibility of distributing cotton yarn to Sümerbank, the state enterprise which was responsible for textile production (Erendil, 1998: 178). When the Turkish government introduced strict regulations over the distribution of cotton and cotton yarn, the cooperatives, established during the 1930’s, took important responsibilities for the distribution of cotton yarn given by Sümerbank (Mutluer, 1995: 28). During this period, cooperatives were such good practices that in 1946 the number of textile cooperatives in the province center increased to 16 (Erendil, 1998).
Almost all textiles were produced by hand until the 1950’s in Denizli and its townships. In 1953, the Sümerbank Clothing Factory was established with new technology and became an immediate stimulant to the local industry. By the 1960’s, the textile sector of Denizli had reached the point where growth continued without almost any state investment. State incentives, which have given to large investors in priority development areas, gave to Denizli only for a short-time during early 1970’s. It is claimed that this incentives helped Denizli to acquire somebig investments in the early 1970’s (Özcan, 1997: 72).
In “1964, the Sümerbank factory began to produce fabric and initiated printing and dying operations (Erendil, 1998). “As a result of this new policy/operation of state owned factory, Sümerbank, small textile producers were no longer able to get cotton-yarn as cheaply and easily as before and had relatively lost their importance in the Denizli economy” (Armatlı-Köroglu, 2004: 108). Although the operations of many small textile producers had slowed down in the end of 1960’s in the 1970’s, with the establishment of few private cotton yarn factories, small firms again gained importance in Denizli (Armatlı-Köroglu, 2004: 108). During the 1970’s, two important factors were experienced for the development of Denizli (Armatlı-Köroglu, 2004: 108). Firstly, in 1973, Denizli was designated as a province having priority for development (Mutluer, 1995). The second important factor in the economic development of Denizli in the 1970’s was the investmentsrealized by the Turkish immigrants working abroad, especially in Germany (Armatlı-Köroglu, 2004: 108).
It is influenced Denizli economy positively in the long-term, however, most of the Turkish immigrants lost their savings in the companies established in Denizli. “As with Kayseri and some other medium-sized cities, many joint venture investments were made in manufacturing by Turkish migrants abroad. Only a few of these survived” (Özcan, 1997: 72).
Due to the existence of these cooperatives, it can be argued that subcontracting relations in Denizli developed in a more symmetrical nature with respect to the distribution of formative power among the textile producers. Further, as Erendil (1998) and Mutluer (1995) argue, state control over the distribution of cotton yarn through the cooperatives, to a certain extent, has weakened the importance of tradesmen and made it possible for textile producers to accumulate some amount of capital. Last, but not least, with the help of cooperatives, small textile producers in Denizli also began to learn the collective responsibility and develop a tradition of mutual trust-support (Erendil, 1998; Pınarcıoğlu, 2000). However, in 1940’s various measures taken by the state prevented the formation of workshops in the capitalist sense (Erendil, 1998: 179) the Law for Encouragement of Industry was phased out in 1941 and ‘Extraordinary Income Tax’ was put into force in 1944. As a result of these legislations, many textile producers in Denizli, like in other parts of Turkey, abandoned the workshop type production and reinitiated artisanal-home production in order to be exempted from the new taxes put into act (Mutluer, 1995: 27).
Although Denizli did not show any substantial growth in the first decades of the Turkish republic, there occurred crucial developments under import substituted industrialization period. These crucial developments constitute historical background of industrial development dynamisms and they were realized throughout the years between 1930’s and 1980’s. Two of them are in particular importance and will be mentioned
Firstly it can be argued that the roots of the collaborative environment were traced back to 1930’s. Before 1930’s there were a small number of tradesmen selling products and controlling textile production in the regions through buying cotton yarn and using subcontractors for production (Erendil, 1998). However starting from 1930’s with the backing of the state, many small textile producers established cooperatives to protect themselves from tradesmen and his controller position in the production process.
According to Pınarcıoğlu (2000) these cooperatives provided cheap cotton yarn to their members and enable them to enter into markets which were previously dominated by the tradesmen. Cooperatives in 1930’s triggered collaborative working habits in Denizli and constituted one of the important historical backgrounds of social capital dynamism. In addition to the establishments of cooperatives, Second World War had further strengthened collaboration among small textile producers. Owing to war conditions import of the cotton yarn became more difficult and small artisanal producers in Babadağ and Buldan were affected from this situation negatively (Armatlı-Köroğlu, 2002). A small number of producers in Babadağ migrated to Denizli province center and they wanted to maintain textile production in their new location. Thus production was relocated in the region towards the center of the province and moreover new comers from Babadağ developed active trust relations while trying to survive in the city being different from their hometown. These active trust relations enabled them to develop solidarity, reciprocity and co-operative working conditions (Pınarcıoğlu, 2000). While world was experiencing Second World War in 1941, to prevent black market conditions Turkish state introduced strict regulations over the distribution of cotton and cotton yarn. In this process cooperatives established during 1930’s were given significant responsibilities for the distribution of cotton yarn given by Sümerbank (Mutluer, 1995; Armatlı-Köroğlu, 2002). The results were progressive. During 1930’s and after the war in 1940’s cooperatives learned how to work collaboratively in an atmosphere of mutual trust and reciprocity.
Secondly in 1950’s there occurred major technological improvements transformed manufacturing structure of Denizli. Two of the most significant steps to transform artisanal textile production to modern industrial production were the establishment of a part of Sümerbank in the region and transition to electrical looms in production. As Erendil emphasizes the introduction of electrical looms as the first transformation in textile sector provided large productivity growth to producers (Erendil, 1998). In addition to this, with Sümerbank the first modern factory based industrial production was triggered in the province. In fact these two important developments were the revolutions in the road of modern textile and garment production capacity.
In addition to these two major changes generated collaborative environment and modern industrial capacity, there occurred other developments that contributed historically to industrial structuring of the region. Some of them were visible in 1970’s. For instance all hand shuttle looms were replaced by electrical looms which increased productivity significantly. Between the years 1964-1979 as a result of this technological improvement value added per textile establishment increased by over 10 times (Pınarcıoğlu, 2000). Establishment of a large printing and dying company in 1974 enabled Denizli to increase quality, quantity and variety of its fabrics. Technological improvements and modernization of production offered a highly processed form for TGI. Thus as Pınarcıoğlu states as 1980’s approached Denizli stepped out of its artisanal production (Pınarcıoğlu, 2000).
It should also be mentioned that owing to developing collaborative environment, industrial and subcontracting relations were very dense and highly symmetrical during 1970’s (Eraydın, 2002, Kazdağlı, 1998). Symmetrical nature of subcontracting relations shaped and gave rise to a collective development medium and a horizontally structured industry. In other words small firms found the chance to develop collectively and this was stemming from the tradition of cooperatives and their reciprocal production relations for textile production. In fact this was one of the most important social capital dynamism in the region. Apart from this there could be identified one another. Development of fabric production in Denizli gave rise to division of production tasks among different firms specializing in different parts of the textiles including cotton yarn, weaving, dying and finishing (Armatlı-Köroğlu, 2002). It can be interpreted that these working traditions in textile industry formed the basis of the modern export oriented clustering structure in TGI . This clustered structure carried out significant economic development dynamisms to the region started around 1980’s.
I.II EXPORT ORIENTED GROWTH AFTER 1980’S
After 1980 in Denizli there are two different form of organization and connection network that had specialized in production of towel and bathrobe. The first of these is production chains that has an underdeveloped technological structure which produce low-quality goods for the low and middle income groups of the home market. As well as towels and bathrobes, these units produce home textiles (bed sheets, duvet covers, curtains, tablecloths etc.) that Denizli started to produce in the first stage of development. Manufacturers in this segment are small and medium-sized and the production is organized by traders today as in the past and even yarn is provided to producers by the merchants. It can clearly be seen how the establishments are small scaled from the employment of two workers in 58 % and two workers in %22.3 of the establisments. These establishments are based on family labor yet and almost %90 of them is busy with custom manufacturing (Eraydın, 1999:264-265).
After the import substituted industrialization period, there experienced an export oriented growth with the start of the 1980’s. The collaborative environment whose roots were generated in the previous period was the main driver of this industrial growth process. However this industrial growth and following local transformation did not have just one face but rather had two faces. In other words there were two aspects of export oriented industrial growth and transformation. On the one hand there was SME-led and symmetrical development with networks of mutual trust, reciprocity and solidarity in which opportunities for growth were redistributed equally among small and big firms by the system. On the other hand there was asymmetrical development creating unequal power relations among large and small firms and deconstructing local collaborative relations through which SMEs were excluded from the network and development opportunities were redistributed unequally among SMEs and leading large firms. By the way of evaluating these two distinct aspects of export oriented process, it is intended to give a realist picture of the well known development story of TGI in Denizli.
Started with 1980’s some entrepreneurs succeeded to strengthen their capital accumulation and marketing relations and by the way they started to enter western markets for export with towel and bathrobe production. These firms generated growth motivation and became the starters of local transformation under export orientation (Pınarcıoğlu, 2000). In 1980’s leading exporter firms in the region attracted many of the small and medium sized firms to export oriented production through subcontracting relations. These active inter-firm relations attracted a lot of SMEs to
profit from growth opportunities of TGI. In this symmetrical development medium of industry, enterprises learned how to supply the orders of western buyers through producing higher quality, minimum price and becoming quick and flexible. In other words in the symmetrical export oriented growth process, as a cluster Denizli become one of the significant full-package textil supplier of western buyers. This integration to global value chains was realized through learning by doing and learning by interacting (Armatlı-Köroğlu, 2002). Moreover Denizli upgraded its production technology while adapting international production standards (Erendil, 1998). In brief, developments like symmetrical industrial growth and technological upgrade constituted equally progressive aspect of export oriented local transformation. Progressive local transformation can be traced through rising numbers of industry. As can be understood from the table mentioned below between the years 1980 and 2000 number of establishments, employment, output and value added raised significantly.
Table 1: Development of Industrial Performance in Denizli 1980-2000
Source: various issues, TÜİK
While manufacturing industry was rising under export oriented textıl and garmet production, particularly in 1980’s and early 1990’s local collaboration among firms was the driving force behind the rapid growth process. Local collaboration in the form of informal institutional relations as well as formal ones contributed significantly to industrial development (Özelçi, 2002). In this respect mutual trust, reciprocity and township relations became the major dynamisms of social capital in TGI cluster of Denizli. An interesting situation could be a very appropriate example of mutual trust and township ties. For instance Pınarcıoğlu notes that (2000) within the context of compatriotic relationships textile producers from Babadağ helped each other in the export and there was not official contract signed in transactions between them.
In fact this was the other aspect of local transformation. Although the exports and number of T&G establishments are increased in 1990’s, the weight of SMEs decreased in the TGI of local economy. As can be understood from the table mentioned below number of SMEs increased significantly between 1992 and 1997 however started from the second half of the 1990’s the number of SMEs started to lessen.
According to Erendil in the beginning of 1990’s, a tendency emerged in leading firms to integrate all complementary parts of the production in the firm in order to catch the quality demand of Europe and USE markets (Erendil, 1998). This was an obvious move towards vertical integration. Leading textile and garment exporters of Denizli tended to prefer integrated production owing to inadequate production capabilities of subcontracting firms in quality. Changing organization of production had negatively affected clustering dynamics and the number of SMEs began to decrease. According to Işık and Pınarcıoğlu (1996) in the new face of local transformation entry to the market was no more as easy as it had used to be. Between 1997 and 1999 the number of textile and garment SMEs decreased from 249 to 194. Horizontal local network relations through which a symmetrical development climate had been formed were fragmented owing to unequal power relations among small and big firms.
As Erendil (1998) points out in her research towards the end of 1990’s there could be identified two worlds of textile production in Denizli. On the one hand there were textile and garment producers using outdated technology and producing low quality standardized goods for domestic markets. On the other hand there were exporters modernized their technology and producing with high quality. The direction of the transformation was towards increasing gap between these two worlds and this was shaping an asymmetrical development climate in which there was domination of a few large firms (Armatlı-Köroğlu, 2002).
The rise and the fall of co-operative form in industrial development story of Denizli is tried to be discussed through evaluating two distinct aspects on local transformation. This evaluation is generated by a brief literature survey highlighting development and transformation of an old success story. Denizli as a well known old success story of Turkey, have experienced an interesting industrial development trajectory for at least three decades. Throughout 1990’s external position of Denizli in global TGI value chain had not changed however internal structure of industry changed significantly. This change negatively affected fundamental and specific dynamisms of regions industrial growth through deconstructing underlying mentality of cluster and social capital networks. How all these developments and transformations have affected competitive power and restructuring efforts of the region in a globally repositioning industrial sector still remains as an open question. In this regard case study of this thesis aims to answer and discuss such questions of industrial development and change.
In Denizli export have increased from 221 to 991 million dollars between 2001 and 2006 (DSO, 2007). A considerable amount of imported goods are raw materials and semi-finished products which are in relation to TGI. According to 2005 data, 25 % of the imported products are materials eligible for weaving and goods which are made up of them (DSO, 2007). The garment industry in Denizli started to shift from a structure which supports the cotton, cotton gin, and yarn production in Turkey by supplying these products from the domestic market, into an import-oriented structure. The largest textile factory which functions as the supplier of fibre and weaved fabric for the towel, bathrobe and home textile producers, Abalıoğlu Tekstil, is closed. The closure of this large factory which has been the most important supplier of fibre and fabric for the T&G cluster in Denizli for long years is a considerable signal of the shift towards the import of raw material and semi-finished products.
I.III STATE INVESTMENT ERA AND THE FIRST TECHNOLOGICAL TRANSFORMATION IN DENİZLİ
After the II. World War, the state decided to open five new cotton yarn factories. In 1953, one of these factories was established in Denizli province center (Mutluer, 1995: 30). This factory was the first modern factory in Denizli and employed 500 workers. In the early 1960’s electricity also started to be used in Denizli province center. This led the first great technological transformation in the textile industry of Denizli: a lot of electric-driven looms were bought from Bursa, Adana and Merzifon (Erendil, 1998: 182). All these developments paved the way for the development of Denizli province center as the center of textile production of the province (Pınarcıoğlu, 2000; Eraydın, 1998). Consequently, Denizli has attracted population from its districts, especially Babadağ (Pınarcıoğlu, 2000). These cheap and skilled labours have been intensely exploited by the producers who succeeded to accumulate some amount of capital in the previous period (Erendil, 1998).
Under these circumstances, during the 1960’s many small but modern textile firms were established in Denizli province center (Pınarcıoğlu, 2000). Even local producers started to produce their own electric-driven looms (Erendil, 1998: 181). “The possibility of increasing production due to the widespread use of electricity and availability of cheap cotton-yarn provided by the Sümerbank factory also* led various producers from the districts of Denizli, especially Babadağ, or various large family
groups to form factory type establishments by combining their capital” (Erendil, 1998: 182). According to the industry census conducted in 1964, in Denizli there were 626 wage workers employed by 13 private textile firms (Pınarcıoğlu, 2000). These relatively large firms were the first attempts for capital accumulation for the members who could establish their own family firms in the following years. As Erendil notes (1998: 182), “other than making production themselves, these stronger groups could also extend their loom capacity through dependent subcontractors in Denizli”. Indeed, during this period, the relationship between producers in the districts and tradesmen or subcontracting firms in Denizli was very dense. As the textile industry was relocated and concentrated in the province center, trade has also become very important and attractive for the textile producers (Pınarcıoğlu, 2000).
In 1964, as the factory established by Sümerbank began to produce fabric and initiated printing and dying operations (Erendil, 1998: 36), small textile producers in Denizli compared with the other districts specialized in the textile production were no longer able to get cotton-yarn as cheaply and easily as before (Eraydın, 1998). Although in the late 1960’s this hindered the operations of many small textile producers in Denizli (Eraydın, 1998), consequently in 1970’s a few private sector firms started to establish new cotton-yarn factories and also provide small firms with modern cotton-yarn treatment (Pınarcıoğlu, 2000). What is crucial in this story is that, as Pınarcıoğlu (1998) argues, due to the existence of more than one firm producing cotton yarn and providing cotton yarn treatment, ‘there was no de facto cartel’ in Denizli. Anyway, the effects of extension of the operations realised by Denizli Sümerbank factory were initially negative. However, it should be also equally noted that with the introduction of new production facilities the number of employees in Sümerbank fabric factory rose from 543 to 1400 (Erendil, 1998: 183).
During the 1970’s, Denizli received important amounts of investments in quite different sectors. In this period, two factors were critical in the economic development of Denizli. Firstly, in 1973, Denizli was designated as a province having priority for development. As Eraydın (1998) argues, inclusion of Denizli among the first priority regions primarily aimed at the elimination of the problems associated with the extension of cotton yarn production of Denizli Sümerbank factory into the fabric production and printing-dying operations. As a result of this decision, public investments to Denizli, especially to its manufacturing industry were fairly increased (Işık and Pınarcıoğlu, 1996: 66). First priority region status of Denizli had continued up to 1981. However, after 1980 many firms in Denizli have continued to utilise from other ‘investment incentives” given by the state.
The second important factor in the economic development of Denizli in 1970’s was the investments realized by the Turkish emigrants working abroad (especially in Germany) (Mutluer, 1995: 74-77; ). In Turkey, the basic thrust behind the establishment of workers’ enterprises was to eliminate the problems that would have been experienced if Turkish emigrants working abroad had returned to country due to the plant closures and job losses caused by the crisis of the 1970’s.
During the period of 1971-82, in Denizli approximately 20 firms were established as multi-partner workers’ enterprises (Pınarcıoğlu, 2000). Only a limited number of these firms operated in the textile sector and most of them became unsuccessful (Erendil, 1998: 185; Mutluer, 1995: 76). But the experience accumulated through these investments helped the transfer of technical know-how from abroad to Turkey and created an atmosphere of local entrepreneurship (Pınarcıoğlu, 1998).
In the 1970’s, two factors mentioned above together with the family groups accumulating capital in the previous periods gave rise to the emergence of new firms in quite different sectors ranging from electronics to textile and food industry. During this period, Denizli experienced a relative sectoral diversity. Between 1971 and 1979, the number of firms operating in Denizli and employing more than 10 workers increased from 34 to 95 (Erendil, 1998: 187). The number of firms operating in the textile industry was 21. As Pınarcıoğlu (2000) argues and it is also evident from the studies of Mutluer (1995), Pamuk (1998) and Erendil (1998), among the newly established textile firms three had critical importance for the economic development of Denizli.
One of these firms, employing 500-600 workers, was established in 1975 by the Turkish emigrants working abroad in order to produce cotton-yarn. Another one, employing more than 200 workers, was again producing cotton-yarn and established in 1977 by a family who, in the late 1940’s, migrated from Babadağ to Denizli province center. The last one, Denizli Dyeing and Printing Factory, was founded by 174 partners (including both textile producers and tradesmen) and it was the first big establishment providing the small textile producers with modern cotton-yarn treatment, dyeing and printing facilities. As it is argued earlier, co-existence of these establishments (both public and private enterprises) hindered any tendency directed towards the formation of a cartel over the provision and treatment of cotton-yarn in Denizli. However, as Erendil argues (1998: 186), “although polarization intensified after 1980’s, it can be easily claimed that the actors or ‘leaders’, who gave the first impetus to growth by responding to favourable conditions of the 1980’s, were also determined in the 1970’s”. Apart from these large firms, in Denizli province center, in 1980 there was 1,700 firms each of which employed less than 10 workers (Pınarcıoğlu, 2000).
It should be noted that in Denizli compared with the other districts specialized in the textile production, subcontracting relationships between the textile producers during 1970’s, was very dense and highly symmetrical (Eraydın, 2002; Pamuk, 1998). The thickness and symmetrical nature of subcontracting relationships have stemmed from both the tradition of establishing cooperatives experienced in the earlier period and the reciprocal production relations required for textile production. As Pamuk (1998) argues, the development of fabric production in Denizli gave rise to division of production tasks among different firms specialising in different parts of the textile production (cotton gin, dying and printing, cotton yarn production). These reciprocal production relations and the multi-partner workers’ enterprises of 1970’s can be considered as the different forms of collaboration relations that have dominated the textile production of Denizli so far.
I.IV TRANSITION PERİOD TO GLOBAL PRODUCTION
In the second half of the 1980’s, as consequences of export oriented development policies, Turkey became one of the most important textile exporting countries. Small firms become important agents of this integration process, however they were seen as the main source of employment generation before export boom of 1980’s. This favourable environment has been fuelled by two important sources: the potential of the region, related to the past experience of industrialization, and the capital accumulated in the hands of various family or capital groups’; the state incentives and measures, designed to promote exports. It has also been noted that collaborative environment in Denizli has been the major facilitator of growth process which is defined by Erendil (1998) as ‘the following successful examples’. In collaborative environment of Denizli, some
entrepreneurs, who had strengthened their position in terms of capital accumulation and marketing relations in earlier stages of growth, started to enter into the export markets. They have also been important in generating growth motivation and become the initiators of local transformation and specialization in towel and bathrobe production (Pınarcıoğlu, 1998). In this process, trade firms operating in Istanbul and foreign fairs were the important ways of integrating to export markets and fulfilling the subcontracting requests of western enterprises. The leader firms of Denizli through subcontracting relations with western enterprises in textile industries drew many medium-sized firms to export oriented production field. Because, the total production capacity of export firms was not enough to meet the demands of export markets and most of the time labour intensive stages of production have been subcontracted to small firms (Erendil, 1998). This interactive environment has attracted a large number of small firms to benefit from opportunities of the town. In this period, enterprises learned many things about export-oriented production and export markets by way of the local network relations and the trial and error method. In other words, the basic characteristic of this integration process could be defined as “learning by doing” and “learning by interacting”.
The leading firms, producing for the global markets, were forced to improve their technology and quality to adapt to international production standards. During this period, Denizli has upgraded its production technology in a step by step fashion from large firms to small ones. Firstly, some leader “firms started to investment in machinery, especially the second hand machinery from Italy and started to export basically home furnishing products (bed sheets and other fabrics) to MiddleEastern countries and EU countries” (Erendil, 1998: 192). Additionally, small firms were also able to upgrade to the minimum level of technology required for the export markets through again the second hand market, which has been created by the local large and medium size firms that either renewed their machinery stock or enlarged their production capacities. This upgrading process has resulted in such a local technological configuration that the levels of technology employed in large and small firms were more or less complementary or similar to each other, which played a very important roles in the establishment of the subcontracting relationships between large and small firms (Kazdağlı, 1998; Aslanoğlu, 1998). In this transformation process, local collaboration and mutual trust, established among the small and medium sized firms, have been the driving force behind the rapid growth in Denizli (Pınarcıoğlu; 2000: 230).
It has been also emphasized that collective learning and adaptation potential of local actors have played an important role in the integration process to export markets. Cooperative form was built upon both the formal relations and the informal relations of close friendship, kinship and township. Being from the same area or being from the same family has always been very important in the establishment and growth of firms (Eraydın, 2002). Eraydın (2002) also notes that the development of entrepreneurship in Denizli has been mainly based on family ties through which the capital needs of the small entrepreneurs have been met. Partnerships have been formed between both the members of the family and the friends with similar backgrounds due to the place of birth, and trust-based relations formed in pervious periods (Erendil, 1998; Varol, 1999). In this respect, a general strategy that was widely used by the textile producers in Denizli during the 1980’s, has been the establishment of partnerships on temporal basis.
Thus, the partnerships were generally broken down when the members successfully adapted to the market conditions and accumulated a certain amount of capital required for the establishment of their own firms.
Although market capitalism has weakened most of the peasant culture values, it seems that township relations are still very important among the social institutions in Denizli (Eraydın, 2002). Compatriotic relationships especially seem to be strong among the textile producers born in Babadağ. The partnerships and mutual aids in the form of provision of information and capital were very dense among the producers born there. Pınarcıoğlu (2000) also notes that within the context of compatriotic relationships textile producers from Babadağ have helped each other in the export 8markets. It is no a surprise that these producers have become very successful in export markets and taken the leader positions in the textile industry of Denizli. Mutual trust among the producers born in Babadağ is such that no official contract is signed in most cases in transactions between them. The well-known ‘Babadağ Banknotu’1 is a case in this respect (Şengün, 1998).
As Erendil (1998: 223) notes, “being from Babadağ has a high reputation among producers who seem to be proud of being from that district and contributing much to the improvement of textile production in Denizli”. Consequently, 1980’s could be considered as the initial stage of integration process to global production networks. In this process, small and large firms’ relations were generally constructed through sub-contracting relations, which depended on long textile tradition and relatively homogeneous local environment. Besides the help of collective environment and trust-based local relations, cheap and skilled labour potential of SMEs in textile industries has been important for taking a place in global markets. Friendly relations of small and large firms have been lost in the later stages of growth and the role of SMEs in growth process has transformed in Denizli.
In Denizli, the export boom came in the first half of the 1990’s with the help of the local opportunities and state incentives in textile sector. During the period of export boom, catching up the international standards in the quality of products became crucial. But, in the beginning of 1990’s “the quality of production in Denizli stayed behind the international market requirements” (Eraydın, 2002). For this reason, leading firms started to modernise their machinery by importing automatic looms. In this technological renewal, like in the first one, state took important responsibilities such as decreasing the minimum investment requirements for investment incentive certificate in the beginning of the 1990’s (Erendil, 1998). Therefore, this gave opportunity to many small and medium sized firms to update their machinery besides large leader entrepreneurs. In the export boom era, many new entrepreneurs have entered the market in order to benefit from opportunities of Denizli. Consequently, the number of firms and employees and the amount of textile exports of Denizli have increased sharply in the 1990’s between 1990 and 1992, the number of textile establishment has increased from 36 to 82. In the same period the number of textile employees has increased from 6638 to 9114. The rate of the increase at the number of textile establishments has been four times more than the rate of the increase at the number of employees. In other words, it is possible to argue that the number of small firms in textile has dramatically increased. This rapid increase has turned into a boom between 1992 and 1997, during which the number of textile establishment has increased from 82 to 276 revealing a specialization in textile related industries.
During the growth process, the firms entering the market with a small size have evolved to different scales from small to large ones. In this evolution of firms, two different types of producers have formed in Denizli. The first type of
producers produces low quality goods with old technology for domestic markets. The second type of producers produces high quality goods for international markets. The increasing gap between these two different types of producers has caused an asymmetric environment, which led to the domination of a few numbers of large firms in Denizli.
In the beginning of 1990’s, a tendency emerged in leading firms to integrate all complementary parts of the production in the firm in order to catch the quality demand of Europe and USE markets (Erendil, 1998). After the middle of 1990’s, due to the effects of economic crises and changing strategies of large firms, the number of SMEs and employees began to decrease A large number of new comers, especially those having weak kinship and township relations, could not survive in the crisis of the late 1990’s, and closed down. Consequently, entry to the market was no more as easy as it had used to be (Işık and Pınarcıoğlu, 1996). From 1997 to 1999, the number of small sized establishments has decreased from 296 to 228 (% 23) and the number of employees has also decreased.
However the number of large firms has increased from 31 to 36. This limited growth shows that although in the initial stages of growth, the emergence of large leader firms had been considered as the initiators of local transformation, in the later stages small firms have been forced to secondary position due to the domination of large firms.
In the local transformation process, network relations have become much more loose and fragmented due to the unequal power relations among the firms (Pınarcıoğlu, 2000: 244). Since the middle of 1990’s, the interfirm relations have changed and the necessity of collective action has diminished, as the demand has been guaranteed in global export markets (Erendil, 1998; 113).
Eraydın (2002) emphasises that “local collaborative relations, which have been very important in 10the initial stages of growth, may be less effective in the later stages due to increasing competition”. Indeed, in 1990’s, large number of large and small firms competed on similar products. In this process small ones have become more vulnerable, compared with the big firms, due to the lack of financial resources, lack of adequate skills, and lack of supporting institutions (Erendil, 1998). Therefore in Denizli, the current loose and fragmented networks lead to the declining collaborative environment. Moreover, now the production networks expend itself beyond the boundaries of the locality. This transformation process brings not only the loss of subcontracting relations but also more flexible relations.
During the period within which large firms integrated their production facilities, the problems, experienced by the SMEs, gave rise to new forms of collaborative practise in Denizli. In the 1990’s, one of the most important developments for SMEs was the foundation of a many-partnered foreign trade company: the Eagean Ready-Garment Producers Association (EGS)” (Pınarcıoğlu, 2000: 237). EGS was founded by small enterprises to compete with the leading large firms in 1993 (Eraydın, 2002). The aim of this company has been to provide services, such as export, transportation, and insurance through the collective companies. In 1996, a bank and a trade firm were founded to solve the financial and export related problems. The success of EGS model originated from supplying major needs of small producers, which depending upon solidarity, mutual trust and self-help tradition (Eraydın, 2002). Therefore, this organisation shows that today capitalist type of institutions start to take the place of traditional communitarian relations, such as kinship, township and ect. In the crisis era, large number of firms have been affected negatively and closed down. Crisis conditions have put the existing products, production organization and network relations into doubt. It seems difficult for the town to continue to articulate with the global textile network as a producer of towel and bathrobes. In this period, EGS has lost its collaborative basis and also its power in Denizli. Although the share of each members could not be more than 3 percent, the dominance of large firms had became obvious in the decision making process in EGS. Conflicting interests could not survive in the same institutions and different power groups have constituted their own institutions in order to keep and increase growth rates within the highly competitive and crisis era. Small firms and large firms have been belonging to different collaborative associations and institutions due to the differentiated aims and problems. The chamber of Industry includes, firstly, large enterprises and Association of Industrial Entrepreneurs (SIAD), which is another institution of large firms. In the end of the 1990’s, the number of associations has increased, which hold usually small enterprises. The most important group among them is MUSIAD (Independent Entrepreneurs Association), which has been constituted by Muslim entrepreneurs (Eraydın, 2002; Pınarcıoğlu, 2000) to implement rules of Islam in economic activities. Under these conditions, many small communities that were newly emerging have caused an institutional split in Denizli.
CONCLUSION AND RECOMMENDATIONS
Denizli is one of the star cities that has an important place in Turkish economy and had been throughout history a pioneer in the industrialization efforts. Also shows that it has the ability to continue this position for many years with it’s advancement dynamic and enterprising potential. In the economic structure of Denizli, agriculture, industry, tourism plays an important role. The active establishments in the neighbourhood are mostly small and medium-sized. The majority of these firms are active in the manufacturing trade, the remaining part are distributed in the services sector, such as trade and tourism.
The realization of the potantial of the industrialization of the province mainly in the field of textiles is based on the ability of Denizli entrepreneurs having important knowledge, experience and culture in “weaving” sector. However, psychology of investing in a well-known lines of business and finding qualified personnel easily depends on the prefer of Denizli entrepreneurs “modernizing” economic activities that has “tradition” instead of tending to “unkown”. It is possible to cultivate every agricultural product on Denizli soil which is very fertile. Especially field crops and garden fruits provides a significant contribution to the province’s economy. The tourism sector provides input from agriculture, industry and services and therefore contributes to the development of these sectors. The tourism sector, which has an important place in Denizli economy made great developments in recent years.
From Denizli, which is in a exportation focused economic activity, an exportation that amounts $ 2.143.877.000 was performed by the end of 2010. Analyzing the structure of this exportation, it would seem that more than 51% of it belongs to textile and garment industry and the rest to marble, travertine, wire, metal and other industrial products and food etc. Exportation is continuing to 109 city all over the world from the province (TÜİK 2011:150).
The base of textile sector in Denizli, which is developing quickly and has an extrovert structure, depends on weaving handicraft. This speciality gave the province the chance to be one of the Anatolian Tiger provinces. In Denizli weaving started in ancient times. In the origin of weaving history of the province stands soft, raven black and available sheep wool. Traditional weaving profession survived in the neighbourhood after the Turkish conquest increasingly. But in this era cotton textile industry also gained
importance. The Denizli Sanjak was the most active fabric production center of West Anatolia in the last period of Ottoman Empire.
Denizli textile sector has some problems which can be solved by national and local precautions. The are as follows; having heavy financing conditions and difficulties in obtaining raw materials, lacking skilled labor and investment in infrastructure besides the problems such as the highness of labor and energy costs, the inward processing regime limitation, lack of R&D (Research and Development) activities, and not benefitting from encourage practices and overvalued Turkish Lira.
The towel and bathrobe are the biggest items of exportation of the textile and garment industry of Denizli. The amount of their exportation has gone beyond %50 of the total exportation of Türkiye. In order to continue and to increase the success of Denizli in foregin trade in future, the industral productivity and competition power must be improved. By following and applicating new technologies, a new improvement trend must be entered that should complete the integration with the developed world economies. And the Denizli economy, that has an important place in Türkiye’s industrial improvement, must not stay behind and even by percepting the globalization as an engine, had to design the industrial configuration according to this.
The establisments in textile sector also must give necessery importance to long terms planning. If the administrators have not the necessary information and skill for planning, cooperation of foreign specialists must be explored. In order to avoid difficulties to find qualitative labour force for the establisments, importance must be given to professional education. And the textile industry must unite cost, quality and variation in an effective manner for a persistable competition power in global dimension. Also a system that should control textile and garment industry trade paralel with the changing global economic atmosphere must be build. University-Industry cooperations must be developed and R&D (Research and Development) activities accelerated.
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