Exporters look at construction and tourism, what will happen to employees

A chain of bankruptcy has engulfed local manufacturers, as a result of rising domestic costs and reduced demand in the international market. Smaller production units, with around 100 employees, mainly in shoe production, are diversifying into the tourism and real estate sectors. Large factories are on the edge of existence as they survive by cutting costs and shifting customers to higher value. The food processing industry for export is diversifying into production for the domestic market. Employees are finding it more difficult to adapt. How lifestyles and inflation are changing the demand for shoes.

The "Nito" shoe production factory in the Mamurras area was closed, taking home more than 100 employees, while its administrator, Mr. L. Turku, is thinking about how to start everything from scratch in another sector.

He has begun efforts to open an activity in the real estate sector in the sale-purchase and leasing in tourist areas. As Mr. Turku, with hundreds of shoe manufacturing units facing bankruptcy, as the largest manufacturing units are seeing a drastic drop in orders.

This crisis, the strongest in 15 years, has put businesses in front of difficult solutions. Small units are closing down and moving to other sectors such as tourism, real estate activities and the food industry, while large factories are adapting, moving to higher production segments and cutting internal costs through increased productivity. .

The most vulnerable seem to be the workers, who have spent more than 20 years sewing shoes and find it difficult to adapt to other sectors.

INSTAT data show that in the shoe manufacturing factories around 20 thousand people were employed in 2022, but data from the industry show that a large part of them have lost their jobs in recent months.

The biggest bankruptcies occurred in districts and factories that employed fewer than 120 workers, worked mainly on subcontracts, had lower profit rates and were unable to cope with the crisis.

Since 1947, when the first shoe production factory was opened in Tirana, Albania has created a tradition that continued with intensity even during the transition, producing for the most prestigious brands on the market such as "Prada", "Tood's", etc. "Geox", "Clarks" etc.

Albania created a good name especially in the Italian market and the factories started to produce for the high consumer segments, at a higher price. However, the war in Ukraine changed consumer behavior, which, combined with the change in lifestyle, has severely hit the production industry in Albania. Internal factors such as the devaluation of the euro and the increase in minimum wages are causing many units to permanently close their doors.

In 2023, shoe exports in quantity recorded an annual decrease of 16%, which continued at the same rate in January 2024.

But the market economy finds its way like the flow of the river, as businesses have begun to diversify into other sectors, while the biggest challenge remains for employees, who seem to be opting for early retirement rather than readjustment.

Almost the entire export-based manufacturing sector is suffering from developments in the exchange rate, and now businesses are finding solutions in diversifying within the sector, or even moving to other sectors.

The INCA company in Lezhë, which operates in the agro-processing sector for export, has installed a production line for the local market, producing a new organic fertilizer for agriculture.

Tourism, a new trend for bankrupt shoe lines

These days, Marsid Taullai is dealing with the closure of the "Tak Shoes" factory in Durrës. He is filling out some documents to assist the employees, leaving behind pain for an activity that he has run for years, giving work to dozens of women in the family, who have limited sources of income.

Mr. Tullai is considering moving completely into the tourism sector, serving in a small hotel and restaurant in the Golem area.

"I had the hotel even when I was managing the shoe factory, but now with its closure, I think to expand more in tourism", he said. The city of Durrës has a strong and early tradition in tourism and is one of the most visited areas of the country.

Shoe factories in coastal cities are diversifying into sectors that are seeing increased activity. Accommodation and restaurants are seen as businesses of interest. Last year, the businesses of this sector and those related to tourism recorded an increase in both income and number of activities.

The country was visited by 10 million tourists and this trend is expected to be at least in the next four years according to the expectations of tourist agencies. However, the shift from shoe production to tourism is not so easy for Mr. Tullai, since the income from tourism is still concentrated in a few months and their sustainability is not guaranteed.

Real estate activities, another choice

Real estate activities saw the largest expansion in the number of businesses in 2022, with annual growth of over 45% according to official sources from INSTAT.

Data from the market indicate that growth has been strong even in 2023, as a result of rapid developments in construction and tourism. The increase in building permits and, at the same time, the demand for housing, mainly in Tirana and the coast, has increased the need for more intermediaries.

Mr. Turku, who for many years managed the shoe production unit "Nito" in the area of ??Mamurras, has now closed the activity and is moving to the real estate activity.

Mr. Turku, who employed more than 100 local workers in his shoe factory, decided to finally close down the activity these days, as a result of the drop in demand from contractors, as earlier in 2023, revenues fell by sharply from the devaluation of the euro and the increase in minimum wages.

Large factories in internal restructuring, those with 100 employees, in bankruptcy

Large shoe manufacturing factories, despite going through a difficult period, which has plunged them into debt, will continue their activity. Factories in the over 200 employee segment seem to be coping somewhat with the crisis, hoping for improvement after May.

"Before the crisis at the beginning of 2023, I had almost 250 employees, but currently I have cut 25% of the jobs. I am trying to cut costs and be able to keep the workforce in balance until the return of orders", said the administrator of the company "Comfort shoes", in Shkodër.

The same tactic is being used by Fehmi Golemi, who owns the "FG Shoes" factory in the Shkodra area. He said he is trying to increase productivity in work processes with fewer employees, waiting for the market to change. "I'm keeping costs under strict control, but it's very difficult.

Since many fashion factories have closed the activity, the responsibility of the employees in those factories that are still working has increased", - said Mr. Golemi. In 2021, after the pandemic, the Albanian market faced unusual demand for the production of clothing and shoes.

Part of the request was rejected due to lack of employees. In this period, pressures from employees increased as there were many offers.

"They were absent without notice, they did not behave correctly at the workplace, but now that the colleagues have gone bankrupt, the employees have also changed their behavior", said Mr. Golem.

Efforts to integrate into higher value chains

Eva Laro, who owns the "ProDyn" shoe production factory in Tirana, like the entire sector, is suffering the consequences of the losses that are coming from the drop in orders and the devaluation of the euro.

Since last year, it started producing a limited amount of shoes for the luxury brand "Prada", but the vast majority of the production goes to the middle level of consumption like "Clark".

The transfer of production to a high level of consumption is an opportunity to increase income, but this process has difficult challenges and risks bringing some factories that have closed the cycle back into fashion.

For example, if for a mid-level shoe, companies were leading all the processes, providing the product "Made in Albania", luxury brands, such as "Prada" still require only a few production processes in Albania.

"I don't want to bring the factory back into high-level fashion, but it's a difficult upheaval. So, at the moment, I'm only working with a few lines. The factory that develops the products and buys the materials is in Italy and they assemble them there. It doesn't seem like a long-term solution to me. At least, not in my vision," Ms. Laro said.

The Albanian clothing and footwear manufacturing industry has been slow to move to new production cycles and high value chains.

The concentration of work with Italian customers left the industry in a lethargic "laziness" and now, almost a quarter of the industry is not able to develop new products on its own, and for the production of luxury brands, it is out of the question.

Ms. Laro said she is trying to minimize losses, cutting production costs, growing and diversifying customers. Production processes in Albania are still associated with losses and employees are not very productive.

Mrs. Laro, who has had foreign experts in the factory for years, has been able to improve productivity and production quality, offering employee training, career incentives and operates with a modern form of internal organization, from the warehouse sector to to human resources.

Difficult employee transition

As well as businesses, the difficulties came acutely for thousands of employees whose jobs were cut.

The average age of workers in shoe factories is about 50, administrators claim. At this age, a woman who has sewn shoes for more than 20-30 years of her life in the factory finds it difficult to reintegrate in another sector.

Marsid Taullai, who just closed the "Tak Shoes" factory in Durrës, and is dealing with the preparation of the hotel, said that he is hiring employees from abroad for the hotel.

"None of the factory workers want to work in the hotel, even though they know I need employees. Many of the women come from traditional families, which have allowed them to work in the community in the factory, but which do not allow them to work in hotels", said Mr. Taullai.

Some women have decided to stop working and help the family. "Today I just closed a contract with the employment agency to take three foreign employees" said Mr. Taullai, despite the fact that he employed over 120 women in the shoe factory.

In the Shkodra area, women who have lost their jobs due to the crisis of the shoe factories have, to a large extent, been integrated as employees in markets, retail trade, restaurants and bars as employees.

In the Mamurras area, the women who lost their jobs in the "Nito" shoe factory have almost all been employed in other factories in the Fushë-Kruja area where there is a series of other activities, such as factories and carpentry that were looking for employees .

In Tirana, it seems that the employee crisis has been milder. Since almost most of the fashion factories are concentrated in the capital, there has been a restructuring within the sector, where the laid-off employees have been re-employed by the big factories.

Despite its size, the entire fashion sector is in crisis, but big businesses are resisting to keep the workforce, which is shrinking rapidly due to immigration and the lack of desire of young people to integrate in this sector.

Fatmir Çela, the administrator of "Kral Shoes", which produces shoes for the Italian market in the area of ??Kruja, said that the increase in production costs in Albania is driving away manufacturers in other countries.

Customers are fleeing to Tunisia and India, he said. "In the shoe sector, Albania used to work with volumes that do not require a lot of skills, now this type of work is being transferred to other countries for lower prices from Italian customers", - said Mr. Çela, who has not yet closed the factory in waiting for demand to improve.

But the wait will not be more than three months. If more than 100 people will remain unemployed, in the Kruja area it will be difficult for them to be distributed to other sectors. MONITOR

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