Case Study. Kayrakkum Carpets

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07/15/2019

Case Study. Kayrakkum Carpets

Background

Kayrakkum Сarpets, named after the town in Tajikistan where it is located, is a company with a proud history and a very promising future.

Created 60 years ago and equipped with modern looms, it was one of the two biggest producers of carpets in the USSR. At its peak, Kayrakkum Carpets employed 6,000people operating 100machines and produced up to 10 million m2 per year.

The Tajik weaving industry grew in 1960-1980, when dozens of silk and carpet weaving businesses were set up in the republic and a producer of carpet-weaving machines was established. Unlike Kayrakkum Carpets, almost none of these businesses survived through the times. In the 1990s, the production exhibited a decreasing trend due to dramatic change in the economic and political environment, shrinkage of the domestic market, and a fall in purchasing power.

The events of this decade pulled the rug from under the Tajik weaving industry. By 2010, imports, mainly Turkish ones, had devoured the domestic market. Kayrakkum Carpets survived, but only just, as plummeting revenue made it impossible to maintain and replace obsolete equipment.

First investments and public support

Zamwell began investing in Kayrakkum Carpets in 2012. There was a clear business logic, despite all the problems. The company was in a region with plentiful high-quality raw materials (cotton and silk, thread and fabric), available labor, and excellent weaving and sewing traditions. More importantly, Zamwell valued the 60-year history of the enterprise, its professional team, and the importance of creating employment for local people.

The first investments were for new equipment. Zamwell built a strong relationship with the Belgian company, Van de Wiele, which delivered a number of up-to-date, high performance looms to the factory.

It was clear, however, that recovery also depended on changes in the regulatory environment. By the early 2010s, Turkish importers had a near monopoly on the domestic Tajik market and local manufacturers could not begin to fight back without special measures that favored local production. These were finally provided by a special program for development of the Tajik carpet weaving industry for the period 2014-2020, initiated by the country’s President.

The effect of the program was almost immediate. Tajik carpet production grew by 30% year-on-year in 2016 and then by 66% in 2017. The largest Turkish importer was forced to localize its carpet production in Tajikistan, creating new jobs for local workers and extra revenues for the national budget, there were a number of local start-ups producing carpets and woven products, and Kayrakkum Carpets was able to consolidate its recovery.

Further investments

By 2015, positive effect from the new equipment and improved market environment gave Zamwell the confidence to expand capacity at Kayrakkum Carpets. Van de Wiele agreed to lease five new looms with a five-year repayment schedule. Now the factory had eight European-built carpet looms. Their output exceeded the combined capacity of Kayrakkum Carpets’ 100 old machines.

By mid-2018, the factory was ready to launch a propylene filament workshop, creating 70 new jobs. On June 28, 2018, the President of Tajikistan, Founder of Peace and National Unity, Leader of the Nation, Emomali Rahmon, opened the new workshop. Senior managers of Kayrakkum Carpets gave the President a tour of the factory’s display center, including a number of new carpet collections,and expressed gratitude for government support, which had played a crucial role in reviving the company’s fortunes.

Kayrakkum Carpets is now firmly on the road to recovery and has a bright future as one of the largest industrial companies in Tajikistan. By the end of 2018, the factory had won 34%of the domestic carpet market.

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