Rising wages in China to create 1.5 million jobs in S Asia

23 Jul '16

3 min read

As wages in China continue to rise, global apparel production and demand is expected to shift to developing economies in South Asia, where 1.5 million new jobs can be created if labour costs in China rise by even 10 %, says a new World Bank report, titled Stiches to Riches.

At present China dominates the global apparel market – commanding 41% of the market as compared with 12% for South Asia. But sourcing apparel from Beijing is proving to be a costly affair for consumer giants like USA and the EU.

Of the estimated 1.5 million new jobs, half a million would be for women, the report said stressing that this too was a “conservative” estimate based on the assumption that there would be no changes in policies to foster growth in apparel and address existing impediments.

The report used detailed US and EU apparel import data to estimate how much production may shift between China and 7 leading developing Asian apparel producers: 4 in South Asia (Bangladesh, India, Sri Lanka, and Pakistan) and 3 in Southeast Asia (Cambodia, Indonesia, and Vietnam).

The results suggested that under current policies, South Asian countries' exports to these markets would increase by 13-25% while the Southeast Asian benchmark countries would fare better, with a 37-51% increase.

Further, based on detailed data on firms and workers, the report found that a 1% increase in apparel output (which is used as a proxy for exports) translated into a 0.3–0.4% increase in employment (for both men and women) in Bangladesh, Pakistan and Sri Lanka. India's values are a bit lower.

Under existing policies as Chinese apparel prices rise by, for example, 10%, the report found that that employment in India would increase by nearly 1.2 million people over and above the current 35 million.

Since many, if not most, of these are jobs would be for women, a rise in Chinese prices alone could directly contribute to India's development, the World Bank report said forecasting a similar scenario for other South Asian countries.

In Pakistan, employment might increase by nearly 2,20,000 people, based on current apparel employment of about 2.5 million people. In Bangladesh, about 1.31lakh people – about the same as the total apparel employment in the United States – based on current apparel employment of about 3.1 million people.

In Sri Lanka, employment is expected to increase by about 14,500 people, based on current apparel employment of about 180,000 people, the report said adding that the employment figure could be larger if these South Asian nations “took steps to tackle inefficiencies that are undercutting their competitiveness.”

Key policy recommendations made in the report include easing barriers to the import of manmade fibers; facilitating market access, and encouraging foreign investment. These policy changes would also help other light manufacturers (like footwear and toys), thereby boosting South Asia's development potential, the report said. (SH)

Fibre2Fashion News Desk – India

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