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South Asian apparel sector must create quality jobs

29 Mar '16
6 min read

To improve productivity, they could help firms enter the formal sector and take advantage of economies of scale with less complex labour policies. They could also promote foreign investment for apparel by adopting clear and transparent policies on foreign ownership (already in place for textiles) and within EPZs. Plus, India could diversify markets by taking advantage of market access to emerging markets. Given that almost all apparel and textile firms are domestically owned, India is in a better position to expand exports to markets - other than the US and Europe - that already have established production networks and sourcing relationships with East Asian and Southeast Asian firms. Finally, better roads will shorten lead times, the report said.

Bangladesh's apparel firms produce large quantities of apparel at low costs, due largely to its low wage rates. Firms mostly specialize in low-value and mid-market price segment apparel and have not penetrated the high-end apparel segments. Along almost every apparel product category, the benchmarking highlights that Bangladesh has the lowest prices. However, it performs poorly in the areas of compliance, quality, and reliability - which are important in attracting foreign investment. Bangladesh also stands to gain greatly in terms of jobs from additional apparel exports a 10 per cent increase in Chinese prices to the US would lead to an increase of over 4 per cent each in male and female employment.

Bangladesh has many policy options to increase exports. Policy makers could attract more foreign investment through additional incentives and transparency to ensure access to buyers and additional capital. They could ensure that policies to improve compliance are enforced (such as better safety conditions in export processing zones [EPZs]), which will help make Bangladesh a more attractive destination for foreign investors. And they could reduce the import barriers faced by firms in importing MMFs to improve quality and produce more higher–value added apparel.

The report said Pakistan has a fast-growing apparel sector that accounts for 19 per cent of its exports, and firms are competitive with global exporters in terms of prices. Yet, despite low prices in most apparel product categories, Pakistan lags competitors in reliability, and political stability is still an issue. It also remains highly concentrated in cotton products.

 

Pakistan stands to gain many jobs from the apparel sector. A 10 per cent increase in Chinese prices to the US would increase male employment by 8.93 per cent and female employment by 8.5 per cent.

For policy makers, one way to increase product diversity and move away from cotton-based apparel is to reduce barriers on imports to ease access to MMFs. They could attract global buyers and investors by adopting policies to reduce red tape and increase transparency. They could diversify markets, taking advantage of market access to emerging markets. And they could shorten lead times by improving road infrastructure to facilitate access to ports for exporting firms.

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