Today, South Asia has a big opportunity to create more apparel jobs, as increasing wages in China forces buyers to seek other good destinations for sourcing from Asia. As per a new report, the region could generate 1.5 million new apparel jobs. It would be great for development, as they heavily employ low-skilled workers, half of which are women. Making them a part of the workforce would not just benefit their families, but the society as a whole.
However, for these jobs to happen, the apparel businesses need to become more competitive and not succumb to high tariffs and import barriers. It is possible by creating stronger links between the apparel and textile sectors, embracing branding and marketing, and including products made from man-made fibers (MMFs). South Asia is acting upon these viable steps, but they can do a lot more to ensure further fruitful results.
Why are South Asian Countries Likely to Move Up the Apparel Value Chain?
Apparel creation is organized in global value chains. These cover the various necessary activities that bring a product from its conception to its final use. You can associate apparel with a buyer-driven value chain that consists of decentralized and globally dispersed development networks, with lead firms coordinating them. They control the highest value activities like marketing, design, branding, and retailing. The buyers outsource the majority of the production process to a global network of producers belonging to low-income nations.
China has continuously dominated the apparel sector because of its shift from a cut-and-assemble supplier to a full-package one. However, the fast-rising living costs in apparel production hubs, along with international security, are heavily pressurizing manufacturers to raise wages. Additionally, the entry of nations like Kenya and Ethiopia, which enjoy a cost advantage, and the presence of a few East Asian countries pose a major challenge.
Despite these difficulties, the South Asian countries are likely to excel and prosper. The significant policy reforms would help keep the apparel sector competitive, transform economies, and benefit other export industries. South Asia’s vast low-cost labor supply makes it very cost-competitive.
Presently, international buyers are streamlining their sourcing strategies. They are focusing on big and more competent suppliers who can carry out a range of activities. These will not only lower their costs but also simplify their supply chains. A capable sourcing agency in Asia will help them meet their goals.
How Will Apparel Production Aid the Developing South Asian Countries?
Historically, developing countries have utilized apparel production success as the initial step toward industrialization. With time, they progressed from light manufacturing (toys, footwear, and apparel) to creating more sophisticated items (electric machinery, parts, and plastics). Acting on this assertion, the developing South Asian countries can concentrate harder on their apparel development initiatives and use the experience gained for further business activities.
Economists believe that the apparel industry was crucial in the initial development of nations such as Malaysia, Japan, Germany, the United Kingdom, Singapore, Sri Lanka, China, and Indonesia.
A Few Strategic Moves for South Asian Countries
India – They have successfully created backward links to the textile sector by focusing on cotton and technical textiles. Additionally, the Technology Upgradation Funds Scheme (TUFS) offers capital investment support for enhancing textile development. But, India has still not shifted to MMFs. It means they concentrate on apparel exports in only the spring/summer season, and factories operate for just 6.5 months.
Pakistan – They have not been much successful in integrating the textile and apparel industries. The country did introduce a policy like that of the TUFS, but with mixed results. Firms had cited implementation problems and high-interest rates. While big companies tend to provide in-house training, this South Asian nation lacks a government scheme for training employees in high value-added activities. Also, it highly concentrates on cotton products.
Bangladesh – It specializes in mid-market price segment apparel. Bangladesh must struggle with high attrition and a lack of skills training for employees, compelling developers to hire expensive foreign nationals as managers. Apart from this, they heavily focus on cotton products, and there is also a lack of upward mobility for women.
Sri Lanka – This South Asian country has significantly progressed in moving up the value chain. They host training institutes that offer courses in apparel and textile technology, product development, quality control, and merchandising. A lot of their producers have shifted to design and retail and introduced their global brands.
In the future, Sri Lanka, which engages in MMF products, can become a regional hub to promote sourcing for global buyers. If you are keen on apparel sourcing from Asia, Sri Lanka is the best destination.
How will eCommerce Help the Cause?
A rise in the use of e-commerce by South Asian apparel producers can help increase competition and productivity. Additionally, it can also facilitate diversification of production and exports. By unleashing its digital trade potential, South Asia can better integrate into global value chains, strengthen commercial linkages between nations across the region, and grow its market access.
They can strengthen digital transactions by using the established e-commerce platforms’ reputation to provide consumer protection, permit cross-border e-commerce payments, and return and redress. Cross-border business within South Asia is just 5% of the area’s total trade. But, e-commerce can stimulate regional apparel business by bringing together buyers and sellers on different sides of national borders.
Other than traders, South Asian consumers will also immensely benefit from the availability of various e-traded goods and services and a reduction in costs. Although there has been a significant rise in e-commerce in South Asia, virtual sales account for only 0.7% and 1.6% of total retail sales in Bangladesh and India, compared to around 14% worldwide and 15% in China. These countries need to embrace the power of e-commerce for the South Asia apparel industry to flourish.
South Asia is likely to dominate the clothing market in the future. If you are thinking about buying apparel from this region, contact an expert sourcing agency in Asia.
Good attempt to unearth the potential of the apparel industry. It would be better if you would drill-down a bit. Does your organization embrace the aforesaid trend? If so, it will be an inflection point considering the backdrop of the new normal.