Published Date: May 6, 2016
The World Bank has said that the rising cost of production in China is forcing the international buyers to look towards other countries for procuring apparel. Pakistan along with other South Asian states is well positioned to take benefit because of their competitive prices.
World Bank seminal report, “Stitches to Riches: Apparel Employment, Trade and Economic Development in South Asia” was launch on Thursday.
Gladys Lopez Acevedo, Economist World Bank, while presenting the key finds of the report said that the apparel was labour intensive, wages in the sector were higher than agriculture sector and it employed more women.
“The report says that bulk of manufacturing facilities is likely to be relocated as China has gone above the desired ceiling where it is no more optimal,” she said, adding that according to the report, one per cent increase in Chinese apparel prices could increase US demand for Pakistani apparel export by 2.53 per cent which was higher than other countries in the region. The report recommends that Pakistan should remove trade restrictions to allow easy access to man-made fibers as inputs, increase in efficiency along the value chain such as integration between textile and apparel, and improvement in social and environmental compliance by introducing better human resource practices at the regional level.
Pakistan ranks fourth in terms of value (4.2 billion dollars) with the same global market share as Sri Lanka, although apparel’s share of total country exports is lower at 19 per cent. Foreign direct investment (FDI) has not played an important role. In the apparel sector, the share of foreign-owned firms is estimated to be less than 2 per cent, and only slightly higher in the textile sector. Wages and working conditions are better in the formal industry than in the large cottage sector, but short-term or temporary contracts are widely used, particularly for women.
The report says the September 2012 factory fire in Karachi has highlighted poor safety standards in the country. Pakistan can benefit from the following policies: increase product diversity by reducing barriers on imports so as to ease access to manmade fibers (such as duty and tax remission for exports, and export processing zones), attract foreign direct investment (FDI) by adopting policies to reduce red tape and increase transparency to close the gap with South Asian countries whose textile and apparel industries are located primarily on the coast, diversify markets by taking advantage of access to emerging markets, shorten lead times by improving road infrastructure to facilitate access to ports for exporting firms, shorten lead times by clustering strategies to provide key infrastructure and common facilities, enhance perceptions of stability as many buyers will not travel to Pakistan, which makes sourcing complicated.
The World Bank results suggest that a 10 per cent increase in Chinese apparel prices will result in a 13–25 per cent (depending on the country) rise in SAR countries’ apparel exports to the United States, although this is below the 37-51 per cent increase in the Southeast Asian countries.
The results show that SAR countries exhibit significant employment generation potential for both males and females. For example, Bangladesh and Pakistan have the greatest potential to increase jobs (in percentage terms) for exports to the US markets, and Sri Lanka is the big winner with respect to the EU markets. It recommends remove trade restrictions to allow easy access to manmade fibers as inputs, increase efficiency along the value chain such as integration between textile and apparel, and improve social and environmental compliance by introducing better human resource practices.
At the country level, policy recommends Bangladesh should improve performance on non-cost factors important to buyers, India should address constraints to firm growth (like integration of textile and apparel, and access to manmade fibers), Sri Lanka should position itself as regional hub and take advantage of emerging markets and Pakistan should increase product diversity and reliability and take advantage of new markets