South Asia became a major player in the global textiles and clothing market with the onset of the third wave of global production. Bangladesh joined the league in the 1980s, owing to the outbreak of the civil war in Sri Lanka. Supportive industrial policy was an instrumental factor in the 1990s, with zero duty on raw material and capital machinery, as access to global markets led to the industry’s boom. Bangladesh overtook India in exports in the past decade as Indian labour costs resulted in products becoming 20% more expensive.
Standing of countries
Lower production costs and free trade agreements with western buyers are what favour Bangladesh, which falls third in the line as a global exporter. The progress of India and Pakistan in readymade garments is recent when compared to their established presence in textiles. India holds a 4% share of the U.S.$840 billion global textile and apparel market, and is in fifth position. India’s exports later witnessed a larger volume of business, following a 0.8% dip in 2019. Pakistan saw a 24.73% rise in textile exports (2021-22), bagging an amount of U.S.$10.933 billion.
India has been successful in developing backward links, with the aid of the Technical Upgradation Fund Scheme (TUFS), in the cotton and technical textiles industry. However, India is yet to move into man-made fibres as factories still operate in a seasonal fashion. Pakistan remains very focused on cotton products; it falls behind due to skilling and policy implementation issues. Bangladesh has been ahead of time in adopting technology. Bangladesh also concentrates on cotton products, specialising in the low-value and mid-market price segment. The country faces the challenge of high attrition and skilling which results in higher costs. Sri Lanka attained the most progress in ascending the value chain. Progress in training, quality control, product development and merchandising are attracting international brands to Sri Lanka.
In leap ahead, the hurdles
The Fourth Industrial Revolution (4IR) has been shifting focus from production machinery to integrating technology in the entire production life cycle. The production cycle incorporates all digital information and automation including robotics, artificial intelligence (AI), virtual reality, 3D printing, etc. Robotic automation exemplifies production efficiency, especially in areas such as cutting and colour accuracy. In the days ahead, comprehensive restructuring can be expected in systems’ adaptation to human and market needs. With change comes opportunities as well as challenges. The Asian Development Bank anticipates the challenges of job losses and disruption, inequality and political instability, concentration of market power by global giants and more vulnerability to cyberattacks.
India’s production centres are operational at near full capacity, with companies contemplating business and production capacity expansions. With a 7% unemployment rate, India faces the challenge of job creation in the wake of increased automation. The World Bank expects this trend to accelerate in the post-COVID-19 market. The 4IR may result in unemployment or poor employment generation, primarily affecting a low skill workforce. The integration of skilling and technological investments will play a vital role in phasing out obsolete jobs, and adapting to new ones. It is imperative to ensure living wages and ease of access to education. The market switched from ‘seasonal fashion’ to ‘fast fashion’, and later to ‘accurate fashion’, reducing lead time. Digitalisation and automation in areas such as design, prototyping, and production are key in order to stay abreast, and in controlling production quality and timely delivery. Quick transportation becomes important in costing control, as reshoring and near-shoring gain currency. While a transition may be easier for large factories, medium and small-scale entities may suffer. Adoption of new technology and automation is closely linked to in-product basket diversity creation too.
On sustainability
Sustainability is also an important consideration for foreign buyers. Bangladesh’s readymade garments initiated ‘green manufacturing’ practices to help conserve energy, water, and resources. Textile and apparel effluents account for 17%-20% of all water pollution. Many Indian players are focusing on input management over tailpipe management. Sustainable practices such as regenerative organic farming (that focuses on soil health, animal welfare, and social fairness), sustainable manufacturing energy (renewable sources of energy are used) and circularity are being adopted. The Indian government is also committed to promoting sustainability through project sustainable resolution.
Tax exemptions or reductions in imported technology, accessibility to financial incentives, maintaining political stability and establishing good trade relations are some of the fundamental forms of support the industry needs from governments.
The labour lead
Access to affordable labour continues to be an advantage for the region. In addition, a country such as India with a very high number of scientists and engineers could lead, as is evident in the areas of drones, AI and blockchain. India’s potential lies in its resources, infrastructure, technology, demographic dividend and policy framework. The creation of a Centre for the Fourth Industrial Revolution is indicative of India’s intent. The U.S. trade war on China owing to human rights violations along with its economic bottlenecks, opens doors for India and Pakistan as they have strong production bases. Similar to China, India has a big supply — from raw material to garments. Bangladesh has also risen as a top exporter in a cost competitive global market.
Bangladesh’s investments in technology in the past decades are an added advantage. On gaining significant knowledge and advanced technologies over the last 30 years, it is in prime position. Bangladesh has envisioned the year 2041 for technological advancement, especially in ICT. Pakistan imported machinery (+77.5%) worth U.S.$504 million by the first half of 2019-2020. India’s proposed investments of US$1.4 billion and the establishment of all-in-one textile parks are expected to increase employment and ease of trade. India extended tax rebates in apparel export till 2024, with the twin goals of competitiveness and policy stability. Labour law reforms, additional incentives, income tax relaxations, duty reductions for man-made fibre, etc. are other notable moves.
A map out
Cotton product dependency and a focus on only major export destinations may diminish the market scope for South Asia. Diversification with respect to technology, the product basket and the client base are to be noted. Adaptability in meeting the demands of man-made textiles, other complex products and services are also important. Newer approaches in the areas of compliance, transparency, occupational safety, sustainable production, etc. are inevitable changes in store for South Asia to sustain and grow business. Reskilling and upskilling of the labour force should also be a priority for the region to stay aloft in the market. Finally, there is a need for governments’ proactive support in infrastructure, capital, liquidity and incentivisation.
Syed Munir Khasru is Chairman of the international think tank, The Institute for Policy, Advocacy, and Governance (IPAG), New Delhi, India, with also a presence in Dhaka, Melbourne, Vienna and Dubai. E-mail: munir.khasru@ipag.org
