There is now a huge window of opportunity for South Asia to create more apparel jobs, as rising wages in China compel buyers to look to other sourcing destinations. Our new report – Stitches to Riches?: Apparel Employment, Trade, and Economic Development in South Asia – estimates that the region could create 1.5 million new apparel jobs, of which half a million would be for women. And these jobs would be good for development, because they employ low-skilled workers in large numbers, bring women into the workforce (which benefits their families and society), and facilitate knowledge spillovers that benefit the economy as a whole.
But for these jobs to be created, our report finds that apparel producers will need to become more competitive – chiefly by (i) strengthening links between the apparel and textile sectors; (ii) moving into design, marketing, and branding; and (iii) shifting from a concentration on cotton products to including those made from man-made fibers (MMFs) – now discouraged by high tariffs and import barriers. These suggestions recently drew strong support from panels of academics and representatives from the private sector and government when the report was launched mid-year in Colombo, Delhi, Dhaka, and Islamabad. South Asia is now moving on some of these fronts but a lot more could be done.
Moving up the apparel value chain
Stitches to Riches? finds that South Asia’s abundant low-cost labor supply makes it extremely cost competitive (except for possibly Sri Lanka). But rapidly rising living costs in apparel manufacturing hubs, coupled with international scrutiny, are increasing pressure on producers to raise wages. Plus, countries like Ethiopia and Kenya, who enjoy a similar cost advantage, are entering the fray, and some East Asian countries already pose a big challenge. The good news is that the policy reforms needed to keep the apparel sector competitive would likely benefit other export industries and transform economies (view end of the blog).
This was reinforced by more than 100 countries worldwide, which highlighted cities as a critical element of their greenhouse gas (GHG) emission reduction strategies in their national climate plans (aka INDCs) submitted to the UNFCCC in 2015.
Since the ensuing signing of the Paris Agreement, these countries have shifted gear to focus on turning their climate plans into actions. What if, as many of us may wonder, we could find a cost-effective and efficient way to help put cities—in developing and developed countries alike—onto a low-carbon path of growth?
CURB: Climate Action for Urban Sustainability, launched this Climate Week, is an attempt to do just that. A free, data-driven scenario planning tool, improve overall efficiency, and boost jobs and livelihoods.
A joint vision for effective city planning
What CURB can do for cities owes very much to the inspiration and stories we have taken from them in developing the tool. It was a fortuitous few hours in early 2014 at the C40 Cities Climate Leadership Summit in Johannesburg, South Africa that really got the ball rolling on the development of CURB.
As your taxi leaves the line of trucks behind, you realize that you could be in any port-city in India or, for that matter, in China, USA or Europe. The types and number of trucks, and the freight carried may vary, but the challenges of port-generated traffic affecting the city hinterland is common. Of course, urban mobility solutions are multi-dimensional and usually include complementary strategies, investments and actors. However, the root cause of port-generated city traffic is simply a product of conventional port planning.
In Kolkata, the problem of port-generated traffic could get worse with the completion of the Eastern Dedicated Freight Corridor and National Waterway 1 (Jal Marg Vikas project). However, thanks to an innovative port-hinterland connectivity solution, supported by the World Bank, the ports of Kolkata and Haldia will dramatically increase their capacity while solving the issue of port-generated traffic. This is great news for the many truck drivers, who can often take a whole night just to get in queue to enter the port.
While some cities have grown, others still lag behind. Such inequalities in development are usually characterized by weak economic performance, low human development indicators, and high concentration of poverty. For example, Mexico achieved incredible growth as a nation, yet per capita income in the northern states is two or three times higher than in the southern states. Disparities in other social and infrastructure metrics are even more dramatic.
The China sourcing conundrum
In conversations with U.S. and European retailers and brands, ELEVATE – a company formed in 2013 to support corporate social responsibility – finds that apparel buyers rate diversifying away from China as one of their top three sourcing goals.
This is not to suggest that there is a desire to exit China – which currently holds by far the largest share of global apparel trade, at 41 percent – but rather a need to significantly reduce dependence on product from China, owing to rising costs, factory closures, unenthusiastic second generation family ownership, new attitudes about working in factories, and a perception that China wants to move to higher-value manufacturing. Sourcing and procurement organizations feel uncertain, and uncertainty is not a friend of supply chains.
The problem is that for all its uncertainty, China still has a huge base of factories, a well-developed transport infrastructure, and a comprehensive eco-system that supplies cut-and-sew operations, and management that has matured with years of experience. Even if a buyer would like to give another country an opportunity, many corporate risk managers view certain countries or regions as quite challenging for doing business.
South Asia could seize this opportunity by better meeting requirements – besides competitive costs – that are vital to global buyers. These include: (i) quality, which is influenced by the raw materials used, skill level of the sewing machine operator, and thoroughness of the quality control team; (ii) lead time and reliability, which are greatly affected by the efficiency and availability of transportation networks and customs procedures; and (iii) social compliance and sustainability, which has become central to buyers’ sourcing decisions in response to pressure from corporate social responsibility campaigns by non-governmental organizations, compliance-conscious consumers, and, more recently, the increased number of safety incidents in apparel factories.
Surveys of global buyers show that East Asian apparel manufacturers rank well above South Asian firms along these key dimensions, as noted in a new World Bank report on apparel, jobs, trade, and economic development in South Asia, Stitches to Riches (see table). So, what can South Asia, which now accounts for only 12 percent of global apparel trade, do to become a bigger player? An encouraging recent development is that buyers have started collaborating to facilitate new sourcing possibilities – as the case of Bangladesh illustrates.