Judging by the number of views of the recent Facebook livestream event on intra-regional trade and investment in South Asia, there is significant interest in this topic. And there should be, given that there remain many important and untapped opportunities to use the power of trade and investment to enhance economic opportunities, including for lesser-skilled people and women in the region.
According to respondents of the Facebook poll conducted during the above event in May 2016, the most important policy to enhance intra-regional trade would be to invest in connectivity and border crossings. Policy makers seem to realize this as well. Over the last two years, new efforts to deepen South Asian cooperation in trade have focused almost exclusively on trade facilitation issues. Let me elaborate.
China now dominates the global apparel market – accounting for 41% of the market, compared with 12% for South Asia. But as wages in China continue to rise, its apparel production is expected to shift toward other developing countries, especially in Asia. How much of China’s apparel production can South Asia capture and therefore how much employment could be created? This is important because apparel is a labor intensive industry that historically employs relatively large numbers of female workers.
In our new report, Stiches to Riches?, we estimate that South Asia could create at least 1.5 million jobs, of which half a million would be for women. Moreover, that is a conservative estimate, given that we are assuming no changes in policies to foster growth in apparel and address existing impediments.
In the coming years and decades, China is expected to slowly relinquish its lead position in the global apparel market, opening the door to other competitors. This is a huge opportunity for South Asia to create at least 1.5 million jobs that are “good for development” – of which half a million would be for women – according to a new World Bank report Stitches to Riches? But those numbers could be much higher if the region moves quickly to tackle existing impediments and foster growth in apparel, which will also yield dividends for other light manufacturers (like footwear and toys).
How South Asia fits in the global apparel market
Currently, China holds by far the largest share of global apparel trade – at 41 percent, up from 25 percent in 2000, with about 10 million workers. But as China continues to develop, it is likely to move up the global value chain into higher-value goods (like electronics, and out of apparel) or switch production among sectors in response to rising wages. A 2013 survey of leading global buyers in the United States and European Union (EU) found that 72 percent of respondents planned to decrease their share of sourcing from China over the next five years (2012-2016).
Already, the top four apparel producers in South Asia – Bangladesh, India, Pakistan, and Sri Lanka – have made big investments in world apparel trade, now accounting for 12 percent of global apparel exports (see figure). In terms of apparel export value, Bangladesh leads the pack (at $22.8 billion), followed by India ($12.5 billion), Sri Lanka ($4.4 billion), and Pakistan ($4.2 billion).
(Country share of global apparel exports)
Source: Stitches to Riches?
Why apparel jobs are “good for development”
When we think of jobs that are “good for development,” the main yardstick is whether they will help translate growth into long-lasting poverty reduction and broad-based economic opportunities. Apparel fits the bill for numerous reasons.
Imagine a school that teaches knowledge and provides hands-on training. A place where students express confidence in their skills, and are excited to make a difference in their future jobs. A bastion of confidence and optimism, where 100% of graduating students have jobs lined up before graduation.
Sounds too good to be true? I found this haven at the University of Moratuwa’s Department of Textile and Clothing Technology, supported by the Higher Education for the 21st Century Project (HETC), which is designed to modernize education by its increasing its quality and relevance. 24-year-old Malaka Perera, who is graduating next month, told me how the program has helped him build a foundation for his career. “The program taught me how to deal with people, along with communications and problem solving skills that I used during my internship. As a result, finding a job was quite easy.”
Sri Lankans have enjoyed the benefits of broad education access for decades, which has allowed the country to build human capital to rise and become a middle income country. However, as a country with rising aspirations in an increasingly globalized world and competitive region, the quality and relevance of its education system is key for the country to maintain its edge and reach new heights.