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Private Sector Development

A new way to mitigate buyer risk in apparel

Mark Jones's picture
Bangladesh's share of the apparel market is increasing
The Alliance and Accord have been working over the past three years with more than 1,500 factories to help them meet new fire and building safety standards

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.

Stitches to Riches? The Potential of Apparel Manufacturing in South Asia

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.

How much of China’s apparel production can South Asia capture?

Raymond Robertson's picture
Clothing Manufacturing
Apparel manufactuaring has the potential to provide much needed jobs to women in South Asia
Photo by: Arne Hoel/World Bank

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.

The promise of digital banking for Nepal’s remote areas

Farhad Ahmed's picture
Rural maintenance workers engaged in culvert maintenance at Parsa District. Credit: World Bank

On a fine Tuesday morning Roghan Devi, a routine road maintenance worker from Dhanusha district visits the local branch of Mega Bank - a commercial bank in Nepal, to receive her monthly salary. She was notified about this through a text message in her mobile phone. Just a few years back, it was unimaginable for her, and for most of the women from her community, to have a personal bank account.
This initiative is part of a World Bank-supported Strengthening National Rural Transport Program (SNRTP) project that works in 33 districts employing over 1,800 routine maintenance workers- over 70% of them are women - to enhance the availability and reliability of transport connectivity for rural communities. To support this initiative, SNRTP forged a joint collaboration with the private sector. 

How Higher Education in Bangladesh Creates Opportunities

Tashmina Rahman's picture
Students hold a discussion. Improved quality of higher education provides an opportunity for better jobs.

A couple of months ago, I visited a few tertiary colleges affiliated with the National University in Bangladesh while preparing the College Education Development Project which aims to strengthen the strategic planning and management capacity of the college subsector and improve the teaching and learning environment of colleges. Almost two-thirds of all tertiary students in Bangladesh are enrolled in these colleges, making them the largest provider of higher education in the country.

World Bank report on education in Bangladesh

A recent World Bank report estimates that around 1.6 million tertiary students in Bangladesh are enrolled in around 1,700 government and non-government colleges affiliated under the National University. This piece of information underpins a huge economic opportunity in context with Bangladesh’s quest to become a middle-income country over the next few years. There is a strong demand for graduates with higher cognitive and non-cognitive skills and job-specific technical skills in the country. This requires an improvement in the quality and relevance of tertiary education to ensure graduates have more market relevant skills. The National University student enrolment size combined with its sheer number of colleges network all over the country make it the critical subsector for making a qualitative dent in the higher education system.

Harnessing Stitches for Riches in South Asia

Gladys Lopez-Acevedo's picture
Stitches to Riches? The Potential of Apparel Manufacturing in South Asia

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).
China dominates global apparel trade
(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. 

Higher education for the 21st century in action

Joe Qian's picture
The graduating class of the University of Moratuwa’s Department of Textile and Clothing Technology. Photo Credit: Isuru Udara

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.