Stitches to Riches? Apparel Employment, Trade, and Economic Development in South Asia

Stitches to Riches is motivated by South Asia's urgent need to create more and better jobs for a growing population. This book investigates the region's potential for expanding and improving jobs in the labor-intensive apparel sector. It estimates the effects of rising wages in China on apparel exports, employment, and wages in South Asia, and provides policy recommendations to leverage the sector for greater job creation.

     Key Messages:  

• As developing countries explore ways to boost living standards and reduce poverty, they are increasingly focusing on policy options to create jobs that are “good for development.” For South Asia, this is a high priority, given that it must absorb close to one million individuals that will enter the workforce every month for the next three decades, and it continues to have a stubbornly low rate (30 percent) of female labor force participation.
• Export-oriented apparel production—long a key industry in South Asia—displays characteristics of good jobs for development. With relatively low skill requirements, apparel manufacturing presents the poor with job opportunities. It also has a unique ability to attract female workers, with women’s share of total apparel employment being much higher than women’s share in other industries in nearly every country in the region.
• Already Bangladesh, India, Pakistan, and Sri Lanka have made substantial investments in world apparel trade. In 2012, for example apparel represented 83 percent of Bangladeshi exports and 45 percent of Sri Lankan exports. The share of female employment in apparel in South Asia is higher than in other manufacturing industries, ranging from 5 percent in Pakistan to 71 percent in Sri Lanka.
• At this point, China dominates global apparel trade but that may change in the years ahead. In addition, rising prices in China are encouraging investors to seek out apparel firms in countries like Cambodia and Vietnam. The potential decrease in Chinese exports presents a huge opportunity for South Asian countries.  
• Stitches to Riches: Apparel Employment, Trade, and Economic Development  is aimed at better informing that debate by demystifying the global and South Asian apparel markets, estimating the potential gains in exports and jobs (including for women), and identifying policies that can unleash South Asia’s export and job potential.
  
  Findings:     
• Southeast Asian countries (Cambodia, Indonesia, and Vietnam) are outperforming South Asian (SAR) countries (Bangladesh, India, Pakistan, and Sri Lanka) in terms of overall apparel export performance, product diversity, and non-cost related factors important to global buyers.
• Our results suggest that a 10 percent increase in Chinese apparel prices will result in a 13–25 percent (depending on the country) rise in SAR countries’ apparel exports to the United States (table), although this is below the 37-51 percent increase in the Southeast Asian countries.
• Our 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 U.S. markets, and Sri Lanka is the big winner with respect to the EU markets.
  
  Recommendations: 
• The book offers timely and specific policy recommendations for stakeholders to better leverage the apparel manufacturing sector’s potential. The focus is on identifying key bottlenecks and areas for improvement in the South Asian countries compared with those of their closest competitors in the South East Asia region (Vietnam, Cambodia, and Indonesia).
• These recommendations include: (i) remove trade restrictions to allow easy access to manmade fibers as inputs; (ii) increase efficiency along the value chain such as integration between textile and apparel; and (iii) improve social and environmental compliance by introducing better human resource practices. At the country level, policy highlights include: (i) Bangladesh: improve performance on non-cost factors important to buyers; (ii) India: address constraints to firm growth (like integration of textile and apparel, and access to manmade fibers); (iii) Sri Lanka: position itself as regional hub and take advantage of emerging markets; and (iv) Pakistan: increase product diversity and reliability, and take advantage of new markets