Eliminate those folds of South Asian textile history

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Securing government support for financial incentives, technology upgrading and workforce reskilling are major challenges

Securing government support for financial incentives, technology upgrading and workforce reskilling are major challenges

South Asia has emerged as a major player in the global textile and apparel market with the start of the third wave of global production. Bangladesh joined the league in the 1980s, due to the outbreak of civil war in Sri Lanka. A supportive industrial policy was instrumental in the 1990s, with zero tariffs on raw materials and capital goods, as access to world markets led to the boom in industry. Bangladesh has overtaken India in terms of exports over the past decade, as Indian labor costs have caused products to become 20% more expensive.

Country Ranking

Lower production costs and free trade agreements with Western buyers are what favor Bangladesh, which ranks third among world exporters. India and Pakistan’s progress in ready-to-wear is recent compared to their established presence in textiles. India holds a 4% share of the US$840 billion global textile and apparel market and ranks fifth. India’s exports then saw a higher volume of business, after a decline of 0.8% in 2019. Pakistan recorded a 24.73% increase in its textile exports (2021-22), for an amount of 10.933 billion US dollars.

India has successfully developed backward linkages, with the help of the Technical Upgrading Fund (TUFS), in the cotton and technical textiles industry. However, India has not yet switched to synthetic fibers as factories still operate seasonally. Pakistan remains very focused on cotton products; it is falling behind due to skills and policy implementation issues. Bangladesh has been ahead in adopting the technology. Bangladesh also focuses on cotton products, specializing in the low and middle price segment of the market. The country is facing the challenge of attrition and high skills which lead to higher costs. Sri Lanka has made the most progress in moving up the value chain. Advancements in training, quality control, product development and merchandising attract international brands to Sri Lanka.

Leaping forward, the obstacles

The Fourth Industrial Revolution (4IR) shifted the focus from production machinery to the integration of technology across the entire production lifecycle. The production cycle integrates 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 color accuracy. In the days to come, we can expect a complete restructuring in the adaptation of systems to human and market needs. With change come opportunities as well as challenges. The Asian Development Bank anticipates the challenges of job losses and disruptions, inequality and political instability, the concentration of market power by global giants, and increased vulnerability to cyberattacks.

India’s production centers are operating near full capacity as companies plan to expand operations and production capacities. With an unemployment rate of 7%, India faces the challenge of creating jobs in the wake of increased automation. The World Bank expects this trend to accelerate in the post-COVID-19 market. The 4IR can lead to unemployment or low job creation, mainly affecting a low-skilled workforce. Integrating investment in skills and technology will play a key role in phasing out obsolete jobs and adapting to new ones. It is imperative to ensure decent wages and easy access to education. The market has moved from “seasonal fashion” to “fast fashion” and then to “precise fashion”, thus reducing lead times. Digitization and automation in areas such as design, prototyping, and production are key to staying current and controlling production quality and on-time delivery. Rapid transportation is becoming important in cost control as relocation and offshoring gain traction. While a transition may be easier for large factories, small and medium-sized entities may suffer. The adoption of new technologies and automation is also closely linked to creating diversity in the product basket.

On sustainability

Durability is also an important consideration for overseas buyers. Ready-to-wear garments from Bangladesh pioneered “green manufacturing” practices to help conserve energy, water and resources. Textile and clothing effluents account for 17-20% of all water pollution. Many Indian players focus on input management rather than tailpipe management. Sustainable practices such as regenerative organic agriculture (which emphasizes soil health, animal welfare and social equity), sustainable manufacturing energy (renewable energy sources are used ) and circularity are adopted. The Government of India is also committed to promoting sustainability through the sustainable resolution of projects.

Tax exemptions or reductions in imported technology, accessibility to financial incentives, maintaining political stability and establishing good trade relations are some of the basic forms of support that the industry needs from the governments.

The lead of work

Access to affordable labor continues to be an advantage for the region. Moreover, a country like India with a very large number of scientists and engineers could be in the lead, as is evident in the fields of drones, AI and blockchain. India’s potential lies in its resources, infrastructure, technology, demographic dividend and policy framework. The creation of a Center for the Fourth Industrial Revolution is indicative of India’s intention. The US trade war against China due to human rights violations and its economic bottlenecks opens doors for India and Pakistan as they have strong production bases. Similar to China, India has a large supply, from raw materials to clothing. Bangladesh has also become one of the leading exporters in a cost-competitive global market.

Bangladesh’s investments in technology over the past decades are an added bonus. Having acquired important knowledge and advanced technologies over the past 30 years, it occupies a privileged position. Bangladesh has envisioned the year 2041 for technological advancement, especially in ICT. Pakistan imported machinery (+77.5%) worth US$504 million in the first half of 2019-2020. India’s proposed investment of US$1.4 billion and the establishment of one-stop textile parks are expected to increase employment and facilitate trade. India has extended tax breaks on garment exports until 2024, with the twin goals of competitiveness and political stability. Labor law reforms, additional incentives, income tax relaxations, synthetic fiber duty reductions, etc. are other notable measures.

An exit card

The dependence on cotton products and the focus on only major export destinations may reduce the market reach for South Asia. Diversification in terms of technology, product basket and customer base should be noted. Adaptability to meet the demands of synthetic textiles, other complex products and services is also important. New approaches in the areas of compliance, transparency, workplace safety, sustainable production, etc. are inevitable changes awaiting South Asia to sustain and expand its business. Retraining and upskilling the workforce should also be a priority for the region to stay in the market. Finally, governments need proactive support with infrastructure, capital, liquidity and incentives.

Syed Munir Khasru is Chairman of the international think tank The Institute for Policy, Advocacy, and Governance (IPAG), New Delhi, India, also present in Dhaka, Melbourne, Vienna and Dubai. Email: [email protected]

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