"Recognised as a highly labour-intensive industry, textile industry has been gaining ground in Southeast Asian countries. Partly being mostly agrarian adds to the advantage as textile requires immense amount of raw materials such as cotton and jute. Coupled with this, high crop subsidies augurs well for growth in the region. China has been sustaining the prime spot for decades now but sheen is slowly getting lost due to ever increasing labour cost, which is favouring other countries such as India, Bangladesh and Vietnam to spot the opportunity and ride growth."
Recognised as a highly labour-intensive industry, textile industry has been gaining ground in Southeast Asian countries. Partly being mostly agrarian adds to the advantage as textile requires immense amount of raw materials such as cotton and jute. Coupled with this, high crop subsidies augurs well for growth in the region. China has been sustaining the prime spot for decades now but sheen is slowly getting lost due to ever increasing labour cost, which is favouring other countries such as India, Bangladesh and Vietnam to spot the opportunity and ride growth. Average labour cost in Bangladesh was $68 per month as against $321 per month in China. The labour costs in India and Vietnam are much cheaper as compared to China. Globally, China is the leader in textiles exports, while India progressively became the 3rd largest exporter of textiles in the world and 5th largest exporter of clothing.
The textile industry in India is pegged at $120 billion and expected to surpass $230 billion by 2020. Inherent advantages include: a strong multi-fibre base (cotton, jute, silk, wool and synthetic), excessive investments, rising disposable incomes and governmental initiatives. In Budget 2016-17, customs duty on raw materials for technical textiles was reduced to as low as 2.5 per cent, this decreased production cost for textile manufacturers. Moreover, initiatives like tax incentives, job security and EPF schemes will make the textile sector more robust. In addition, India also received an FDI of $620 million in 2016-17, this is triple the size of the FDI in 2013-14. India is also in the danger of losing opportunities to Vietnam and Bangladesh, which are quickly establishing themselves with cheap labour. Stats reveal while India saw negative growth of 1 per cent (2015-16), Bangladesh accomplished a growth of 6 per cent owing to the accessibility of cheap labour and its capability in form of big garment factories to process large orders. Garment factories can employ merely 150 people, while garment units in Bangladesh staff around 600 workers. Indian garment factories are not in a position to handle exceptionally large orders due to the size constraints and are losing their business to the counterparts in neighbouring nations.
What works for Bangladesh
The Bangladeshi government does not want to leave any stone unturned to boost growth for clothing manufacturers. The nation’s textile policy 2017 says, the administration will ensure access to duty-free markets, and aid private firms for development of infrastructure and encourage the use of IT in textiles. It will also establish colleges and training institutes to promote local brands in fashion and textiles. However, the government will have to enforce compliance of international standards in manufacturing units, especially in the wake of a recent industrial catastrophe of an outbreak of fire and collapse of the garment factory building. This is required to ensure that cheap manufacturing should not be provided at the cost of the safety and security of workers and good working conditions should not be compromised upon.
Vietnam’s apparel sector also saw an export growth of 10 per cent (2015-16). New foreign investments spurred in the spinning and weaving sectors after the elimination of non-tariff barriers and implementation of Trans-Pacific Partnership Agreement (TPP). Although the USA, which is the biggest importer of Vietnamese textiles and garments has withdrawn from the TPP, the other 11 nations with a combined GDP of $12.4 trillion have agreed to sign the deal. The agreement will help Vietnam to get deep access to the global supply chain, improve its exports and will also reform its labour market. Texhong Textiles (China), Itochu (Japan) and Kyung Bang (South Korea) have all invested in Vietnam to set up spinning and spindle factories. The young labour force in the nation is willing to work at low wages besides a small capital investment is required to set up a factory, this has made Vietnam the hub for setting up of manufacturing factories. Thus, big brands such as Nike and Samsung moved their production from China to Vietnam in the recent years due to the above reason.
Gauging their potential
The future of apparel in Vietnam and Bangladesh looks promising as governments are continuously making attempts to reduce costs and improve sale efforts and are also promoting small and medium-sized firms to grow bigger through various tax incentives and schemes. However, time will tell if they can improve their operational efficiencies to the extent where these nations will be in a position to supersede India in the overall textile market and not only the garment industry.