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

South Asia is in the midst of a demographic transition. For the next three decades, the growth of the region’s working age population will far outpace the growth of dependents. Close to one million individuals will enter the workforce every month. This large, economically active population can increase the region’s capacity to save and make crucial investments in physical capital, job training, and technological advancement. But for South Asia to realize these dividends, it must ensure that its working-age population is productively employed. As one of the most prominent labor-intensive industries in developing countries, apparel manufacturing is a prime contender. With around 4.7 million workers in the formal sector and another estimated 20.3 million informally employed (combined with textiles), apparel already constitutes close to 40 percent of manufacturing employment. And given that much of apparel production continues to be labor-intensive, the potential to create more and better jobs is immense. There is a huge window of opportunity now for South Asia, given that China, the dominant producer for the last ten years, has started to cede some ground due to higher wages. But the region faces strong competition from East Asia―with Cambodia, Indonesia, and Vietnam already pulling ahead. Plus the sector suffers from production inefficiencies and policy bottlenecks that have prevented it from achieving its potential. Against this backdrop, this report hopes to inform the debate by measuring the employment gains that the four most populous countries in South Asia―Bangladesh, India, Pakistan and Sri Lanka (hereafter `SAR countries’)―can expect in this new environment of increased competition and scrutiny. Its main message is that it is important for South Asian economies to remove existing impediments and facilitate growth in apparel to capture more production and create more employment as wages rise in China. The successful manufacturers will be those who can supply a wide range of quality products to buyers rapidly and reliably―not just offer low costs.

For a timely and comprehensive perspective on the current and possible future of the apparel industry in South Asia, look no further than this well-researched and highly enjoyable read, Stiches to Riches? Apparel Employment, Trade, and Economic Development in South Asia. Not only does the book dispel the common clichés and myths about the immiserating growth in store for countries that find themselves as apparel exporters and recipients of investment in the industry, but it shows how the industry is a key component in supporting women s empowerment, overall employment, and long-run development. Unlike some economic tomes that are more difficult to decrypt than the Enigma code, this book cleanly lays out its arguments for why apparel is a natural way for South Asia to kick-start jobs and build the foundation for better living standards. It provides key policies to help countries in the region facilitate the organic development of the sector (by tearing down barriers to trade and improving the investment climate for apparel) without resorting to picking winners under industrial policy. China relied on the industry as a launching pad for manufacturing iPhones, why shouldn t South Asia look forward to similar successes? --David Gould Lead Economist, Office of the Chief Economist (Europe & Central Asia Region), World Bank

This book focuses on an industry vital to South Asia, both from an employment as well as a female labor force participation perspective. Even to those very familiar with the garment industry, the meticulous empirical research in the book will offer new insights on and confirmation of existing hypotheses. I am confident it will prove particularly valuable to policy practitioners and researchers --Sanjay Kathuria Lead Economist, Trade & Competitiveness (South Asia Region), World Bank

By combining a critical mass of quantitative and qualitative analysis, this work provides important new insights to policy makers around South Asia to help them take full advantage of the apparel sector and, by extension, labor-intensive industries to pull millions out of poverty. One of the biggest insights of this report is that it is necessary to import in order to export; this is the prime reason for why Bangladesh and Sri Lanka have been doing markedly better than India and Pakistan in this industry. --Vincent Palmade Lead Economist, Trade