Textiles in 21st Century: Challenges and Opportunities Dr H.L Vijayakumar Past Chairman , Textile association India Karnataka unit
Opportunities• Rising Market opportunities• Shifting of production from western countries to Asia• Growth in the urban Population, Income and Lowest median age.
Rising Market Opportunity For Developing Countries• Most developed countries will see continued decline of their textile and apparel industry and create fresh opportunity of up to US$ 140 Billion for exports for developing countries by 2020• In addition, an opportunity of approx US$ 360-370 Billion likely to be created due to rise in demand• Hence an additional market opportunity of ~US$ 500 Billion likely to be created by 2020
And…Resulting In Continuing Shift Of Export Base Towards Asia For Apparel ….Declining Apparel Exports of Western / Growing Apparel Exports of Asian Developed Countries Countries Trade Value Trade Value CAGR CAGR Country in 2000 Country in 2000 since 2000 since 2000 (US$ mn) (US$ mn) Korea Vietnam 1821 22% 5027 -12%Republic Cambodia 970 18%Dominican China 36071 16% 2555 -10% Republic USA 8629 -8% Bangladesh 5067 10% Mexico 8631 -7% India 5960 8% Canada 328 -6% Pakistan 2144 8%
..Leading To Increase In Global Textile & Apparel TradeSource: WTO, UN Comtrade & Technopak Analysis
Challenges for Textile sector• External- Stability of currency- Economical slowdown- Price Fluctuation- International polices• Internal- Impact of Globalisation- Infrastructure- Availability of trained man power- Local Govt. polices- Supply chain- Brand and product mix
Disruptive Growth in Textile Industry…..(Before 2005) (2005-2015) (2015 onwards)FACTOR DRIVEN EFFICIENCY DRIVEN INNOVATION DRIVEN Raw Material Availability Vertical / Virtual Integration Product Manufacturing excellence Design / Brand Labor availability Supply Chain Efficiency ChannelsGovernment policy influenced Diversity in product mix Business Processes
Conclusion• There are many favorable opportunities for the growth of textile sector in the world.• The global economical melt down and the price fluctuation posing major threat to the stability of the sector.• WTO impact in shifting of production centres from one region to other will have major threat to the lively hood of common man.
While the world economy just started to see the recovery from the worsteconomic crisis since the 1930s, the sigh of relief could not last longer as theUS and EU economy are now preparing for the worst. The recession caused bythe financial crisis in late 2008 put us in an uphill struggle to survive. On topof that, the historical rise of cotton and textile price and the inadequacy ofenergy and infrastructure in the country had been some major challenges.Dwelling in such a situation the industry attained an outstanding growth in the2010-2011 fiscal year (FY), i.e. July 2010 - June 2011, which has been possiblefor the all-out effort and resilience of our entrepreneurs and for theunparallel supports by our proactive workforce, and for the supports from ourvalued buyers who have been always with us in our good and bad times.However a further slowdown in the world economy would not be that easy forus to handle and we are yet to see how differently it could affect our industryand economy. In addition to all these challenges, there as some newopportunities as well like – reforms of GSP rules, preferential access to somenew and potential markets. The soaring production and labor costs incompetitor countries and their resulting impact on comparative advantage isleading a change in global sourcing pattern of apparel, and certainly the nameof Bangladesh tops the list of preferred sourcing destinations. Now we need aholistic approach by the government in reforming the infrastructure andadministrative machineries in order to enable Bangladesh to tap most of itsopportunities.
Since the beginning in early 1980s, there have been numerouschallenges throughout the journey of the readymade garment (RMG)industry till now, but the incredible achievement of garment exportsfrom Bangladesh has outshined the most optimistic expectations.Bangladesh has been positioned as the second largest readymadegarment exporting country in the world in 2010 as per the statistics ofWTO (if EU is not considered as a country, rather an economic zone).The global clothing market clearly recovered in the last year,according to latest data from the World Trade Organization (WTO).Total exports were up 11.4% in dollar terms, at US$351.5 billion, afterfalling 13.2% in 2009. China remains the leading exporter in valueterms, EU as an economic zone ranking second after China, atUS$22.30 billion. During the period 2000-2010 Chinas exports gained260% while Bangladeshi exports increased 210% over the same period.The share of Bangladesh stood 4.6% in the said year.
As the world economy started recovering from the recession since early 2010,the FY2010-2011 marked a turning point for our RMG industry. Exportsincreased by 43.36% during this time in monetary value compared to previousyear reflecting a strong come back. However, this growth was not absolute, asa significant portion of this growth has been caused by the cotton and textileprice hike in the international market. The real growth in volume term wasnot more than 20%-25%. However, export prices stopped rising in My 2011 asthe cotton price started getting normal, meaning that there might be a dentin monetary value-wise export growth in coming months.
Apparel imports started slowing down again amid thecrises in EU and US economies….After a better-than-expected performance during the last fiscal year, theglobal apparel market is signaling a clear slow-down ahead, which has alreadybeen visible by a fall in US import volumes in July-September 2011. Import byEU has also started decelerating in July 2011. There are now clear signs thatthe global clothing market began shrinking again. The official statistics ofBangladesh for the month of September 2011 shows a negative growth by6.66% compared to the same month of previous year. A breakdown of thefigure by product category reveals that though woven exports managed tokeep a slightly positive growth by 0.50% during the said month, knitwearexport seen the real slowdown by -12.38%. The crisis in US and EU economy,unemployment, debt crisis and poor economic forecast are all indicating atough time ahead. A clear dry-out in order position is already observed.Moreover, the safeguard duty imposed by Turkey has also been another reasonas exports to Turkey has already started to shrink. The overwhelmingconcentration on US and EU is one of the major reasons of the vulnerability.The over dependence in two major markets (i.e. EU and USA) has been amajor reason behind such demand shock and there is no alternate to diversifyour export markets.
Availability of skilled workers and productivity….Despite all the hurdles in global economy the world clothing market grew ata good pace. However, lack of adequate workers has been one of the majorchallenges for a supplier giant like China which is eventually leading to ashift to populous countries like Bangladesh. But the lack of enough skilledworkers is a concern for our industry. The level of productivity is alsoanother major concern for us. Therefore, particular focus is needed on skillsdevelopment and productivity enhancement. Focus has to be given onknowledge sharing in the area of fashion designing and innovation in orderto enable the industry to graduate to next higher level. An enhancedproductivity level and optimizing the cost of labor and inputs couldsubstantially help the industries to tackle the wave of inflation and otheremerging pressures.
The rising inflation in emerging economies, anopportunity in disguise for Bangladesh………Inflation remains a major issue in low cost countries. The inflation rate has amajor impact on the level in wages which increase cost of production. Therising inflation in Bangladesh and other competitors including China, Vietnam,Cambodia, Myanmar, Pakistan, Indonesia and India is a threat to thecompetitiveness. Consumer prices are still rising in India and Pakistan, whileChina and Vietnam have been able to get a grip on it. Inflation in Bangladeshhas come down a bit from 11.97% in September 2011 to 11.42% in October2011.From industry perspective the concern remains that despite a number ofhurdles the minimum wages for the garment workers was increased by 80%which came into effect from November 2010. The implementation of the newminimum wage is highly satisfactory from the very first month. But the soaringinflation, which is now a thirteen year record high, is just not axing theincome of marginalized group, but also limiting the competitiveness ofindustries and fading out the benefit of the wage increase.
Resource efficiency through cleaner production &technology up-gradation………………The evolving pattern of global trade competitiveness is one of the most prior issues to plan ourfuture business. In context of Bangladesh, we have seen in the past two decades how the non-tradefactors have emerged as important as trade factors. The growing concern on environment and theprogress toward eco-friendly business in recent time is also encouraging. Nevertheless, greener andcleaner production is going to be one of the most important pillars for our future business. Moreover,energy efficient green and clean production is also a means to cost efficiency as well. Bangladeshbeing a rising contender in the global apparel industry has a huge scope to enhance the efficiency ofwater, gas and electricity usage. This becomes more important while addressing the truth that thecountry itself has been facing some major resource challenges, and we have already gone beyond thepoint of taking proactive steps. We have to adopt energy efficient and environment friendlymachineries and technology in our production plant, particularly low risk and energy saving boilers,energy saving light, LED light, Servo motors and so on. To reduce emission of harmful chemicals wehave to use effluent treatment, to reduce the use of chemicals in the wet processing we should usewater treatment plant and low-liquor ratio dyeing machine. Initially these will incur someinvestments, but if we can become energy efficient then the cost will come down. Besides, weshould also catch up with the technologies available like CAD-CAM, ERP, spreading machine, layingmachine, automatic cutting machine, folder, guide, attachment in sewing machine, etc to reducethe cost of excessive human employment. There is also a growing regulatory as well as communitypressure on industries for environmental compliance. Buyers are also giving increasing priorities togreen producers. Therefore, it is a high time to prepare ourselves to take the lead.
Market Access and Nation Branding…………As the multilateral trade negotiation of WTO is failing to see any progress,frustrated on the slow pace of current multilateral trading system, manycountries are signing preferential trading agreements in the forms of regionaltrading arrangements and bilateral trading arrangements. However, we havebarely seen any progress on this issue. Considering the dynamics of globaltrade regime an immediate initiative is necessary to look into the prospect ofsuch trade arrangements with prospective trade partners.Besides, Bangladesh has quite successfully able to satisfy the consumers withcompliance, quality, price, lead time and commitment. Bangladesh is not onlyexporting basic clothing, but also producing apparels for renowned brands.Here the country perception plays a big role when it comes to further marketpenetration and targeting high end apparel segment, where nation Branding isa precondition. Country branding has become vital for export marketing, forfurther penetration in the existing markets and to develop new markets. Apositive country perception is also required to support industry’s progress tohigh end fashion industry.
Growth in world apparel imports……………Despite all the adversities in the global economic situation theworld apparel exports have grown by 11.39% in 2010 compared tothe previous year. The world apparel export was worth of 351.46billion US dollar in the mentioned year. Such an increase reveals asteady growth in world apparel consumption and showing anopportunity for the manufacturing countries.
New market exploration……………The overwhelming concentration of our exports to the European Union andNorth America has been quite vulnerable for the future of the apparelindustry, particularly for Bangladesh. The United States, Canada and theEuropean Union countries (predominately Germany, United Kingdom, France,Netherlands, Spain, Italy, Belgium, Denmark and Sweden) take more than 90%of our apparel exports. Market diversification has always been limited; despitewe have tremendous opportunities to explore the Latin American, SouthAfrica, East European and even the Asian regions. The Latin American regionremains largely untapped, though the economies of those countries arebooming rapidly. The retail sale of clothing is increasingly quite impressively incountries like Brazil, Mexico, Chile, Russia and Turkey. On the other hand, Asiais the habitat of around 60% of world population. There is a tremendouspotential in the growing Asian economies like China, India, Indonesia, Korea,Malaysia, Hong Kong and Singapore to develop our alternate markets. Therising middle class and higher middle class groups and their spending power isa clear indicator of the potential of these markets.
Market access……….The simplification of GSP rules of origin adopted by 27 European countries from 1January 2011; and the similar initiative adopted by Norway from 1 April 2011,Switzerland 1 May 2011 and Japan 1 April 2011; preferential market access offered by anumber of countries, like South Korea, China and Malaysia have opened a hugeopportunities for garment export to these countries. Besides the Government of Indiahas granted duty free quota free (DFQF) access for 45 apparel items from 6 September2011 under SAFTA which is another big opportunity for us. India has tremendouspotential for our apparel exports being one of the most emerging economies in theworld and our next door neighbor. Other advantages remain less lead time, pricecompetitiveness, less consumption of fabrics due to comparatively smaller sizespecification and the growing middle class population in India. These 45 RMG itemssecured 79.04% of our RMG exports to India in FY2010-2011. However, there are someother items which were granted Duty Free Quota Free access by India from before,which accounted 1.94% of our RMG exports to India in FY2010-2011. On top of it, thedecision taken by the Government of India on 24 November 2011 allowing 51% foreigninvestment in the multi-brand retail segment (like Wal-Mart, Carrefour) and 100% FDI insingle brand retailing (like H&M, Zara) will facilitate global retail houses to open storesin India. This would eventually create a unique opportunity for Bangladesh to supply ourquality and competitive apparel products to Indian market through these multinationalretailers most of which are already in business in Bangladesh and having their liaisonoffice here.
The China Plus move……Important to note that China still remains the leader in worldapparel market with a 36.94% share in 2010 (WTO), but the risingwages and production and inflation is eroding theircompetitiveness. This is leading to a restructure in the sourcingpatterns as the retailers and importers are focusing on “China Plus”countries; Bangladesh is the ultimate choice. Also we have noticeda good number of brand buyers have come to Bangladesh andsourcing higher value added items, which is also helping us to keepthe growth pace. We believe we could explore more opportunitiesin both traditional and non-traditional markets for a wider range ofproducts.
The importance of the apparel industry to the economy ofBangladesh cannot be overemphasized. This is not just about thestatistics, it is more about livelihoods. It is not just about exportearning and GDP, it is also about the millions of people producingthese goods to lead productive lives and providing opportunitiesfor future generations. The RMG industry has been playing a vitalrole in accelerating economic growth through employmentgeneration, poverty alleviation and empowering women. A hungerand poverty free Bangladesh is envisioned by the government by2021, when Bangladesh will celebrate the golden jubilee of itsindependence. So the entire nation needs to unite and act toreach the potentials.
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