ISLAMABAD, May 5, 2016 –Pakistan has been successful in establishing and growing its apparel manufacturing industry, however, more can be done to realize its potential as a regional hub and to continue to boost opportunities, especially for women and the poor, according to a new World Bank report.
The Stitches to Riches? Apparel Employment, Trade and Economic Development, launched in Pakistan today is aimed at demystifying the global and South Asian apparel markets, estimating the potential gains in exports and jobs, and identifying policies that can unleash country’s export and job potential compared with those of their closest competitors in the Southeast Asia region (Vietnam, Cambodia, and Indonesia).
The report finds 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 those who offer low costs.
China currently dominates global apparel trade but that may change in coming years due to the rising prices in China. Investors are compelled to seek out apparel firms in other countries. The potential decrease in Chinese exports presents a huge opportunity for South Asian countries. A 10 percent increase in Chinese apparel prices would increase apparel employment in Pakistan for males by 8.93 percent—by far the biggest winner—followed by Bangladesh (4.22 percent) and India (3.32 percent).
Women are also expected to benefit the most as their share in the total apparel employment is much higher than their share in other industries. This is true for Pakistan as well. The report finds that 1 percent increase in expected wages in Pakistan would raise the probability of women entering the labor force by 16.3 percent.
“Job creation is among the government’s top priorities. Apparel manufacturing presents the poor with job opportunities in Pakistan especially for females”, says Illango Patchamuthu, World Bank Country Director for Pakistan. “These employed women would in return spend more on the health and education of their children, which will contribute towards the larger development goals of the country”.
Pakistan has a fast-growing apparel sector that accounts for 19 percent of its exports, and firms are competitive with global exporters in terms of prices. Yet, despite low prices in most apparel product categories, Pakistan lags competitors in reliability, and policy continuation. It also remains highly concentrated in cotton products.
“South Asia has taken many steps in recent years to support the textile and apparel sector, but it now needs to step up its game by tackling inefficiencies that are undercutting its competitiveness”, says Gladys C. Lopez-Acevedo, one of the authors of the report and a Lead Economist for the World Bank. “Pakistan should use this opportunity and implement policies to become a regional leader in creating good jobs, bringing more women into the work force and diversifying its products and end markets to increase skills and value.”
Policy Actions required
The report suggests that Pakistan could benefit from the following policies:
Increase product diversity by reducing barriers on imports to ease access to manmade fibers (such as duty and tax remission for exports, and export processing zones).
Attract Foreign Direct Investment by adopting policies to reduce red tape and increase transparency to close the gap with South Asian countries whose textile and apparel industries are located primarily on the coast.
Diversify markets by taking advantage of access to emerging markets. Shorten lead times by improving road infrastructure to facilitate access to ports for exporting firms and by clustering strategies to provide key infrastructure and common facilities.
Enhance perceptions of stability as many buyers are reluctant to travel to Pakistan, which makes sourcing complicated.