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South Asia Economic

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DOI: 10.1177/139156140400500212

2004 5: 348South Asia Economic JournalBeena Pandeyenvironment

Competitiveness, Productivity and Job Quality in the Post-MFARags or Riches?Book Review: Garment Industry in South Asia

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348 / South Asia Economic Journal 5:2 (2004)

budgets could undermine these gains. The non-formal system has thus far provedto be ineffective and for the state to achieve genuine literacy, it is the formalsector that needs enhanced investment. This reviewer is particularly pleased

with the assertion on the links between primary education and literacy.4

The volume is loaded with excellent analysis of every conceivable subject ofpolicy relevance to AP politicians, bureaucrats, civil society and all other stake-holders. One hopes that the concerned higher-ups would read this volume, atleast via a series of briefings from the authors.

Bhanoji RaoGITAM Institute of Foreign Trade

Visakhapatnam

Gopal Joshi (ed.) Garment Industry in South AsiaRags or Riches? Competitiveness,Productivity and Job Quality in the Post-MFA environment. South Asia Multidiscip-linary Advisory Team, ILO, New Delhi, 2002, 246 pp. ISBN: 92-2-111910-6.

During the past two decades, South Asian countries have witnessed rapid ex-pansion of employment opportunities and export earnings in the garment industrydue to quota arrangements under the MFA. As a result, for the first time, anunprecedented number of female workforce have joined the garment manu-facturing activities in some of these countries. However, the expected terminationof the quota arrangement under the MFA by the year ending 2004 is likely toadversely affect the employment opportunities and job qualities in these countries.This book mainly provides a broad overview of the adverse consequences ofpotential loss of employment opportunities and its sustainability in the long run,

which is an outcome of a sub-regional workshop, organized by ILO to formulatefuture strategies for the garment industry to survive in the liberalized and global-ized post-MFA environment. The book contains edited country papers presentedin the workshop from five select South Asian countries, viz., Bangladesh, India,Nepal, Pakistan and Sri Lanka. It basically describes the state of employment,

job quality and competitiveness in the respective garment industry.The first chapter presents a comprehensive overview of competitiveness,productivity and status of jobs in the South Asian garment industry. It revealsthat South Asian countries, despite the phenomenal expansion in employment

4 Several years ago based on a cross-country regression, I found, not unexpectedly, that in

populations with an average education of seven years, literacy rate is over 90 per cent. It is perhaps

a waste of time to go on speaking about literacy campaigns and so on, when there is an unfinished

agenda in terms of ensuring quality schooling for all eligible children. Here the greatest challenge

is for government schools to match the private schools in terms of physical infrastructure and

quality teachers.

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opportunities and export earnings due to the growth of the export-oriented gar-ment industry, have a marginal share in garment exports in the total world garmenttrade. It has been aptly stated that the items exported by these countries still

remain quite narrow and limited, while other Asian countries have far morediversified and high-value-added export items.Various factors accounting for the substantial increase in garment exports have

been discussed in detail. For example, Chinas share of garment exports increasedto 15 per cent in 1995 from mere 4 per cent in 1980, enabling it to become one of theleading exporters. Due to its comparative advantage in as many as 32 categories ofexport items, compared to similar exporting countries such as India and Indonesia,it moved up significantly from its eighth rank. During the nineties, Bangladesh

attained the largest annual growth rate of almost 17 per cent in garment exports,owing mainly to a very low wage rate among all the South Asian countries in theregion, apart from technological upgradation and a union-free EPZ.

With regards to the input material for the garment industry, the book clearlyindicates that India and Pakistan have a comparative advantage and are endowed

with ample sunlight for the production of cotton as compared to Bangladesh,Nepal and Sri Lanka which are at a disadvantage in terms of natural resourceendowments. Government policies in Pakistan for allocating quotas only to

existing exporters have deprived the new entrepreneurs for entering in the exportsbusiness. In India, a large percentage of cotton component in apparel has heldback growth that could be otherwise utilized for high-value-added garments

with inputs of various fabrics. Sri Lanka is the only country in the region whichhas moved up in the value chain.

The book also says that most South Asian countries are commodities exportersresponsible for assembling low-cost discount clothing, not independent exportersof branded merchandise or even commercial sub-contractors or component sup-pliers. As a result, garment exporters from South Asian countries are basicallyconfined to buyer-driven commodity chains (BCC) rather than producer-drivencommodity chains (PCC).

The author aptly highlights that the confinement of exports at mass merchan-dising and discount chain outlets on a commodity basis, which has resulted inlow receipts in terms of unit price of the garments exported. Except Sri Lanka,

very few garment export items from South Asian region fetch higher prices.

The second chapter discusses the current status and future prospects of theRMG industry in Bangladesh in terms of its growth, employment and exports.It reveals that the dynamic performance of the industry has transformedBangladesh from a jute exporting country to garment exporting country. TheRMG industrys total export earnings has increased to 76 per cent from themere 4 per cent in 198384. It has also been stated that two most importantfactors for the success of RMG industry are the availability of cheap labour andthe preferential treatment received from the European Union (EU) under the

GSP scheme. Gender discrepancies in jobs and wage rates as most women workas either operators or as helpers rather than as production managers, or supervisors



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have also been reviewed. Once their quota is removed, Bangladesh is expected

to suffer from its lack of textile industries and poorly developed infrastructure.

Although Bangladesh seems to enjoy the low-wage cost advantage, it also suffers

from low productivity and poor job quality.Chapter 3 analyses the employment prospects in the Indian garment industry

and the consequent challenges that confront Indian policy makers. It provides a

broad overview of the changes that took place in the composition of garment ex-

ports in India since the late sixties. There has been steady increase in the share of

cotton knitwear products whereas share of handloom garments have declined

substantially. With regard to the fabric base, cotton garments continue to dominate

the Indian export basket followed by synthetic and woollen garments. A very

clear picture has been given regarding the gradual change in destination of Indianexports, from USSR and Eastern Europe to US and European markets. It suggests

that the successful case study of Tiruppur Knitwear industry can be easily extended

to other centres of garment production in India. It has been recognized that the

removal of quota restrictions would lead to an expansion of export markets for

Indian garment producers. However, the lower labour productivity as compared

to China, Indonesia, and Bangladesh may threaten Indias competitiveness and

thereby decline in exports.The status of the garment industry in Nepal has been shown as a new entrant

with a mixed picture in the next chapter. Surprisingly, the total export performance

of the Nepalese garment industry has been showing the rising trend as its export

earnings have increased three times (increase by 254 per cent) while the total

volume has increased only by 61 per cent. This substantial hike have been attrib-

uted to the US market which accounted for almost 87 per cent of total export

earnings and 88 per cent of total export volume in financial year 200001.

However, the cost of labour and cost of production consisting of transportationof goods for both imports and exports of products for Nepalese garments con-

tinues to be relatively high as compared to India and Bangladesh because the

industry has been largely based on imported raw materials. Likewise, the cost of

credit from banks is relatively high ranging between 14 to 16 per cent as against

8 to 10 per cent in Bangladesh.

With the expected removal of quota restrictions, the garment industry in Nepal

needs to prepare itself to meet the challenges of globalization under the WTOregime. As there are some special provisions under the Uruguay Agreement for

the developing countries which can guarantee freedom of transit, access to per-

manent international markets and inflow of foreign investment in the country,

countries like Nepal can utilize this to improve its competitive edge to survive

and prosper in the world market. Various indicators have also been discussed in

the chapter regarding the competitiveness and productivity performance of

Nepals garment exports which allow comparative analysis among the SAARC

region.



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Further, it reports that though the garment industry is basically a women-

oriented industry, in Nepal the number of male workers dominates female

workers by a ratio of 85 per cent to 15 per cent. It has also shown that the Nepalese

garment sector has experienced both a growth and a declining trend in its em-ployment size mainly due to its increasing shift in technology and manufacturing

systems from a piece-rate system to an assembly-line system by using imported

sophisticated machines. The author clearly admits the limitations of lack of

authentic data for the analysis on employment pattern in the garment industry.

Within the South Asian region, Bangladesh dominates exports which constitute

almost 8 per cent towards the net exports of Asia followed by Indias 7 per cent

share, whereas Pakistan has a meager share of 2 per cent in the total Asian exports

as revealed in the fifth chapter. It further states that despite the higher marketshare of womens wear as compared to mens wear globally, Pakistan has a strong

bias towards mens wear because its exporters have the benefit of mass production

and stable profits in this category. However, in 1999, the export of woven and knit

garments for women was US$ 116 million and US$ 80 as compared to US$ 460

and US$ 457 million for mens garments. Several other important reasons have

been given for the non-preference for the womens wear as it requires sophisti-

cated processing procedures and fine fabrics which directly affects the conversioncost of the garments. But at the same time when the exports of 1999 are compared

with 1995, it is evident that the share of knit garments in the Pakistans exports

have increased from 30 per cent to 41 per cent over 199599. More than 90 per

cent of the Pakistans exports of garments are directed towards mainly the USA

and the EU. The categorization of products within the EU to allocate quotas are

fairly simple as compared to that of the USA. Though in these two countries the

quota utilization reveals that Pakistans apparel sector is mainly dependent on

cotton products and on mens wear. It has been clearly and comprehensivelystated that the existing quota policy in Pakistan not only discourages the

diversification of products but has hampered the entry of new exporters through

the imposition of high entry barriers in terms of large investments required in

quota procurement.

As far as the employment pattern in the garment industry in Pakistan is con-

cerned, industry prefers to hire male workers as stitchers rather than female

workers as helpers and, above all, the labour laws impose restrictions on womensemployment after 7 p.m. Interestingly, the majority of the female work force are

only employed to perform semi-skilled operations particularly in the clipping

and packaging sections and are thereby paid the lowest wages. Apart from this,

the implications of imposing standards such as ISO 9000 and 14000, another

standard SA-8000 (Social Accountability) standard which the European country

can impose on suppliers, has been taken care of in great detail. According to the

author, if such standards are implemented properly, this would definitely lead to

an improvement in job qualities in the garment industry in South Asian countries.



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The status and the major issues faced by the Sri Lankan garment industry has

been presented in the sixth chapter. After the late seventies, the Sri Lankan gar-

ment industry experienced phenomenal growth and it continues to be the largest

manufacturing sub-sector in terms of its contribution to the GDP, total exports,foreign exchange earnings and employment generation. In 1992, with the dual

objective of fuelling industrial growth and the problem of rural employment,

the 200 Garment Factory Programme was initiated. Under that programme

investors were offered quotas and several concessions including tax holidays,

free importation and access to off-shore finances.

After discussing the geographical distribution of garment establishments in

Sri Lanka and the total number of employees employed in the different provinces,

it also presents the gender composition of the labour force by occupational cat-egories in the garment industry. Furthermore, it provides a useful source of infor-

mation regarding its major guaranteed export markets for garments through

bilateral agreements with the USA, the EU, Canada, Norway, Sweden, and Finland.

Sixty per cent of Sri Lankas garments are exported to US followed by 30 per cent

of its exports to the EU. Following this, though, two new market opportunities

have emerged during 2000 for its expansion. The first, the Indo-Sri Lanka Bilateral

Free Trade Agreement, which permitted 8 million pieces of garments at 50 percent duty concession to the Indian market, however, proved ineffective in offering

any benefits. The second, the Trade and Development Act which facilitated duty-

free entry to the US from the Caribbean and sub-Saharan African countries

provided an opportunity for the Sri Lankan garment industrialists to relocate in

sub-Saharan Africa and target the US market. It has been stated that the

composition of Sri Lankas category-wise garment exports mainly dominated by

womens outerwear and mens outerwear accounted for approximately 45 and

15 per cent respectively of the total garment exports.However, the Sri Lankan garment industry has also been affected by various

problems such as poor working conditions, poor incentive structures, high labour

turnover and absenteeism, inadequate training, strained employeremployee

relations, restrictive labour regulations, low investment in technology, slow turn-

around time and lack of professionalism in the industry. Given these obstacles

the garment industry is now faced with pressures of globalization and phasing

out the quota system.The final chapter summarizes the conclusions from the viewpoint of different

concerned representatives like employers, workers and the respective govern-

ments in the South Asian countries. On the whole the book gives an indepth

account of the garment industry in South Asian countries, highlighting different

aspects of the working of these industries which has contributed a great deal in

terms of increased employment opportunities particularly for the civil workers

and women workforce which has also increased its exports volume and foreign

exchange earnings.



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With the removal of MFA in 2004, these countries have to formulate nationalstrategies to improve their productivity, service quality and expand market oppor-tunities. Stress is also to be laid on specific measures for improving job qualities

and conditions of work. Attention is also required to be paid in implementinginternational labour standards emphasizing on fundamental human rights.Besides, measures are also to be initiated to enhance constructive labour manage-ment relations for promoting social dialogue to resolve conflicts.

Beena Pandey

Research AssistantRIS, New Delhi

India


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