the-south-asian.com June 2004
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South Asian Cotton Textile Industry
Global Picture 2004- Cotton Textile & Apparel Markets
China produces 17 million and the USA 16 million bales of cotton. A bale of cotton weighs 227kg.
- After a marked slow down from 2000-2002, US
domestic clothing sales picked up in mid-2003. Textile exports rose 2.9% in
January-July 2003 but clothing fell 6.2%. US imports surged, especially from
China and Vietnam. By August 2003 textile output was down 9.8% and clothing
13.3%. Several big players filed for bankruptcy in the U.S.
Industry shrank in the first half of 2003 as
domestic demand remained weak and exports of most items fell in volume,
although values picked up.
India’s export recovery failed to raise output but Pakistan’s exports of cotton fabric, towels and garments have soared as a result of trade concessions, due to the Frontline status of war on terror. Pakistan’s plan to start new "garment cities" will focus on higher value clothing. In Sri Lanka fast export growth boosted output but sales to the USA and EU were weak. Slow growth in EU and US markets also hit exports from Bangladesh.
WTO 2005 - Impact on South Asian Textiles
Post WTO – 2005 – McKinsey-DHL- Report Summary
In the years 2005 and beyond, India could be the next big winner after China in the post quota period to the detriment of other Asian suppliers, says a report commissioned by DHL and authored by Mc Kinsey. The following are the report recommendations of areas that need to be improved: [the report interviewed 40 DHL customers].
According to the DHL-McKinsey Apparel and Textile Trade Report, the value of the global textile and apparel industry will most probably go up to $248 billion by 2008, with China, India and Pakistan expected to be the "clear winners". The report forecasts that India has the potential to increase her share from the current 4 per cent to 6.5 per cent valued at $16 billion by 2008. Pakistan can grow from $ 5 billion to about $ 10 billion by 2008.
The report noted that by 2013, exports from India could grow 15 per cent to 18 per cent annually amounting to over $30 billion, provided reforms are implemented.
Report Caveat :- the window of opportunity is small [ 1 year ] . Existing export growth is going to be only 8 per cent per year if required reforms are not implemented.
Post WTO- Reforms needed for India & Pakistan:
1. De-Regulate & Improve Logistics. India’s market share will depend on the way the United States and the European Union impose specific textile safeguards in order to limit the surge in shipments from China, the "white paper" explains.
Scenario 1. Taking shares to declining Asian suppliers.
US and EU would not try curbing apparel imports from the PRC and China would take a 50% share of global market by 2008.In the four coming years, China's apparel exports would therefore rise 16.6% per year to US$124 billion.
Scenario 2 .
Brussels and Washington would re-impose quotas on a series of apparel categories from China whose apparel exports would "only" increase by 7.3% per year to US$64 billion in 2008. The rest of Asian countries would be the first victim of quotas' removal and China's consecutive expansion.
Falling Exports: Hong Kong, Korea, Indonesia, Thailand, the Philippines and Taiwan.
Unchanged Exports : Low-cost countries notably Vietnam, Bangladesh and Sri Lanka.
Rising Exports: China, Pakistan and India would gain from quotas' elimination, with India's exports growing by 8 to 10% per year to US$12 to 16 billion by 2008 while Pakistani sales would be up 6% per year to about US$4 billion in the fourth year of the post-quota era.
2. Improve productivity
The rise in India's exports will actually depend on a series of domestic improvements, from deregulation in labour laws to investment in updated equipment, Mc Kinsey says.
India already enjoys low labour costs, wide availability of textile materials and large market shares in specific categories. Indian plants suffer from very low productivity, however, compared with the United States and China.
"Productivity of Indian exporters is 35% of US levels, compared with Chinese exporters that operate at 55%," according to another study by Mc Kinsey about men's shirt producing plants.
"The overall productivity of the Indian and Pakistan industry, including tailors and domestic manufacturers, is only 16% of the US," the report adds.
Regarding production of men's shirts, for instance, India should improve workflow, invest in better technology, reduce faults in fabrics, expand the size of factories and more importantly shift from tailors to manufacturers.
3. Reduce delivery delays:
India also suffers from an absenteeism rate of 13% versus 5% for the rest of Asia. "Rejection levels are 3.3% versus 1.8% for rest of Asia, and delayed shipments are 19% versus 9% for rest of Asia." Reducing lead times should be a major priority since US brands and retailers such as Gap and Nike intend limiting their apparel product development lifecycle from 12 down to only 9 months. Domestic environment of Indian companies should also be improved. Import tariffs and other barriers should be reduced while new laws should allow women working during the night, according to the report. So-called "de-reservation" of Indian industry should be extended to hosiery and knit fabric manufacturers, allowing large units to develop their activities. The Infrastructure should also be improved, Mc Kinsey said.
4. Critical Success Factors identified in the report include:
Local manufacturers recommendations:
2. Use Information and Telecom technology to aggressively
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