If Pakistan takes steps to tackle inefficiencies that are undercutting its competitiveness by easing barriers to the import of manmade fibers, facilitating market access and encouraging foreign investment, the employment opportunities will increase manifold in the country.
This was said in the latest report of the World Bank. The report says China now dominates the global apparel market – accounting for 41 per cent of the market, compared with 12 per cent for South Asia. But as wages in China continue to rise, its apparel production is expected to shift towards other developing countries, especially in Asia. This is important because apparel is a labour intensive industry that historically employs relatively large number of female workers.
The report says that under the current policies, as Chinese apparel prices rise by, for example, 10 per cent, World Bank finds that in Pakistan, employment might increase by nearly 220,000, based on current apparel employment of about 2.5 million people. These changes will also help other light manufacturers like footwear and toys, thereby boosting Pakistan’s development potential.
The United States, the European Union (EU), and other developed countries buy the largest shares of globally traded apparel and it is their retail firms that typically decide what kind of apparel consumers would want. The process begins with these firms presenting designs and orders directly or indirectly to producers in developing countries. Producers respond with production characteristics – including costs and non-cost factors like production times, quality assurances, and, increasingly, worker conditions. On that basis, developed countries’ buyers then decide on where to source the apparel.
As prices rise in China, these buyers are looking for other places from which to source apparel. The responsiveness of these buyers to prices in different countries is analysed by economists with the concept of elasticity, which is defined as the percentage change in quantity demanded for a given percentage change in price.
The report uses detailed US and EU apparel import data to estimate how much production may shift between China and seven leading developing Asian apparel producers – the four countries in South Asia, Bangladesh, India, Sri Lanka, and Pakistan and three in Southeast Asia, Cambodia, Indonesia, and Vietnam.
The results suggest that under current policies, South Asian countries’ exports to these markets will increase by 13-25 per cent depending on the country. However, the Southeast Asian benchmark countries will do even better, with a 37-51 per cent increase depending on the country.
Using detailed data on firms and workers, the World Bank also estimate the change in employment that would occur if exports were to increase. It finds that a 1 per cent increase in apparel export is associated with a 0.3–0.4 per cent increase in employment for both men and women in Bangladesh, Pakistan, and Sri Lanka.