The textile
industry is an important contributor to the overall growth of some Asian
economies and many Asian players are the front-runners in the industry
globally. The article looks at the factors that have significantly contributed
to the industry’s development and the business opportunities in these markets.
China enjoys
stable growth for imports and exports of textile and apparel
Asia is a leading manufacturing and sourcing hub
for the global textile and apparel. China, an economic leader in Asia, recorded
an eye-catching performance. The exports and imports of the country have grown
steadily for two consecutive years.
According to the statistics of the General
Administration of Customs, China's exports of textile and apparel in 2018
reached US$276.73 billion, a year-on-year increase of 3.52%. The export
continued to maintain positive growth throughout the year. Among them, the
exports of textile totaled US$119.098 billion, representing a rise of 8.12%
while the exports of apparel totaled US$157.633, showing a slight increase of
0.29%.
In 2018, China's textile and apparel industry
experienced a growth for the exports of upstream products and a slowdown for
the exports of downstream products. On the one hand, the delocalization of
Chinese apparel production networks has led to a slowdown in related exports;
on the other hand, the incomplete supply chain of the neighboring low-cost
apparel producing countries has triggered the demand for Chinese yarns and
fabrics.
Facing with the demand for domestic consumption
upgrades, the Chinese government has repeatedly lowered tariffs on imported
goods and promoted a substantial increase for the imports of consumer goods.
According to statistics from the General
Administration of Customs, in 2018, the imports of textile and apparel of the
country reached US$26.14 billion, a year-on-year increase of 6.4%. Among them,
the imports of textile rose by 3%, and the imports of apparel increased by
14.8%.
Other Asian
countries gaining presence
In addition to China, some other Asian countries
are also enjoying a rapid economic growth. According to a report by PwC,
Vietnam, India and Bangladesh have the potential to be the fastest growing
economies between 2016 and 2050 with average annual growth of around 5%. These
countries will benefit from their energetic and fast growing working-age
populations, boosting domestic demand and output.
In these growing countries, the textile industry
has been a powerful driving force that provides impetus to economic
development. For example, Bangladesh (US$29.3 billion), Vietnam (US$26.7
billion) and India (US$18.4 billion) were listed among the world’s top 5
largest apparel exporters in 2017, as stated in the World Trade Statistical
Review by the WTO.
Notably, with the rising government focus and
encouraging policies, a favorable environment have been created for boosting
domestic textile manufacturing, creating employment opportunities, as well as
attracting foreign investment.
Both local
and foreign investment increasing in Bangladesh
The textile industry plays a vital role in the
growth of Bangladesh’s economy, generating over 80% of the export earnings and
contributing more than 12% in GDP, according to Bangladesh Textile Mills
Association (BTMA).
As introduced, primary textile sector of Bangladesh
has turned into very a strong backward linkage industry for the RMG (Ready-made
Garment) sector. Currently, the local spinners can supply 85% of the raw
materials to the export-oriented knitwear sector and 35 to 40% to the woven
sector. The local woven fabric capacity can be increased up to 60% in next five
years if all the infrastructural issues are addressed.
From 2014 to 2018, the local entrepreneurs invested
an average of Tk1,380 crore per year in the primary textile sector to meet the
demands of fabrics and yarn.
BTMA also revealed that, over the next five years,
Bangladesh has the scope to invest a fresh Tk 50,000 crore in the primary
textile sector as the demand for locally made fabrics has been rising in both
the domestic and international markets.
Mohammad Ali Khokon, president of BTMA, pointed out
that the government should supply energy and industrial land at a reasonable
price so that the spinners and weavers feel encouraged to invest in the sector.
Investment in the local fabrics will lessen the dependency on imports, majorly
from India and China.
To attract large-scale foreign investment and
develop the country’s infrastructure, Bangladesh government has taken
initiatives to construct 100 special economic zones across the country on
75,000 acres of land by 2030 to spur planned industrial development in
protecting the unscrupulous use of agricultural land.
In 2017, Bangladesh’s textile and apparel sector
received foreign investment worth US$421.68 million, which is 15.70% higher
than US$364.44 million in 2016, according to Bangladesh Bank’s data.
Economists said FDI in the sector could be a
solution for Bangladesh to move towards value-added products since the country
is highly dependent on import for higher end fabrics.
At the 6th China & Asia Textile Forum 2018,
Faruque Hassan, Senior Vice-President of Bangladesh Garment Manufacturers and
Exporters Association (BGMEA), said: “Although we are the second largest
importer and exporter, our market share reached 7%. At the moment, Bangladesh
is a hotspot for foreign textile investment. In particular, with the policies
and incentives launched by the government, we are hopeful of more foreign
investment projects to arrive in the future.”
Vietnam's
garment sector turns appealing for FDI investors
In 2018, Vietnam’s textile-garment sector has
grossed over US$36 billion in export turnover, up over 16% against the previous
year, according to Vietnam Textiles and Apparel Association (VITAS). This is
the highest rise over the past three years, compared with 12.1% in 2015, 4.07 %
in 2016, and 10.8 % in 2017.
The sector ran a trade surplus of some US$17.86
billion throughout the year, representing a year-on-year increase of 14.39 %.
VITAS has set the target of raising the export
turnover to US$40 billion in 2019, up 10.8 % and bringing trade surplus to
US$20 billion.
More importantly, Vietnam’s textile-garment sector
has become increasingly appealing to large foreign investors who want to seize
opportunities with the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP) effective in January 2019, analysts said.
VITAS statistics showed nearly US$15.9 billion in
FDI had been injected into more than 2,090 textile and garment projects in
Vietnam by 2017 end. In the first half of 2018, the industry attracted US$2.8
billion in FDI.
VITAS is hopeful of more foreign direct investment
(FDI) projects to arrive in the coming years.
At the 6th China & Asia Textile Forum 2018,
Nguyen Binh An, Secretary-General of Vietnam Cotton & Spinning Association,
pointed out the competitive advantages of the country. “The Vietnam Government
has attracted numerous foreign investors to the country with a number of
incentives, rules and regulations. In addition, the electricity cost and labor
cost are low here. In brief, the rapid growth of Vietnam in the last decade was
mainly attributed to the government policies and competitive cost levels.”
Many German and US companies manufacturing garment
items are expanding their presence in the country. Germany’s Amann Group, one
of the world’s top three leading producers of high-quality sewing and
embroidery threads, is expanding its network in Asia to Vietnam with a new
factory being constructed at the Tam Thang Industrial Park in the central
province of Quang Nam.
The group will produce around 2,300 tonnes of
sewing threads per year at the new production site, mainly for apparel and shoe
manufacturers, according to a news agency report. The first phase of the
project is scheduled to commence in late July.
US-based KraigBiocraft Laboratories Inc., which
manufactures spider silk-based yarn, is working with agricultural cooperatives
in Quang Nam to expand mulberry production and develop high-performance silk in
Vietnam.
The firm plans to set up a centre for silk research
and development (R&D) and grow about 2,500 hectares of mulberry to support
spider silk in the country.
The domino effect generated by FDI expansion in the
textile and garment sector has also led to a rise in the number of foreign
suppliers of machinery and equipment for the industry.
In June last year, ILLIES Vietnam, a member of the
German C. ILLIES & Co. and a leading distributor of industrial textiles
machinery and equipment, announced expansion of its portfolio in the spinning
sector. It now provides machines and spare parts for short-staple yarn-spinning
systems for the Rieter Group and the local textile market.
Favorable
policies leading growth in India
The Indian textile industry, currently estimated at
around US$ 150 billion, is expected to reach US$ 250 billion by 2019, according
to India Brand Equity Foundation (IBEF), a Trust established by the Department
of Commerce, Ministry of Commerce and Industry, Government of India.
Indian textile industry contributes to 7% of
industrial output in terms of value and to 15% of country's export earnings.
Textile and apparel exports from India are expected
to increase to US$ 82 billion by 2021 from US$ 37.9 billion in FY2018. Manmade
garments remain the largest contributor to total textile and apparel exports
from India, contributing 24.53% to total textile.
The textile industry has witnessed a spurt in
investment during the last five years. Rising government focus and favorable
policies are leading to growth in the textile and clothing industry.
The Indian government has come up with a number of
export promotion policies for the textile industry. It has also allowed 100%
FDI in the Indian textile industry under the automatic route.Cumulative FDI in
the Indian textiles reached US$ 2.97 billion between April 2000 to June 2018.
The Ministry of Textile is encouraging investments
through increasing focus on schemes such as Technology Up-gradation Fund Scheme
(TUFS). Under the Union Budget 2018-19, US$ 355.27 million has been allocated
for TUFS and US$ 4.63 million for the Scheme for Integrated Textile Parks,
under which there are 47 ongoing projects.
The Directorate General of Foreign Trade (DGFT) has
revised rates for incentives under the Merchandise Exports from India Scheme
(MEIS) for two subsectors of Textile Industry - Readymade garments and Made ups
- from 2% to 4%. As of August 2018, the Government of India has increased the
basic custom duty to 20% from 10% on 501 textile products, to boost “Make in
India” and indigenous production.
In addition, the Government announced a Special
Package to boost exports by US$ 31 billion, and attract investments worth US$
11.93 billion during 2018-2020. As of August 2018, it generated additional
investments worth US$ 3.78 billion and exports worth US$ 854.42 million.
The future for the Indian textile industry looks
promising, buoyed by both strong domestic consumption as well as export demand.
With consumerism and disposable income on the rise, the retail sector has
experienced a rapid growth in the past decade with the entry of several
international players like Marks & Spencer, Guess and Next into the Indian
market.
High economic growth has resulted in higher
disposable income. This has led to rise in demand for products creating a huge
domestic market.
Pakistan’s government
taking initiatives to revive the industry
Pakistan’s textile industry is the eighth largest
manufacturer in Asia. The textile industry has an overwhelming impact on the
economy, contributing 57% to the country’s exports and 8.5% to the country’s GDP,
according to the Ministry of Textile Industry Government of Pakistan.
The Pakistan Readymade Garments Manufacturers and
Exporters Association (PRGMEA),Central Chairman Mubashar Naseer Butt, said
value-added textile products could earn plenty of foreign exchange for the
country.
According to him, the exports of the value-added
garment sector grew 11.22% in 2017-18 and the sector is a major taxpayer, the
largest employment generator in the entire textile chain and exports up to
US$5.5 billion worth of products.
Meanwhile, the new government has introduced
visionary steps and launched some export-led policies to revive the industry.
It is striving to increase exports among other options by reducing energy
tariffs, providing incentives like drawback duties, and cheaper financing under
Long Term Financing Facility (LTFF) and Export Refinance Facility (ERF).
Previously, the government agreed to reduce energy
(RLNG) tariff for Punjab-based five export-oriented sectors, including textile,
to US$6.5 per million metric British thermal unit (mmBtu), down 35 to 50%
compared to the earlier rates.
With this move, Pakistan’s energy tariff comes in
tandem with the regional countries (such as India and Bangladesh) at US$5 to
7/mmbtu, which will help Pakistan in competing with these countries.
Moreover, Pakistan is in negotiation phase-II of
free trade agreement (FTA) with China, which would be a breakthrough for
textile industry as currently Pakistan is paying tariff of 3.5% on yarn versus
0% on Bangladesh and ASEAN countries. Tariffs on other textile products range
from 4 to 9% versus 0% in ASEAN countries, including Indonesia, Malaysia,
Thailand, Philippines, and Vietnam.
Analysts believed that the rationalization of these
tariff rates in FTA phase II would unlock potential of textile exports to
China.Under the strategic trade policy framework, the government set export
target of US$46 billion by 2023.
Over the next five years, the entire textile
industry chain, starting from raw material manufacturers to value-added textile
units, is estimated to invest around US$7 billion, according to All Pakistan
Textile Mills Association (APTMA) Secretary General for Punjab Chapter Anisul
Haq.
The exports and imports of China have grown
steadily for two consecutive years.
Over the next five years, Bangladesh has the scope
to invest a fresh Tk 50,000 crore in the primary textile sector.