The sourcing trends in South East Asia
For a long time China has been the most important resourcing market for the procurement of textile and apparel articles. The country is the number one of the resourcing countries for textiles and apparel in Europe. However, changes cannot be ignored. The total export figure of textiles to the European Union is decreasing continuously. Whilst in 2010 41 percent of all textiles and apparel articles exported to the European Union came from China, this figure decreased to 35 in 2013. China has changed from a former low cost country into a market with a high technological standard. This resulted in an increase of the labour and production costs and the abovementioned drops which will still continue. Hence it follows that the cost pressure remains high because a large number of companies are still making their decision for or against a resourcing market dependent on the labour cost level existing in a country. This means that new markets are opening constantly. Texprocess Forum will provide an extensive overiew of the current sourcing trends.
It is a fact that China will still maintain its position as an important resourcing market for the future, because no other market offers such high capacities than China does. Nevertheless the decline in population and the abovementioned reasons bring about that the globalization of the markets is proceeding further and that several Asian neighbour countries of China are gaining more and more importance for the procuration of certain partial quantities of goods and product groups.
Bangladesh being one of the countries having the lowest labour cost level worldwide has conquered the second place behind China of the resourcing countries for textiles and apparels for the European market. As a consequence this Asian country has pushed out Turkey from this position for the first time in 2012 and established itself in the textile branch. However it cannot be denied that Bangladesh is under a strong pressure as a consequence of the recent incidents that have occurred such as the Rana Plaza disaster that cost the lifes of more than 1000 people. Various measures to bring about improvements such as the Accord of Fire and Building Safety have meanwhile been implemented so that first positive effects with regard to the working and labour conditions are noticeable. As far as the quality of the goods manufactured and supplied is concerned, remarkable progress has been recognizable in the past years. The qualification of the suppliers is more and more increasing. However this development resulted in an increase of the production cost level. Hence it follows that the procurement caravan moves on to new markets in the direct neighbourhood, such as Cambodia and Myanmar.
Cambodia belongs to one of the countries having the lowest labour cost level worldwide and is more and more frequented as a resourcing market by the clothing branch and last but not least by the Chinese who are investing in manufacturing plants in Cambodia with the aim of not losing by this indirect way their hegemony in the branch. The textile industry is the commercial sector having the highest growth rates in the country and a 70 percent share in the export rate. According to the internet portal “Zeit Online” (time online) companies like Adidas, Puma, H&M, Gap, Lewis, Nike and Wal Mart already maintain manufacturing capacities in Cambodia. The reasons for that are among others China’s willingness to invest and the transfer of knowhow and the customs-free export to USA as well. A bigger part of the business transactions is executed through agencies which form a useful bridge between the buyer and the manufacturer. International textile manufacturers are campaigning for fair wages and socially-acceptable working and labour conditions.
No other country in Southeast Asia has a lower labour cost level than Myanmar. A military dictatorship was dominating this Southeast Asian country during a period of 48 years. The country was extremely isolated and suffered from severe sanctions imposed by the European Union. As the international economic blockades have stepwise been relaxed since 2010, the apparel industry has been developing into a prosperous commercial sector and gaining importance on the international market. Major customers like the US American company GAP maintain manufacturing capacities in the country. Others will follow. For German buyers the country is gaining importance as well. According to information of German Trade & Invest, apparel articles worth 47 million Euros were exported from Myanmar to Germany in 2013. This is an increase of 20 percent compared to the previous year. The export rate share of textile articles amounts to almost 84 percent from Myanmar’s total export rate amounting to 56 million Euros. The rate of export of textile articles into all countries of the European Union amounts to 131 million Euros (an increase of 17 percent) and represents a 59 percent share of the total export rate. Like Cambodia, Myanmar is profiting from investments and transfer of technology and knowhow from abroad. This lets expect that the training of skilled personnel will progress and investments will be made in the still insufficient electric power system and infrastructure.
The list of further examples of new resourcing markets can still be completed by several countries in the Asian regions. Vietnam should be mentioned in this connection. This country was strongly influenced by the French colonial rule in the 19th century. Therefore certain cultural barriers are lower than in other Asian countries. The production rate of Denim cloth and outdoor articles is increasing continuously. However due to its high technological standard, South Korea’s textile and clothing industry is strongly influenced and characterized by the production of functional clothing such as sporting goods. India and Pakistan should not be forgotten as well. Beside China these countries are counted among the Asian countries were cotton is cultivated. This is an important factor for the decision to manufacture textiles and clothing articles in these countries.
Apart from Asian countries the clothing industry in Africa is growing as well. Africa is registering a high economic growth. Last but not least, the growth of population has a positive effect on the development of the textile and clothing industry for instance in Ethiopia.