The clothing sector has traditionally been a gateway to export
diversification and industrial development for low-income countries
(LICs) due to its low fix costs, relatively simple technology, and
labor-intensive nature. It has served to absorb large numbers of
unskilled, and mostly female, workers and build capital and know-how
for more technologically advanced activities within and across sectors.
But the environment for global clothing trade has changed significantly
which may condition the role the sector can play in promoting export
diversification and industrial development in LICs today. Main drivers
have been the rise of global buyers and their global sourcing
strategies, the phase out of quotas in the Multi-Fiber Arrangement
(MFA), and, more recently, the global economic crisis.
In the context of these changes, this study analyzes how the
clothing sector can still provide a gateway to export diversification
and industrial development for LICs today. The key objectives of this
study are to assess main developments in the global clothing sector
associated with the Multi-Fiber Arrangement (MFA) phase out, global
buyers and their sourcing strategies, and the global economic crisis;
analyze challenges that LICs are facing in the post-quota and
post-crisis world in entering and upgrading within global clothing
value chains; and identify policy recommendations to increase the
competitiveness of LIC clothing exporters as well as to further their
integration into and improve their positions within global clothing
value chains. For the study interviews with buyers in the US, the EU
and South Africa as well as case studies in Sub-Saharan African LICs
(Kenya, Lesotho and Swaziland), Cambodia and Bangladesh were
conducted.
The study finds that global consolidation in the clothing sector has
increased entry barriers at the country and firm level. This has
created new challenges to LIC suppliers as low labor costs and
preferential market access are not enough to be competitive in the
clothing sector today. Suppliers with broad capabilities have been able
to develop strategic relationships with global buyers. Marginal or new
suppliers are entering the global value chains through intermediaries,
but face limited upgrading opportunities. FDI plays an important role
in integrated LICs into global clothing value chains, yet it needs to
be used in a way that promotes and upgrades local clothing industries.
Overall, the clothing sector still provides opportunities for export
diversification and industrial development. However, this requires
pro-active policies to increase the competitiveness and local
embeddedness of LIC clothing exporters.
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