NEW DELHI: Asia is expected to remain a dominant player in garment production over the coming decade even as China looks to reduce its apparel manufacturing operations and move up the value chain, analytics firm Fitch Solutions said in a report on Tuesday. The outlook for the textile sector highlighted that India and Indonesia, which offer low-cost cheap labour and large domestic markets, may lose out due to the lack of conducive business conditions.

Even as China moves up the value chain, many other countries in Asia benefit from favourable labour market dynamics for apparel production, sufficiently predictable logistical connections to serve external trade, free trade agreements that ensure preferential access to major consumer markets, and geographic proximity to raw material producers in China and India, the report said.

“Accordingly, we have already started to see Vietnam benefiting from these trends and expect to see more investments into the country. In addition, we expect Bangladesh, Cambodia and Myanmar to see greater gains in the coming years as costs in Vietnam also rise,” Fitch Solutions said.

It identified India and Indonesia as potential recipients of manufacturing shifts and growth in terms of global apparel export share.

However, according to the report, the two countries’ annual growth rates will look less impressive compared with the other four countries including Vietnam, Bangladesh, Cambodia and Myanmar.

“The countries’ large populations, at 1.4 billion in India and 274 million in Indonesia, make them the second and fourth-most populous nations, respectively, in the world and suggest strong growth potential for domestic consumption,” said the report.

However, a lack of preferential trade access to the US and EU markets, as well as higher labour costs, will act as obstacles for these markets, it observed.

“We at Fitch Solutions expect rising labour costs in China to continue pushing out low- to mid-range manufacturing to cheaper cost centres across Asia.

“However, we believe that it will be exacerbated by rising trade protectionism globally and geopolitical risks attached to operating in China, as relations between China and the West deteriorate. This trend has already taken place for at least half a decade,” said the report.

It estimates high growth potential for textile manufacturing in neighbouring countries such as Cambodia, Myanmar, Bangladesh and Vietnam, supported by large and growing active populations and low labour costs.

Author: Neha