Productivity is the measure of how efficiently resources (including labor and capital) are utilized to produce goods and services. In Asia’s garment sector, several challenging factors are at play:
While labour productivity in Asia’s garment sector has risen in recent decades, it remains low relative to other manufacturing sectors. Few garment producing countries have successfully moved up the value-chain in apparel production, with most manufacturers remaining engaged in low-skilled ‘cut-make-trim’ operations. Factors such as inadequate training, outdated work processes, and poor working conditions can hinder workers' efficiency.
(Lack of) an Enabling Business Environment[1]: This refers to the conditions and factors that support and facilitate the growth and operation of businesses. In the context of the Asian garment sector, this includes regulatory ease, access to finance, infrastructure, workforce skills, and political stability. When these conditions are favorable, they can significantly impact the productivity of the garment sector in Asia by reducing operational costs, attracting investment, fostering innovation, increasing competitiveness, improving workforce development, and mitigating issues related to corruption and bureaucracy.
The industry's complex supply chain involves multiple stages, from raw materials to finished products. Managing this complexity can result in delays, increased costs, inefficiencies and risks. Events like the COVID-19 pandemic highlighted these vulnerabilities and how with more links in the chain, the more things that can potentially go wrong.
Ensuring compliance with increasing environmental and labour standards and regulations can be challenging, especially in countries with weak enforcement mechanisms. The burden to meet growing demands falls on the local enterprises and management who are under immense pressure from buyers to produce. Yet, failure to meet these standards can result in commercial losses, legal issues and reputational damage.
: The industry in Asia faces intense global competition, particularly from current and emerging low-cost manufacturing centres nearer to final consumer markets (which remain Europe and North America, predominantly). This competition creates pressures for manufacturers to seek ways to cut costs, potentially compromising labour standards and product quality.
While digitalization offers unparalleled opportunities for industry innovation and upgrading, many businesses in the industry still struggle with technological adoption due to -among others- limitations in infrastructure, capacity and access to capital.
The industry needs workers with diverse skills, including digital literacy, but there may be a skills gap in the workforce, making it challenging to adapt to technological advancements.
Addressing these challenges requires a multi-faceted approach, including investment in worker training and welfare, supply chain optimization, sustainability initiatives, and responsible sourcing practices. Additionally, adopting digital technologies can help streamline processes and improve overall productivity in the garment and textiles industry in Asia.
[1] This refers to the conditions and factors that support and facilitate the growth and operation of businesses. In the context of the Asian garment sector, this includes regulatory ease, access to finance, infrastructure, workforce skills, and political stability. When these conditions are favorable, they can significantly impact the productivity of the garment sector in Asia by reducing operational costs, attracting investment, fostering innovation, increasing competitiveness, improving workforce development, and mitigating issues related to corruption and bureaucracy.