I: Major customers are becoming increasingly dissatisfied with their current garment supplying countries.
1. Asian Garment export capacity is falling. This should not come as a surprise. This trend has been developing for some time. (I have written extensively on this subject
a. The domestic market demand in every country has been growing. Local sales are easier and more profitable than exports. Local factories everywhere have been shifting production to meet that demand.
b. As economies develop, other industries such as electronics are proving more attractive than garment making to both to investors and workers.
c. Demographics particularly in China are working against the garment industry. Our sewers are mostly women aged 18-25. China’s median age is approaching 36, with the result that even Chinese factories are moving out of China
2. Major supplying countries have serious problems:
U.S. customers view Bangladesh as a disaster waiting to happen. Unlike their European counterparts are taking a proactive approach
Serious ongoing labor disputes continue to cause serious delivery problems. In our industry delivery is everything. Right now Cambodia does not look good.
This country’s problems are not new. The industry is committed to commodity goods, at prices which have become uncompetitive
This is potentially the most serious problem. The same customers that are leaving their other traditional garment supplying countries are all rushing to Vietnam. Vietnam is a victim of its own success. From 2005 to 2014, Vietnam’s U.S. market share has grown from 4.0% to 11.4%.
That market share increase is accelerating.
There is a limit to Vietnam’s garment export capacity. There is an increasing possibility that the industry has overreached that limit.
II: Major customers are reaching out to develop new garment supplying countries both in Asia and elsewhere. Possible locations include India, Myanmar and the African countries included in the African Growth and Opportunity Act
Each offers its own unique advantages:
a. India has the best product-development capability in Asia.
b. India’s garment industry goes back to the beginning of time (and then some
c. India’s population approaches China’s and has an almost infinite potential capacity
d. India is home to one of the world’s largest textile industries
a. The industry s it currently exists produces a good product and a difficult product;
b. With a population of 60,000,000 it has the people necessary to develop a substantial industry
c. The new government appears to be serious about developing the country
3. Sub-Saharan-Africa (AGOA)
a. The industry has the best free Trade Agreement (outside of Jordan, Egypt and Israel, which allows duty free access to the U.S. for all garments regardless of material country of origin;
b. AGOA is the fastest growing supplier region to the U.S. market, albeit from a very low base. As of YTD June 2014, AGOA’s U.S. market share increased by 9.2% — from 1.17% to 1.28%.
c. Chinese are investing heavily in AGOA based factories.
The problem is that, while each of these supplying regions offers its own special advantages, all of them carry the same obstacles
- Lack of road and rail transport
- Shortages of electric power
- Poor labor regulations
- Poor worker union structure
- Endemic Government corruption
- Chronic Bureaucratic delays
These are the same obstacles common to Bangladesh, Cambodia and India and other failed garment export industries. We can see from past experience the cost to the industry for their failure to solve these problems.
Unless customers can work to overcome the obstacles, investments must inescapably lead to failure tomorrow.
The difficulty is that these issues are beyond the control of either customers or suppliers. In many instances they are beyond the control of national government.
The cost of moving a 40 ton container from Djibouti to Addas Ababa is beyond belief. The obvious solution is: build a road. The question is who will pay for this road. Clearly the answer is not the customers and not the local factories. Unfortunately the answer is also not the Ethiopian Government — they do not have the money. If the industry wants a road, industry must go to the people with the money to build the road: The World Bank.
If industry needs better labor regulations and a responsible labor union structure, industry must go to the people who have the facilities and the necessary influence: The International Labor Organization (ILO)
These and similar international institutions and development banks have the funds and the ability to overcome these obstacles. The problem is that they have no knowledge of the garment industry.
If the major garment importing customers want to effect change, they must have a seat the table where change is decided.
It is time to grow up and assume our place in the global economy