Prospects for Development of the Garment Industry in Developing Countries: What Has Happened Since the MFA Phase-Out?

On January 1, 2005, the controlled trade regime on textiles and clothing which was based on the Multi-Fiber Arrangement (MFA) made in 1974 was abolished. This institutional change wrought great impacts on the world market for textiles and clothing.This paper reviews the impacts of the changes on the main markets and examines the prospects for the markets and the source countries. The main conclusions are as follows: (1) after the renewal of quantitative restrictions on Chinese garment exports were agreed with the US and the EU, the post-MFA surge in Chinese garment exports was significantly attenuated; (2) instead, the growth in garment exports from other Asian low-income countries to the two markets was revived in 2006; (3) the Japanese market has been kept almost intact from the impact of the regime shift; (4) some developing countries, such as Bangladesh and Cambodia, not only survived the liberalization but also have steadily expanded their garment exports throughout the transition; and (5) an indicative fact is that the profitability of the garment industry in Bangladesh and Cambodia was high on average according to surveys conducted in 2003, which might have bolstered the steady growth of garment exports in the past, and possibly future growth, too.

Technology Choice in the IT Industry and Changes of the Trade Structure

In the IT industry, there has been a remarkable increase in the demand for system LSI. A system LSI must be produced, tailor-designed for each electrical appliance. It is said that this production method has made the IC cycle ambiguous in recent years. It can be sought that the choice of whether the economy pursues a development path centering on technology which is tradable or technology which is embodied in labor, depends on the historical background. The relationship between these two types of technologies is changing rapidly every one or two years. In this background, the analysis is focused on the new trend of technology. In the section 2, the newest trend of technology in the field of system LSI is explained. Then, which kind of technology will be developed and how it will have an affect in the near future, is considered.

Is the Vietnamese garment industry at a turning point? : upgrading from the export to the domestic market

Vietnam’s garment industry has been loosely characterized by the duality based on market orientation: export and domestic. Export-oriented garment suppliers were typically SOEs and foreign invested firms, while those producing for the domestic market have been mostly small, private companies. With a booming economy, other industrial sectors have emerged, and the garment industry is no longer the sector most favored by workers. Wage rates have been increasing, and a supplier’s ability to cope with this through successful upgrading has been the key determinant of whether it can further grow and flourish. Those who fail to cope are finding themselves in an increasingly difficult position. This paper looks at both the export- and domestic-oriented garment suppliers, and attempts to highlight how the industry can further develop by examining the bottlenecks that vary depending on the type of supplier. It suggests that in the long run, upgrading and value addition in the domestic market will be the key strategy.

The Garment Industry in Cambodia: Its Role in Poverty Reduction through Export-Oriented Development

Cambodia's export-oriented garment industry has contributed greatly to poverty reduction in the country through employment of the poor. This paper provides a statistical verification of this contribution based on firm-level data from 164 sampled companies collected in 2003. Its main conclusions confirm the substantial impact that employment in the garment industry has had on poverty reduction in Cambodia. Firstly, entry-level workers receive wages far above the poverty line. Secondly, females make up the predominant share of the main category jobs in the industry. Thirdly, barriers to employment and to promotions up to certain job categories are not high in terms of education and experience. Another important finding is that a typical sample firm exhibited high profitability, although there was wide variation in profitability among firms. This average of high profitability could be a good predictor of Cambodia's viability in the intensified competition since the phase out of the Multi-Fiber Arrangement (MFA) at the beginning of 2005. A point of note is that Cambodia's pattern of industrial development led by a labor-intensive industry is similar to that of neighboring countries in East Asia which earlier went through the initial stage of industrial development, except that Cambodia has lacked a strong government industrial promotion policy which characterized the earlier group.

The Flowchart Model of Cluster Policy: The Automobile Industry Cluster in China

This paper proposes a general model of the flowchart approach to industrial cluster policy and applies this model to Guangzhou's automobile industry cluster. The flowchart approach to industrial cluster policy is an action plan for prioritizing policy measures in a time-ordered series. We reached the following two conclusions. First,we clarified the effects of Honda, Nissan, and Toyota on agglomeration in Guangzhou's automobile industry cluster. Second, we established that local governments play a crucial role in successful industrial cluster policy, and that the mayor of the local government should be offered incentives in order to target industrial clustering and implement cluster policy.

Competitiveness of the knitwear industry in Bangladesh : a study of industrial development amid global competition

This paper assesses the technical efficiency and profitability of the knitwear industry in Bangladesh taking into account the sector’s role in poverty reduction. While stochastic frontier analysis was invoked to assess technical efficiency, three alternative measures, namely the rate of return, total factor productivity and the Solow residual, were used to gauge the extent and determinants of the profitability of the industry based on firm-level data collected in 2001. The estimation results indicate the high profitability of the knitwear firms. In Bangladesh, the dynamic development of the industry has entailed great diversity in efficiency in comparison with the garment industries of other developing countries. While there is a significant scale effect in profitability and productivity, no supporting evidence was found for the positive impact on competitiveness of industrial upgrading in terms of usage of expensive machinery and vertical integration and industrial agglomeration.

Asian Industrial Development from the Perspective of the Motorcycle Industry

This paper discusses the diversity of industrial development among Asian countries that emerges through an investigation of the motorcycle industry despite its uniform industrial attributes. The paper then explores factors that generate diversity, focusing attention on the differences in knowledge-based assets accumulated in each country. It finds that diversity is brought about through the differences in domestic industrial resources and the capabilities of local firms. The analysis underscores each country’s intrinsic logic in industrial development, contrary to the current trend of stressing assimilation through the global production networks of multinational corporations.

What motivates female operators to enter the garment industry in Pakistan in the post-MFA period?

Pakistan's knitwear exports had been struggling since the quota phase-out until 2009. A particular feature of Pakistan's garment industry is that hiring more male sewing operators at piece rates. Recently, a few surviving knitwear factories have adopted a strategy of shifting from male piece-rate operators to salaried female operators. In Pakistan, female participation in general workforce is very limited and hiring salaried female operators requires management effort and expertise. However, even in the factories with such management skills, household factors prevent females from working outside because Pakistani culture disrespects women working in factories. Our survey reveals that financial motives compel female household members to work outside their homes and that female operators contribute substantially to their households' finances.

Black economic empowerment in the South African agricultural sector : a case study of the wine industry

This paper explores the extent and forms of black economic empowerment (BEE) in the South African agricultural sector through a case study of the wine industry in the Western Cape. Compared to the mining and fisheries sectors, the progress of BEE in the agricultural sector is still in the early stage. However, various forms of black entry into the wine industry, not limited to BEE deals by large corporations, began to emerge, especially since the enactment of the Broad-based Black Economic Empowerment Act (BBBEE Act), Act 53 of 2003. This paper identifies two types of BEE wineries as unique forms of black entry into the wine industry and investigates in detail their features, backgrounds and challenges by referring to several prominent examples of each type of BEE winery.

Exploring the sources of China's challenge to Japan : models of industrial organisation in the motorcycle industry

In view of the recent rise of China, this paper looks into one of the most important yet relatively overlooked ingredients of the Chinese success: industrial organisation. It will examine the case of the motorcycle industry, in which the rise of Chinese manufacturers even disrupted the established dominance of Japanese industry leaders. Adopting the modified version of the global value chain governance framework, this paper shows that the rise of China has been driven by a distinctive arm’s-length model of industrial organisation, which is in sharp contrast to the conventional captive model that has sustained the Japanese leadership.

Slow and steady wins the race : how the garment industry leads industrialization in low-income countries

This paper investigates how the garment industry escapes this vicious cycle and argues for the validity of labor-intensive industry as a starting point for full-fledged industrialization, even though it might at first seem to be a digression from the path to an innovation-led economy. By examining original firm-level data on garment-producing firms collected in 2002 and 2008 in Bangladesh, Cambodia, Kenya and Madagascar, the following conclusions are drawn: (1) low wages, though still sufficient for poverty reduction, are the main source of competitiveness in low-income countries; (2) after the successful initiation of industrialization causes wages to begin to rise, there is still a possibility for productivity enhancement; and (3) skill bias in technological progress is not yet a major factor, implying that the garment industry is still a labor-intensive industry. In sum, labor-intensive industry should not be discounted as a part of the development strategy of low-income countries.