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Power of 3? South Asian Nations Look to Link Up

Putting aside petty rivalries and long-held jealousies, India, Bangladesh and Sri Lanka are beginning to realize a combined force could grow the apparel and textile business for all three countries.

More than just politics and rhetoric, industry leaders are looking at the bigger picture and seeing how working together could yield greater success than going it alone.

The idea was furthered at a conference organized by the Confederation of Indian Industries last week and later reiterated to Sourcing Journal by analysts and industry leaders. The long-held sense of competition is giving way to more collective thinking, according to experts.

“The dynamic of global sourcing has been changing,” said Faruque Hassan, president Bangladesh Garment Manufacturers and Exporters Association (BGMEA). “We believe Asia will lead for next few decades. The possibility of a regional value chain with raw materials and marketing can make a global brand.”

Taking into account China Plus one—the business strategy to avoid investing only in China and diversify into other countries—the emphasis on combining forces to mitigate the situation is growing.

India has a unique capacity in the vertical supply chain starting from cotton to finished apparel and fashion design; Bangladesh does not grow cotton, nor petrochemical fiber, yet we have become the second-largest apparel exporter,” Hassan said, while adding that Bangladesh is the second-largest cotton importer in the world.

The urgency to rethink the situation has been felt across all three countries as the pandemic roiled supply chains, with lockdowns, order cancellations, and the two biggest importers from the region, the U.S and European Union, beginning to take nearshoring more seriously.

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While Bangladesh has somewhat recovered—exports are up 12.6 percent in 2021 at $31.45 billion, from $27.94 billion in financial year 2020 (ending June 30)—this is still below the $34.13 billion registered in financial year 2019.

The feeling seems to be similar in Sri Lanka, which saw apparel exports in 2020 drop to $4.2 billion from $5.3 billion in 2019. Although this year has seen 12 percent growth, and the country expects to reach $5.1 billion by  year-end, this figure is lower than the 2019 level, and that has the industry concerned.

“We don’t have to do it alone,” said Suchira Surendranath, director strategy and investment for Brandix Lanka Ltd Group, Sri Lanka. “It’s a unique, once-in-a-lifetime opportunity for Asia as a whole, and especially for India to capture a share of the global market without the need to compete only on price. The possibilities for tangible value with a compelling story line are endless if we build a closer collaboration. We can build a regional apparel and textile hub that becomes a preferred sourcing destination.”

“India itself may not have access to European Union and the U.S. through preferential schemes, but Bangladesh has access to U.S. and Canada. Sri Lanka has access to Europe and India has access to the Japanese market. This contributes to the balance, as well. We already have all the factors to make this a reality, and with this collaboration we can be on a level playing field with the rest of the world,” he added.

One reason for India’s interest in the partnership could be because the nation appears to be losing ground. According to the Indian commerce ministry, textile exports plunged 9.57 percent to $31.69 billion in the financial year 2020-21, ending March 31, compared to $35.04 billion in 2019-20.

“India’s lack of resilience was further exposed during the Covid crisis, which saw overall global demand fall by 3.8 percent, with India seeing an 18.7 percent decline in 2020. However, the country’s recent performance in global trade has not been commensurate with its abilities. Exports declined by 3 percent during 2015–2019 and by 18.7 percent in 2020. And yet during the same period, other low-cost countries such as Bangladesh and Vietnam have gained share,” said global consulting firm Kearney.

Last week’s Kearney and CII report noted that the textiles industry is the backbone of India’s economy, making major contributions to both employment and exports but that India was a clear laggard from 2015-2019, with textile exports shrinking 0.8 percent in the same period.

“All categories mirrored this reduction, excluding home textiles and technical textiles. This ultimately resulted in India dropping from second to fifth among global exporters, with Vietnam (11 percent growth in the same period) and Bangladesh (10 percent growth in the same period) rising,” according to the report.

Uncovering the reasons and finding ways to address them would be instrumental in reaching the $100 billion textiles export target that India’s new minister for textiles, Piyush Goyal, set for 2026.

“There are times when an industry gets a second chance—a chance to change its growth trajectory and claim its rightful space in the world market. For India, that time is now,” said Neelesh Hundekari, a partner at Kearney. “A South Asia hub is a great idea.”  Over the past few years, India stagnated while neighbors like Bangladesh and Vietnam flourished. “What are the root causes? Duty disadvantages? Where we don’t have a level playing field India does suffer,” he added.

“The post-Covid world is seeing a realignment of geopolitical relations, and Western economies are reevaluating their business partnerships and investment destinations,” Hundekari said.