Mar 25, 2016
‘Apparel sector faces low-productivity trap’
Mar 25, 2016
An Indonesian economist has warned textile-garment sector in developing countries against falling into a low-productivity trap and getting stuck there.
At a conference in Ho Chi Min City last week, Gatot Arya Putra said there is a need to adopt appropriate strategies and policies are not adopted to help it to get out of such a trap.
The conference on the impact of Vietnam’s international integration process on the apparel industry was organise by the Center of Business Studies and Assistance (BSA), the HCMC University of Social Sciences and Humanities and Friedrich-Ebert-Stiftung Institute.
Putra said many developing countries have competed with one another for the low value part of the global value chain for the textile-garment sector. As a result, labourers in the sector are offered low wages that are enough for their basic needs only, and cannot save money for career development.
Putra said that apparel is a key sector of Indonesia but it is now caught in a low productivity trap.
He blamed poor technology which has caused productivity to stay low in Indonesia while enterprises in the sector lack supporting policies to invest in modern technology.
He stressed that the apparel sector should be offered favourable policies and financially aided to improve productivity.
Putra cited the apparel industry in South Korea and Taiwan that were once caught in the low-productivity trap but they successfully managed to get out of it because of appropriate policies, and shifted to other industrial sectors that turn out products of higher values.
Putra said the Vietnamese Government would need to take action right now if the nation wants to be as successful as South Korea and Taiwan.
Professor Mustafiz Rahman from the Centre for Policy Dialogue in Bangladesh suggested that countries should join forces to set the floor price for textile-garment products to share adequate benefits in the global value chain.
Le Tien Truong, general director of Vietnam National Textile and Garment Group (Vinatex), said Vietnam ranks third in terms of productivity for technicans. He said the problems in Vietnam are public governance and cooperation among domestic businesses.
Truong said production and public governance expenses are factored into the total cost of products and that firms’ investment in technology can improve labour productivity but if public governance cost rises steadily, they cannot bring down the total cost.
With more foreign investors entering Vietnam’s apparel sector to take advantage of Trans-Pacific Partnership (TPP) trade agreement,
Truong said Vietnamese firms should study the production technology they use and the products they have rather than worrying that they will seize all the opportunities.
Truong said if Vietnamese apparel enterprises can cooperate with one another, they can negotiate for the supply of input materials with reasonable prices.
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