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South Asian countries must unite for regional clothing and textile hub, say trade experts

Sunday Times, Sri Lanka

South Asian countries must unite for regional clothing and textile hub, say trade experts

15 April 2007

Trade experts say countries in the South Asian region can form a major textile and apparel hub - provided they can work together. Right now, mutual mistrust and trade barriers against each other, are stopping SAARC countries from cashing in on a waiting opportunity.

“Although the South Asian countries compete with each other in the developed countries’ market for T&C (textile and clothing) exports, there exists a potential to establish the region as the global hub for the T&C trade through regional cooperation in trade, investment and skill development,” says the latest report by the Centre for Trade and Development (CENTAD), India. The CENTAD, South Asian Yearbook of Trade and Development 2006 report’s chapter on textile and clothing is compiled by Ratnakar Adhikari and Chatrini Weeratunge from the UNDP, Asia Pacific regional centre, Sri Lanka.

But while the potential is there, trade experts say trade barriers erected by South Asian countries against each other, is one of the main obstacles to a South Asian textile and apparel hub. These trade barriers inhibit regional industry growth by obstruting the exchange of raw materials in the garment trade.

“The lack of intra-regional trade in raw materials is one of the main obstacles hampering the region’s prospects of forming a textile and clothing hub. To form a hub, all the countries in the region should remove tariff barriers on raw materials. But right now, all the countries, except for Sri Lanka and the Maldives, list most of these raw materials under the sensitive list in the SAFTA and are not required to reduce tariffs under the SAFTA,” says Adhikari.

The SAFTA - the South Asia Free Trade Agreement - is expected to reduce trade barriers between the seven SAARC countries. But trade experts say the SAFTA is not aggressive enough. As it is, trade among SAARC countries is less than 5% of the region’s total trade with the rest of the world. But other regional blocs are showing much bigger volumes of intra-regional trade. For instance the North America Free Trade Agreement intra-regional trade is over 50% and ASEAN countries have over 20% trade among its member countries.

However, improved cooperation within the South Asian region could help weather competition from other parts of the world, by creating a vertically integrated industry at a regional level. “Given the fact that creating a vertically integrated production structure in countries like Bangladesh, Nepal and Sri Lanka is not feasible, the possibility of creating regional vertical integration, to ensure a certain degree of specialisation in countries within the region, should be explored,” says the report.

For this strategy to work, SAARC countries must work with each other at government level. Within the countries the private sectors needs to work closely with their governments. As a starting point trade experts suggest facilitating trade in the garment and textile sector by reducing documentation and procedures for imports and exports. SAARC countries are also told to adopt more favourable policies on investment towards each other and create an enabling environment for transfer of technology and skills.

Trade experts say the SAFTA Sensitive List should be revised to liberalise trade in garments and textiles within the region. SAARC countries are also told to adopt a common position towards the rest of the world, to collectively hammer down external trade barriers to SAARC exports.