The Garment Industry in Low-Income Countries: An Entry Point of Industrialization

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The Garment Industry in Low-Income Countries: An Entry Point of Industrialization
Edited by Takahiro Fukunishi and Tatsufumi Yamagata
The Garment Industry in Low-Income Countries: An Entry Point of Industrialization

Contents
List of Tables vi
List of Figures x
Preface and Acknowledgements xii
Notes on the Contributors xiv
1 Introduction: The Dynamism of the Garment Industry in
Low-income Countries 1
Takahiro Fukunishi and Tatsufumi Yamagata
2 Cambodia: Growth with Better Working Conditions 38
Yoko Asuyama and Seiha Neou
3 Bangladesh: Market Force Supersedes Control 77
Mohammad Yunus and Tatsufumi Yamagata
4 Vietnam: Upgrading from the Export to the
Domestic Market 105
Kenta Goto
5 Pakistan: Challenges for Women’s Labor Force Participation 132
Momoe Makino
6 Myanmar: Promised Growth with Restored Market Access? 177
Toshihiro Kudo
7 Madagascar: Unyielding Growth amid the Political Turmoil 213
Takahiro Fukunishi and Herinjatovo Aimé Ramiarison
8 Kenya: Stagnation in the Liberalized Markets 243
Takahiro Fukunishi
9 Cross-Country Comparison of Firm Performance:
Bangladesh, Cambodia, and Madagascar 283
Takahiro Fukunishi
Index 308

List of Tables

1.1 Overview of the garment Industry in the seven countries (2011) 4
1.2 Top 15 garment exporters to the US market 6
1.3 Growth rate of export value to US and EU markets (%) 9
1.4 Average monthly wage of operator (nominal, $) 10
1.5 Ratio of manufacturing wage to GDP per capita (average from 2004 to 2008) 27
2.1 Timeline of international trade environments related to the Cambodian garment industry 41
2.2 Major incentives for the Cambodian garment industry: comparison of 1994 and 2003 Law on Investment 45
2.3 Estimated average firm performance of the Cambodian garment industry 48
2.4 Average monthly wages by job classification and types of workers 50
2.5 Average firm performance (2002 prices) based on the IDE Surveys 51
2.6 OLS regression of TFP on various firm characteristics 55
2.7 Average educational level of employees (based on managers’ recognition) 62
3.1 Number of employed persons in Bangladesh’s garment industry (by sex) 83
3.2 Chronology of Bangladesh’s garment industry 85
3.3 Growth rate of exports from China and Bangladesh to major markets (%) 90
3.4 Structure of minimum wage for garment workers revised in 2010 (Bangladeshi taka) 94
4.1 Output based on ownership 111
4.2 Firm size distribution (2010) 112
4.3 Wage comparison 113
4.4 Weighted average unit prices and decomposed sources 117
4.5 Key characteristics of different garment suppliers 119
5.1 Wages in garment industry of major exporters in 2006 (US$) 140
5.2 Average monthly earnings of Pakistan’s sewing operators (US$) 144
5.3-1 Why prefer piece rate status? 145
5.3-2 Why prefer fixed salary status? 145
5.4 OLS estimation of earnings equation 146
5.5 Summary statistics (sample means) 152
5.6 Why not working outside the home? 155
5.7 Probability of letting female members work outside (mean marginal effects) 157
5.8 Attitude toward women working outside (mean marginal effects) 162
5A.1 Summary statistics of workers in the garment industry in Lahore 175
5A.2 OLS estimation of earnings equation (growth in earnings) 176
6.1 Apparel exports of Myanmar and Vietnam to the
United States, the EU and Japan 183
6.2 Main apparel exporters of Myanmar to Japan (2007) 187
6.3 Japan’s imports of apparel 189
6.4 Average monthly wages, 2008 192
6.5 MGMA’s proposed model wages for apparel workers 194
6.6 Approximate monthly wages of apparel workers 195
6.7 Literacy rate and school enrollment rate 196
6.8 Educational background of workers, 2008 197
6.9 Average firm rating on labor, 2008 198
6.10 Average firm rating on infrastructure, 2008 199
6.11 Apparel firms’ assessment of electricity in Yangon, 2010 200
6.12 Freight charges for 20-foot containers 202
6.13 Comparison between road and marine
transport (time) 203
6.14 Comparison between road and marine
transport (costs) 204
6.15 Telecommunication access in 2011 205
7.1 Selected economic indicators 216
7.2 History of the garment and textile industry in Madagascar 217
7.3 Local and foreign ownership and EPZ status of
the sample (2008) 222
7.4 Summary of statistics for production, factor use,
and profit (2008) 223
7.5 Average wage by position and experience
(Ariary at 2008 prices) 224
7.6 Exit and survival between 2009 and 2011 by
supply market 230
7.7 Changes in employment from 2008 to 2010 231
7.8 Changes in employment by position 232
7.9 Real wage change by position (relative to 2008) 233
7.10 Average TFP of firms exporting to the US market (2008) 236
7.A1 Sample st ructure (exporting factories) 238
8.1 Evolution of exporting firms 250
8.2 Overview of the garment industry in Kenya 252
8.3 Retail prices of apparel products (2005, Kenya Shilling) 253
8.4 Measures to cope with competition (local firms
operated since 2000) 254
8.5 Number of sample by entry and exit 261
8.6 Summary statistics 263
8.7 TFP index (unweighted averages) 267
8.8 Average TFP index by firm survival as of 2005 269
8.9 Weighted averages of TFP index 269
8.A1 Sample structure of firm interviews 273
8.A2 Interviewed firms (except EPZ firms) 274
9.1 Number of samples 285
9.2 Descriptive industry statistics in three countries (2008) 288
9.3 Production function estimates (three countries in 2008) 290
9.4 Average TFP estimates by country 290
9.5 Change of average TFP estimates 296
9.A1 Production function estimation (Bangladesh and
Cambodia in 2002 and 2008) 301
9.A2 Average TFP by firm turnover 301
9.A3 Decomposition of unit cost (cross-country comparison) 304
9.A4 Decomposition of unit cost (across time comparison) 305

List of Figures

1.1 Share of low-income countries in US/EU apparel imports 7
1.2 Unit price ($ per dozen) 11
2.1 Evolution of the Cambodian garment industry:
exports and numbers of factories and workers 39
2.2 US garment imports from Cambodia by China’s
quota status imposed by the US 58
2.3 The US’s and the EU27’s garment imports from
Cambodia: price, quality, and unit value 59
2.4 Composition of export markets for Cambodian
garments 67
2.5 Number of new entrant factories in the Cambodian
garment industry 67
3.1 Garment exports from Bangladesh 79
3.2 Map of Bangladesh 81
3.3 Nominal and deflated minimum wages for the lowest
grade of garment workers 93
3.4 Real wage index (1969–70 = 100) 95
4.1 Export performance of the Vietnamese garment industry 107
4.2 Revealed comparative advantage 109
4.3 Trends in the number of garment suppliers and workers 109
4.4 The garment smiling curve: functional hierarchy in
the garment production-distribution flow 122
5.1 Exports of garments (HS code 61 and 62) to US, EU,
Canada and Japan in 2011 (US$ million) 134
5.2-1 Year to year growth of exports of knitwear products
(HS code 61) to US, EU, Canada, Japan before and
after the MFA phase-out 135
5.2-2 Year to year growth of exports of woven wear products
(HS code 62) to US, EU, Canada, Japan before and after
the MFA phase-out 135
5.3-1 Unit price (US$/kg) of knitwear (HS code 61)
imported to the EU in 2004 and in 2011 137
5.3-2 Unit price (US$/kg) of woven wear (HS code 62)
imported to the EU in 2004 and in 2011 137
5.4-1 Growth of unit price (US$/kg) of knitwear
(HS code 61) imported to the EU in the post-MFA
period (inflation adjusted) 138
5.4-2 Growth of unit price (US$/kg) of woven wear
(HS code 62) imported to the EU in the post-MFA
period (inflation adjusted) 138
5.5 Composition of Pakistan’s exports (1980–2010) 141
5.6 How do you like your current job? I would like to work... 165
5.7 Why not willing to work outside? 166
6.1 Myanmar’s apparel exports 179
6.2 Myanmar’s apparel exports by destination 180
6.3 Apparel exports of Myanmar and Vietnam 181
6.4 Gaps in wages and other costs 207
7.1 Garment exports from Madagascar (million US$) 218
7.2 EPZ performance 221
7.3 Change of the average output and input from
2008 to 2010 229
7.4 Average unit costs of exporters to the US market (2008) 235
8.1 Import value of clothing 246
8.2 Origin of clothing imported in Kenya 247
8.3 Export and import value of clothing 249
8.4 Number and size of EPZ firms 257
8.5 Distribution of TFP index by firm survival as of 2009 268
9.1 Share of firms by supply market (2008) 286
9.2 Cost structure and profit in value added (2008) 291
9.3 Decomposition of unit cost (2008) 292
9.4 Changes in average input and output from 2002 to 2008 294
9.5 Composition of costs and profits in value added 295
9.6 Decomposition of unit costs in 2002 and 2008 298


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