Where Will the Textile Industry Source Next? Key Emerging Markets to Watch

As the global textile industry continues to evolve, companies are increasingly looking beyond traditional sourcing hubs like China, India, and Bangladesh. With rising labor costs, supply chain disruptions, and a growing emphasis on sustainability, the search for the next big textile sourcing hub is more critical than ever. In this context, several emerging markets are gaining attention for their potential to become the next global powerhouse in textile manufacturing.

Myanmar

Myanmar’s main problem is competing with countries like China, which has an abundant skilled workforce. However, Myanmar has an advantage in labor costs compared to China and all other neighboring countries. With the revision of the labor law in October 2011, the interests of Myanmar’s labor force will also be protected. Manufacturers investing in Myanmar need to strike the right balance between reducing labor costs and maintaining labor satisfaction. Although these issues are tricky to handle, Myanmar’s labor force is likely to cooperate with foreign manufacturers because foreign investment indicates that existing wage packages will be improved.

The political, economic, and social challenges facing the country are frustrating on multiple fronts. The country needs to shift its focus to improving education and the economy. Maintaining political stability, firmly fighting corruption, and establishing peace are equally important.

To solve the problem of rising labor costs, a low-cost country must be established, and Myanmar is an ideal choice. As manufacturers from other countries begin to invest in Myanmar, the size, skills, and productivity of Myanmar’s textile industry workforce will increase significantly. Myanmar is a new textile supplier to watch.

Philippines

He is concerned about the “rather unstable business environment” in the coming quarters due to the lack of new production orders. He explained that foreign buyers are increasingly turning to regional suppliers, which further impacts Philippine exports. He warned that this trend, combined with a possible recession in key markets, could lead to a decline in production orders for Philippine apparel manufacturers

However, despite these challenges facing the apparel industry, Philippine service exports grew by 20.7% to $34.7 billion in the first nine months of 2023. This growth could offset some of the losses in the apparel industry.

The news highlights the vulnerability of the Philippine economy to external factors, especially the performance of major trading partners. The government may need to explore a diversification strategy and focus on strengthening the services sector to mitigate the impact of the global economic slowdown.

Pakistan

The Pakistani textile industry faces several major challenges that hinder it from taking advantage of the changing global apparel sourcing dynamics. One of the major obstacles is the high cost of energy. Pakistan's industrial electricity tariff is as high as 15 cents/kWh, almost double the 8.3 cents/kWh in Bangladesh.

Labor costs also add to the financial pressure on Pakistan's textile industry. The minimum wage for garment workers in Bangladesh is $113 per month, while in Pakistan it is $135, a gap of about 20%. This wage gap, coupled with higher energy costs, further undermines Pakistan’s competitiveness.

Pakistani exporters are subject to an advance tax of 2% and a final income tax rate of 29%. The removal of the zero tax rating (SRO 1125) dealt a major blow to the domestic industry, and more recently, the sales tax exemption for local supplies for export manufacturing was also removed.

The negative impact of these policy changes was further exacerbated by the continued and indefinite delays in sales tax refunds. Coupled with tight monetary policy and high interest rates, this has led to a liquidity crisis and working capital shortage across the industry.

Despite the decline in global fashion purchasing power, there has been no significant decline in clothing exports. This is mainly due to product and market diversification.

Textile producers must create their own sustainability story to enhance brand influence - saving water and energy, using natural fibers such as jute blended yarn, etc. Manufacturers must tell their story. Ultimately, create a sustainable story. It is a symbiotic relationship. Ultimately, this will enhance the position of textile manufacturers, which in turn will demand better prices and market influence.

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Conclusion

The search for the next textile sourcing hub is a dynamic process influenced by various factors, including trade policies, labor costs, and sustainability concerns. Myanmar, the Philippines, and Pakistan are emerging as strong contenders, each with its unique strengths and challenges. As the global textile industry continues to evolve, these regions could play a pivotal role in shaping the future of textile manufacturing.

For companies looking to diversify their sourcing strategies, keeping an eye on these emerging markets could provide a competitive edge in the ever-changing global landscape. The next textile sourcing hub may very well be among these rising stars.