Realising Opportunities for the 21st Century Through Resilient Global Value Chains for the Textile and Apparel Industries

The COVID-19 pandemic has exerted an unprecedented public health crisis and external shock to the global economy. Worldwide lockdown, quarantine measures and a sudden halt to global mobility, have forced many businesses to close and production of numerous goods and services to be suspended. Consequently, the world economy is expected to contract and countries will face considerable acceleration in unemployment and poverty rates. The economic crisis emanating from both supply and demand shocks is likely to leave behind a legacy that we have not experienced since the Great Depression. 

During these challenging times, Islamic Development Bank (IsDB) strives to provide the most targeted assistance to our Member Countries to restart their economies and reposition themselves in the Global Value Chains (GVCs). IsDB’s 57 Member Countries include many of the world’s fastest-growing economies. Jointly, they represent the purchasing power of almost one quarter of the world’s population. The combined GDP of IsDB member countries amounts to roughly USD 7 trillion. With GDP growth rates of up to 8% per year, their economies have considerable potential to further increase their market share in the global economy. The coronavirus pandemic may pose short to medium term risks and vulnerabilities, but success in overcoming these short-term impediments and recovering quickly, will allow IsDB member countries to increase their market share in the global economy. Further boosting added value in their economies and creating employment opportunities to support their socio-economic development.

IsDB Member Countries in the textile and apparel GVC

We have identified textile and apparel industry as one of the key industries in which our Member Countries have the potential to increase their value added, spur economic growth, and boost employment opportunities. The industry supports their exports, creates significant number of employment opportunities, and is a starter industry in their industrialisation process. When the industry expands, it provides a base on which to build capital for more technologically demanding industries. For instance, textile and apparel exports constitute 85% of Bangladesh’s total exports, 59% of Pakistan’s, 12% of Turkey’s, and 11% of Egypt’s. The labor-intensive sector employs millions of people in IsDB Member Countries. The share of employment in textile and apparel industry, over total manufacturing workforce, is 40% in Bangladesh and Pakistan, 28% in Turkey, and 27% in Indonesia. 

In total, IsDB Member Countries account for 15% of global production of raw materials, 11% of global textile exports, and 17% of global apparel exports. In addition, they account for 25% of global cotton production and 16% of global cotton exports. Member Countries accumulatively also account for 26% of global wool production but only and make up 3% of global wool exports. IsDB Member Countries are highly import dependent on textile and apparel machinery. They account for 3% of exports worldwide whereas 23% for imports. Most of the IsDB member countries are positioned in the raw materials or the production stage of the textile and apparel GVC and they are playing a limited role in the most value adding stage of retail, comprised of marketing, branding, and sales. Thus, they have unlocked potential to reap more benefits from the global markets.  

Trends Shaping the Future of Textile and Apparel GVC

In our detailed analysis on the textile and apparel GVC, we have identified several trends that will shape the efforts to rebuild a resilient value chain in the future. Growing world population, increasing urbanisation, and environmental sustainability concerns, will have a global impact on the textile and apparel industry. Technology driven innovations have started to shape different stages of the textile and apparel GVC. Big data applications, artificial intelligence (AI), automation, robotics, machine learning, and 3D technology have already started to enhance product design processes and reduce lead times, via innovations such as: laser-cutting machines, sewing robots, and nanotechnology. Internet of things and blockchain technology is expected to bring greater transparency and traceability throughout the supply chain. Sustainable and recycled fibres are expected to replace resource intensive raw materials at an increasing pace and technical, smart textiles have enormous potential to be used in several industries such as automotive, construction, and medical equipment. 

In terms of industry specific trends, diversification and inclusion of new global suppliers, will mean a possible increase in nearshoring, to be closer to the final sales markets, with the growth of the Asian market influencing the sourcing decisions of leading firms. In addition, leading firms will seek strategic partnerships with first-tier suppliers to meet demand and reduce lead times. Relatedly, suppliers will be expected to have full-package capabilities, professionalisation, and digital expertise for end-to-end integration and increasing digitalisation requirements for sourcing, production, and sales in digital platforms. The future market structure will mainly be determined by a country’s location, as well as the ability of its textiles and apparel industry to provide cost-effective production, competitive skills, quality products, and efficient lead times. 

It is vital for IsDB Member Countries to adapt to these trends, catch up with technological developments to be internationally competitive, and reposition themselves in the GVC for engaging in higher value-added activities in rebuilding a resilient textile and apparel GVC. The COVID-19 external shock to the textile and apparel industry will accelerate the pace of transformations caused by worldwide megatrends, industry specific trends and the shift to technological innovation. Countries and firms which can adapt to these trends with swift actions will reap the most benefits in the medium to long term. If IsDB Member Countries do not take swift actions to restart and restructure their economies in line with these shifts, the wealth, technological, and productivity gaps with other countries is likely to be widened. This would have an unprecedented negative impact on employment and poverty rates with a gloomy prospect for their socio-economic development in the years to come

Promoting Industry Coalitions and Partnerships for the Future 

Within its shift towards its new business, the IsDB has set clear goals to catalyse private and public investment for the economic and social development of its Member Countries. The IsDB places strong partnerships between the private and public sectors at the core of its strategy to sustainably drive modernisation and growth. Some of the potential areas for collaboration in the IsDB’s new business model include partnerships between IsDB Member Countries to increase trade and investment relations, co-financing with governments, multilateral development banks and other international organisations, and crowding-in market resources private-sector in development interventions. IsDB is building wide platforms to bring diverse actors together and to ensure effective collaboration between them in different sectors including textile and apparel.

IsDB publication on the future of the textile and apparel industries is a major step toward realising the objectives indicated in this article. IsDB’s new business model entails supporting the socio-economic development of its 57 Member Countries by offering innovative and sustainable solutions to their development challenges and building collaborative partnerships. We believe that only with collaborative efforts we can address the pressing challenges of our age and we ask the global community to join forces with IsDB to rebuild resilient and sustainable solutions for the future.