Bangladesh’s textile value chain is rising faster than any other Asian countries because of low-cost manufacturing firms shifting out of China, according to Asian Development Bank (ADB).
Firms from Singapore, Japan, Taiwan and South Korea, which have traditionally relied on low-cost production in China, have had to adjust.
The progress in sector-level value chains’ intraregional production activities within sectors appears to be changing, with shares within industrial exports showing interesting shifts between 2000 and 2011, according to the ADB’s Asian Economic Integration Report 2015 released on Wednesday.
The report examines trends in trade, finance, migration, foreign direct investment and other economic activities in the region.
“Intraregional trade within the labour-intensive Asian textile industry still increasingly dominated by the China—which covers about two-thirds of intraregional exports—shows Bangladesh and Vietnam emerging as important players,” said the report.
In the meantime, it said domestic value added shares of three East Asian economies—Japan, Korea and Taipei, China—have declined 6-8 percentage points during this period.
“With rising production costs in other economies in general, setting up operations such as in Bangladesh and Vietnam has been on the rise,” it said.
Apart from rising domestic value added shares, the foreign value added to Bangladesh and Vietnam exports is also increasing in a much faster pace than that experienced by the rest of their peers (excluding China).
The report found that trade in Asia has slowed faster than that of world trade in recent years.
The region’s trade expansion has witnessed low gross-domestic product growth since 2012.
The report also included a study of Special Economic Zones in the region.
It found that governance gaps and lack of focus undermined performance in some zones, while successful zones managed to build close ties with the domestic economy.
Economies with low incomes and young population (high ratios of 20-34 years old to total population) are generally relied on migrant sources —such as India, Bangladesh, and Afghanistan.
Bangladesh has attracted FDI in garments and generated new trade, but has had limited success in upgrading and diversifying Special Economic Zone (SEZ) exports.
Overall, Bangladesh and Sri Lanka continue to reap static SEZ benefits, in particular employment generation and FDI inflows—based on orthodox and heterodox approaches.