Here is an interesting summary of the shift in apparel sector after MFA in 2005. Excerpts:
Many expected that the shifts in apparel production across countries after the MFA would be mainly driven by wage differences because apparel is labor intensive. Wage differences, however, only explain 30 percent of the variation in the change in exports across countries. For example, China was predicted to gain while nearly all other countries lost. But, in fact, other large Asian apparel exporter countries, such as Bangladesh, also increased exports. Other countries, such as Hong Kong SAR, China, Mexico, and Honduras, experienced falling exports and market shares. Therefore, export gains were not simply due to a shift from higher-wage countries to lower-wage countries. Countries that gained the most, including India, Bangladesh, Vietnam, and Pakistan, implemented proactive policies specific to the apparel industry. While wage differences explain some of the production shifts, domestic policies targeting the apparel sector, ownership type, and functional upgrading of the industry perhaps played a more important role.
Once apparel exports was one of the star products of Nepal. But, this sector is now fast losing competitiveness. Where and how did it go horribly wrong? The answer lies in an inability to foresee the changes brought about by globalization. Policy makers and garment investors failed to notice quite obvious signs of change in the international market. They failed to design corrective policies to restructure the outdated domestic garment industry. Instead of addressing the constraints that were making the garment industry uncompetitive, they basked on the already secured preferential agreements and wasted valuable time and resources in securing more of them.
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