Pamela Mar examines the changes needed to bring the garment industry into the 21st century.
In April 2013 when Rana Plaza in Bangladesh collapsed, killing over 1100 garment factory workers, much of the world recoiled in shock to discover that such barbaric working conditions still existed and that workers were paid as little as US$60 a month for their labor. The clothes they produced bore no signs of such conditions: the goods arrived at suburban malls, department stores, or from online warehouses neatly packed and tagged, with intricate designs and embroidery, perfect in color, style and stitching.
Three years later, the clothing industry is still on the move, offering consumers more styles to choose from more frequently and, for a price, customized to individual tastes. New materials are being developed, new technologies like sensors and RFID tags are being embedded in clothing to give it additional functionality like reading your body temperature. In the stores, sensors and beacons are tracking consumer movements and preferences, so retailers can sell you more of what you (or they) want, all the time.
All this is made possible by the rapid advance of technologies such as robotics, which are revolutionizing the way we work, live, and relate to each other. We "are at an inflection point in our economies and societies because of digitization" according to Eric Brynjolfsson and Andrew McAfee, who call this the Second Machine Age, in their book with the same title. In the Rise of the Robots Martin Ford says that technology's rapid advance is rewriting the core economic paradigms that the world has relied on for industrialization thus far.
Except that all this change seems to have avoided the emerging markets, the very places most in need of new technologies and a productivity revolution. Even a casual observer would notice that despite all the technology progress since the fall of Rana Plaza, garment factories in key emerging markets and some of the world's leading (and ranked) exporters of clothing such as China (1), Bangladesh (3), Vietnam (4), India (5), Turkey (6), Indonesia (7), and Cambodia (8) have not changed that much. They still seem largely stuck in the 1990s.
Rows and rows of workers sit engaged in painfully manual tasks: sewing, weaving, brushing and sanding, pinning, cutting, and so on. The work is unskilled, meaning that "anyone"-even those who are illiterate-can be trained to perform it. Tasks are tedious and repetitive, and backbreaking.
In a typical factory, production targets are calculated by instinct and written on whiteboards, quality measurements are taken with a measuring tape and then tracked on clipboards, and fabric rolls have handwritten tags indicating their specs and arrival date. Garment parts are tracked with individual stickers resembling an old fashioned price tag. And all along the production lines, it is not uncommon to see clumps of workers waiting for their part of the production to arrive.
Paradoxically, these factories are facing some of the most severe pressures that they have ever seen. They face a constant struggle to make ends meet in an economic environment that is stacked against them. Retailers want goods faster, cheaper, and in smaller batches, and may reserve the right to make more last-minute changes in order to catch consumer trends. Meanwhile, wages are increasing 10-15 per cent per annum, unions may becoming more powerful, and compliance demands are becoming more strict. On top, buyers want environmental efficiency, and investment into clean production for things like water and waste.
At this low-skill, labor intensive end of the global value chain, large factories with 4000 or 6000 workers struggle to attain the advantages of large-scale production. Smaller factories are too small to keep up and too labor intensive to really be nimble. Nearly thirty years after the shift of much of global apparel production to the emerging markets, the thousands of SMEs which have created 15-20 million jobs in Asia and driven forward growth and development seem stuck in the 20th century.
What does robotics, and the digital revolution, mean to them?
To the factory, the prospect of automation, data-driven production, and robotics may seem like a godsend, though significant people and process barriers must be overcome. This is because the thousands of enterprises that sprouted- and drove China's GDP growth at above 9 per cent per annum in the 1990s and early 2000s-did not benefit from deliberate planning and MBA-styled strategy and management. They scaled rapidly to meet targets by churning out working hours, which were their main competitive advantage. As production shifted out of China due to rising wages and the state's push to move up the value chain, countries like Bangladesh, Cambodia and Vietnam experienced the same rapid, frontier-style growth that relied primarily on cheap labor.
Data from the Asian Productivity Council shows that growth in Asia was largely powered by investments of labor (including longer working hours) and financial capital rather than investments in technology. A decomposition of economic growth from 2000 to 2013 shows that investments in IT accounted for less than 5 per cent of economic growth, compared to the US and Japan at well over 22 per cent and Hong Kong and Singapore at 10 per cent. Low investment rates into IT help to explain why, one and a half decades into the 21stcentury, thousands of garment factories still operate "via clipboard."
History shows that although countries may begin the course of economic development by relying primarily on labor and capital to drive growth, sustained growth is basically about acquiring and mastering advanced technologies. Those who fail to use technology to drive productivity end up in the middle income trap, which is where former Asian tigers such as Thailand and Malaysia are today.
China appears determined to avoid the middle-income trap by getting out of low-skilled industry by pushing garments abroad or inland, and investing heavily in new technologies and renewables to drive growth in the next 13th Five Year Plan. Bangladesh, Indonesia, Vietnam and other Asian producer nations may have benefitted from China's move up the value chain by capturing jobs being pushed abroad, but they should heed China's lesson that low-skill labor offers just a short respite from poverty.
Factories in these nations need automation, data analytics, and eventually robotics more than ever. This is also a major opportunity for nations looking to secure their economies by giving factories the tools to compete in a fast, digital and high standards trading world. The productivity gains could be significant as even a modest 5-10 per cent productivity gain would add billions of foreign exchange to a nation's GDP that could be invested for the future.
Governments, industry, and workers' advocates have everything to gain from ending the cycle of growth based on cheap low-skill labor, and creating factories for the 21st century. Let the technology revolution begin!
The views expressed in the reports featured are the author's own and do not necessarily reflect Asia Global Institute's editorial policy.
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