www.ifc.org/thoughtleadership NOTE 96 • DEC 2020 Innovation, Investment, and Emerging Opportunities in Today’s Textile and Apparel Value Chain By Sumit Manchanda, Sabine Schlorke, and Maud Schmitt Textile and apparel manufacturing is a critical creator of formalized jobs, a well-known path to industrialization, and an enabler of value chain relationships that modernize economies and make them more complex. Today, value chains that support the textile and apparel industries are rapidly evolving. They are integrating new technologies, embracing workplace innovations, adopting sustainable efficiencies, and inventing products and processes to meet the changing demands of global consumers and markets. This pattern has largely been repeating itself since the First Industrial Revolution more than 250 years ago. At the most fundamental level of the textile and apparel value chain, countries with an abundance of low- wage, minimally skilled workers enter the industry to do the heavy manual labor and, with time and learned experience, build skills that enable them to graduate to the production of complex products that help them integrate into more important value chains and steadily advance their standards of living. Textile and apparel manufacturing is among the world’s water usage by the fashion industry stands at ca. 93 billion oldest industries. Because there is a relatively low barrier to cubic meters of water—equivalent to the consumption of entry—the principal requirement is low-cost labor—the sector five million people.1 With such progress toward greater has traditionally served as a strategy for developing countries sustainability, complexity, and efficiency, the textile sector can to establish and leverage an industrial knowledge base to lead to more prosperous and advanced economies. systematically modernize and grow their economies. As demand for fast fashion continues to increase with the In recent years, investments in logistics, telecommunications, emergence of new and increasingly affluent consumer markets predictive technologies, and manufacturing processes—all of around the world, a new generation of low-cost regional which were prohibitively expensive in emerging markets and stitchers, sewers, and dyers (such as in today’s Ethiopia, developing economies until recently—have helped countries Vietnam, and Cambodia) are rushing to meet it. As countries integrate into more lucrative value chains and improve the with experience in the clothing and garment industries (for lives of millions of people. As a result, quality healthcare has example, China and the Republic of Korea) move up the become more abundant, education levels have improved, and complexity ladder, they cede their less sophisticated businesses job prospects are better. to newcomers while innovating their way to other, more Along with an increase in demand for apparel products to complex levels of production. meet modern fashion trends from emerging middle classes in developing markets, there are many new opportunities for Most of today’s developed economies have experienced a similar investment in the textile and apparel value chain that can industrialization journey. That trend precipitated the “Asian accelerate its progress toward greater sustainability. Textile Tigers” of Singapore; Taiwan, China; Hong Kong SAR, China; manufacturing has a large environmental footprint through and Korea in the 1960s. It has been the dominant evolutionary its water demand and GHG emissions. For example, annual pattern of the textile and apparel value chain ever since. About the Authors Sumit Manchanda, Senior Operation Officer, MAS Advisory, Manufacturing, Agribusiness, and Services, IFC. His email is smanchanda@ifc.org. Sabine Schlorke, Manager, Global Manufacturing, Manufacturing, Agribusiness, and Services, IFC. Her email is sschlorke@ifc.org. Maud Schmitt, Research Assistant, Thought Leadership, Economics and Private Sector Development, IFC. Her email is mschmitt@ifc.org. 1 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Today the trend is moving even faster due to advances in consumer markets where shoppers are younger and have technology, telecommunications, logistics, and manufacturing growing incomes. These markets are likely to continue to processes. Value chains that serve the clothing and garment expand, perhaps even eventually overtaking in importance the industries are far more fluid than a generation ago, automation aging European and U.S. markets. is more common, data analytics are speeding up decision The emergence of middle-class consumers in developing markets making, there is a greater diversity of products (ranging from is accelerating the pace of investments in complex, higher-value cotton tee-shirts to personal protective equipment, or PPE, technologies that efficiently, safely, and sustainably manufacture made from advanced synthetic fibers), and shoppers are more products that can command higher prices in global markets. plentiful and wealthier around the world. Such a progression into more complex production processes and We have yet to understand the full impact of COVID-19 on more sophisticated products has historically preceded leaps in the textile and apparel manufacturing industry, but as the social, educational, environmental, and economic development. pandemic exposes inefficiencies in value chains, companies It has led to more and better-paying jobs, greater community and countries are hastening investments in initiatives that well-being, and increased opportunities for future generations. reduce risks and mitigate future disruptions. In Bangladesh, That evolution in industrial capabilities and know-how is the where economic growth has been impressive but complexity dynamic that powers countries to modernize and advance by has stagnated, industry leaders have long worried about their becoming more economically complex. country’s reliance on ready-made garments. What is Economic Complexity? Ready-made garment (RMG) manufacturing accounts for a Textile production and apparel manufacturing have historically staggering 80 percent of Bangladesh’s exports and employs some been gateways to industrialization, modernization, and more 4.4 million workers. Because the sector depends on imported diverse and flexible economies. This progression toward more fabric from China and India, a disruption to that supply chain advanced production—or higher economic complexity— could devastate both it and the national economy. Consequently, means that companies and sectors adopt more sophisticated Bangladesh has begun to seek diversification opportunities, production methods to manufacture more complex and drawing on the experiences of countries like Vietnam, Turkey, unique products. It also helps companies integrate into more and Morocco to leverage existing manufacturing capabilities sophisticated regional and global value chains, leading to and establish global value chain relationships, with the goal greater manufacturing opportunities, access to higher-value of entering higher value sectors such as electronics assembly, consumer markets, and stronger economic growth. footwear, and other light manufacturing. Economies with a high degree of economic complexity Diversification, which had been an aspirational goal of many are home to a greater diversity of specialized know-how. textile and apparel manufacturers for years and a mantra According to Ricardo Hausmann, a Harvard professor who in many boardrooms, is being addressed with new urgency studies the concept, the key takeaway from those countries as potential and ongoing geopolitical and environmental is to add “capabilities to your capabilities” to improve your disruptions expose vulnerabilities in value chains. Economic Complexity score. 2 Even before the pandemic, apparel manufacturers were deepening their integration into local and regional value 100,000 Qatar Norway Germany GDP per capita 2016 (constant 2010 USD) chains and cultivating more diverse and resilient supply USA Japan chain partnerships in an effort to become more nimble, more competitive, and quicker to address fashions trending on Chile 10,000 social media. Long supply chains were becoming unwieldy and Peru China “just in time” deliveries functioned better when suppliers were Thailand Nigeria geographically closer. At the same time, shifting value chains Ghana India presented new opportunities for countries and companies 1,000 Senegal to leverage their expertise and experience, and to diversify, Mali Uganda High income in some cases shifting from natural fabrics—the entry point Guinea Malawi Ethiopia Low income Madagascar Lower middle income for most textile and apparel manufacturing—to produce Upper middle income apparel using man-made and synthetic fibers, which requires 100 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 more sophisticated production processes, more complex Economic Complexity Index value 2016 technologies, and better skilled and educated workers. On the marketing side, forward-looking brand strategists FIGURE 1 Economic Complexity Drives GDP Growth have been engaging dynamically with emerging middle-class Source: Manufacturing and Textile Deep Dive Team, IFC. 2 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Examples of high-complexity economies are Germany, Japan, the By forging value chain partnerships, introducing new United States, and Norway. High economic complexity indicates technologies, establishing overseas plants, benefiting from an export mix with a broad diversity of products as well as trade and investment policies, and expanding capabilities (such products that have low ubiquity. Economic complexity also tends as starting Sri Lanka’s first seamless knit operation in 1999), to be positively correlated with GDP growth (Figure 1). MAS has leveraged 35 years of manufacturing experience to On the distribution side, advanced economies possess become one of the world’s most recognized design-to-delivery recognizable global brands, a capacity for strong research and solution providers. Its customers are a who’s who of global development, advanced design and innovation capabilities, brands that include Victoria’s Secret, Nike, Calvin Klein, client-oriented quality controls, and a flexible network Puma, GAP, H&M, Patagonia, and Tommy Hilfiger. of outsourcing partners. On the buying and selling sides, Today’s Accelerating Trends competition is based on brand and quality, with many companies operating at the forefront of the technology frontier. Today, textile and apparel value chains are more fluid and global than ever. As a result of global telecommunications Often a stepping-stone to greater economic diversification, that facilitate instantaneous messaging and data analytics textile and apparel manufacturing can support increased powered by artificial intelligence, decision making is far faster complexity in the structure of production along the dimensions than before. Online shopping has created direct-to-consumer of product, process, and value chain complexity. The textile and purchasing options that have opened the door to value- apparel value chain can enable local manufacturers to produce creating “servicification” add-ons for clothing companies. more complex products that are made through more intricate process technologies and are integrated in global value chains. Many new middle-class markets in corners of the world that MAS Holdings, a Sri Lankan company founded in 1984, is a a generation ago commanded no attention from the apparel garment manufacturer that evolved into more complex activities industry are now viewed as future profit centers that cannot be and illustrates the process. Starting as a producer of lingerie, ignored. Markets such as Southeast Asia’s six core economies— the company leveraged its accumulated manufacturing know- Vietnam, the Philippines, Indonesia, Malaysia, Thailand, how to diversify its production processes and its products, and and Singapore—are young, digitally sophisticated, and have eventually branched out into broader value chains. By 2001, it disposable incomes that are creating demand for fashion had become a diversified producer of sportswear, performance- brands, according to McKinsey’s “The State of Fashion 2020.” wear, and swimwear, and as of 2019 the company was the Meanwhile, there is an increased focus on sustainability among largest textile and apparel manufacturer in South Asia, with 53 apparel brands that understand the value of cultivating a manufacturing facilities across 16 countries and over 99,000 socially responsible reputation. Through resource efficiency, people involved in its operations, which range from information waste management innovations, circularity (reducing, reusing, technology to industrial parks. The company today generates and recycling in an effort to reduce waste and conserve natural $1.8 billion in annual revenue. resources), and the implementation of transparent labor practices, sustainability strategies are critical to protecting the planet and attracting consumers who increasingly desire brands Number of that are environmentally friendly and socially responsible. components PRODUCT in a product A July 2020 McKinsey survey of more than 2,000 British and COMPLEXITY German fashion consumers found that a majority are making Number of tasks Number of activities significant lifestyle changes to reduce their environmental in a process PRODUCTION it takes to deliver a impact and that “engagement in sustainability has deepened through which a COMPLEXITY product to market in product is made a specific industry during the COVID-19 crisis.”3 E-commerce plays a role in the sustainability equation as well, not only as an important sales PROCESS VALUE CHAIN COMPLEXITY COMPLEXITY channel but as a facilitator of more streamlined value chains. Digitalization and data analysis—now more transparent and • Technological changes impact the structure of production accessible than ever—are enabling companies to predict and in all dimensions (complexity and scale) manage inventories and fine-tune sales fulfillment options, • Positive changes in product, process, and value chain complexity are important for industrialization driving more cost-efficient and energy-efficient logistics. Overarching policy initiatives are also weaving their way into FIGURE 2 How Textile and Apparel Manufacturing textile and apparel value chains. With the support of the United Drives Economic Complexity Nations, industry stakeholders in 2018 created the Fashion Source: Manufacturing and Textile Deep Dive Team, IFC. Industry Charter for Climate Action with the goal of achieving 3 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. net-zero emissions by 2050. Today, the global apparel and where, a spokesperson at the time told the media, “the know- footwear industries account for approximately 8 percent4 of how and the suppliers are located.” Some industry experts the world’s greenhouse gas emissions and consume 79 trillion asserted that Adidas had simply overestimated the technical liters of water per year.5 But as the costs of renewable energy sophistication, logistical savings, and economic feasibility of technologies, effluent treatment, and more efficient equipment deploying a robotic workforce, and that, for these reasons, its decline, brands and manufacturers are increasingly committing experiment was premature. to more stringent sustainability standards. Today, the global textile and apparel manufacturing sector At the company level, new technologies are hastening product employs about 60 million workers6—80 percent of them in innovations and complexity as well as accelerating sustainability Asia, and mostly female7—and employment is not expected to efforts. Investments are being made in new fabrics and materials shrink any time soon. At the same time, working conditions in that, for example, are being designed with recycling and reuse the industry have been improving as a result of greater value in mind. Process innovations ranging from automation and chain transparency and global initiatives such as Better Work, laser cutting to 3-D printing are making factories cleaner, safer, a partnership of the International Labour Organization and and more energy efficient. IFC that strives to improve compliance with labor standards, prevent abusive practices, curb excessive overtime, and bolster As digitalization and virtual design technologies wind their profitability and community support. way through the global network of interconnected and symbiotic value chains and become cheaper, developing Risk mitigation in the era of the COVID-19 pandemic and countries are finding opportunities to participate in global global warming is proving to be a powerful catalyst for markets and increase their knowledge, skills, standards, changes in globalization strategies as well. Manufacturers are reducing their reliance on a single sector for export complexity, and commitments to sustainability. earnings and are diversifying their supply and value chains In low-wage countries there has been concern that automation to guard against natural and man-made disruptions. Asian could become a job killer and lead to near-shoring, when manufacturers are exploring nearby consumer markets brands shift their apparel manufacturing plants closer to their such as India, China, Southeast Asia, and Africa to leverage primary consumer markets and replace workers with robots. demographic advantages and expand market breadth. But in most cases, robotics and automation in the textile and Apparel production is slowly moving away from China, apparel industries are still no match for low-wage workers which still reigns as the largest exporting nation, to seize with years of manufacturing experience and know-how. new opportunities in India, Bangladesh, and Vietnam that One near-shoring experiment that flopped began in 2015, are attracting attention and investment. Particularly since the when Adidas built two fully automated “Speedfactories” in outbreak of the pandemic, textile companies have ramped up Germany and the United States. The idea was to reduce the production to expand their product mix to meet demand for time it took to deliver products to European and U.S. store protective equipment made of man-made fabrics, as well as shelves by eliminating shipping delays. But by 2019, Adidas leisure and athletic clothing that is favored by work-at-home had reversed course, relocating those plants back to Asia employees during COVID-19 quarantines. TEXTILES AND APPAREL VALUE CHAIN AGRI TEXTILES APPAREL DISTRIBUTION Raw Apparel Branding & material Fabric production and processing production end of use Fiber Weaving/ Apparel Retail/ production Spinning Dyeing Knitting Processing production Wholesale GLOBAL BRANDS ARE INVOLVED ACROSS THE ENTIRE VALUE CHAIN FIGURE 3 Textiles and Apparel Value Chain Source: Manufacturing and Textile Deep Dive Team, IFC. 4 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Textile and apparel manufacturing continues to be a foundational industry for emerging economies. Since the Number employed First Industrial Revolution began some 250 years ago, when 10,000,000 : . m machines powered by steam and water began to replace hand 9,000,000 production, textiles and clothing manufacturing have been 8,000,000 foundational to industrial innovation, helping to expand the 7,000,000 use of new technology and the skills needed to operate it. 6,000,000 Textile and apparel manufacturing has played a pivotal role 5,000,000 : . m in the industrialization process of most developed countries : . m 4,000,000 : . m because of the low start-up costs and direct linkages to 3,000,000 advanced technologies and improved living conditions. 2,000,000 : . m With each successive industrial revolution, textile manufacturers 1,000,000 built upon their capabilities. During the Second Industrial : k : k : k 0 Revolution, textile companies adopted mass production, CHINA BANGLADESH PAKISTAN INDONESIA assembly lines, chemical dyes, and the electrical grid. In the Third Industrial Revolution, they adapted electronics and FIGURE 4 Textiles and Apparel Employment in Four information technology to their processes. Today, they are Key Exporting Markets, 1980–2017 increasingly using data-driven tools, robots, instantaneous Sources: UNIDO Industrial Database, 2019, and Better Work Country communications, and artificial intelligence to innovate. These Updates, October 2018. advances are already impacting not only what products are being manufactured, but also how they are being made, where The human and economic ramifications are enormous, given they are made, and the workers needed to make them. the sector’s 60 million global workers and the importance With each revolution, the cost of technology has declined, of the industry to the well-being of many countries. In and the accessibility of technology has proliferated, allowing Bangladesh, as previously mentioned, textile and apparel additional countries to enter the industry. production accounts for 80 percent of the country’s total exports and is a critical component for economic growth. Apparel factories, unlike highly automated car plants or Because the vast majority of textile and apparel industry semiconductor assembly lines, continue to be labor-intensive employees around the world are women, many of whom are enterprises, requiring armies of low-wage workers to sew, the sole breadwinners for their families, the sector is also dye, stitch, and handle hundreds of millions of pieces of fabric crucial to advancing gender equality and social reform. and apparel in every conceivable size and color, to produce a near-endless selection of clothing. As a result, big brands Complacency is the foe of complexity. While history shows continuously seek low-wage assembly workers (ideally near that many countries launched their initial industrialization their target consumer markets), providing opportunities for efforts by starting with the textile and apparel value chain, the next cheapest workforce to enter the industry. some have failed to leverage their know-how and build on their capabilities. A vision and a set of conducive policies are Industry 4.0 technologies, including “sewbots” as well as 3D necessary to maintain momentum, but it is incumbent upon the printing and the Internet of Things, have the potential to disrupt private sector to implement, innovate, and invest in industrial the industry, but are unlikely to displace labor in significant strategies in order to grow more diverse and complex. numbers anytime soon. As Figure 4 shows, China, Bangladesh, Pakistan, and Indonesia experienced surges in textile and Korea, Japan, China, Thailand, Malaysia, and Vietnam are apparel industry employment between 1980 and 2017, just as examples of countries that pursued industrialization strategies robotics and automation were booming in many industries. in textile and apparel value chains before diversifying into more complex products and sectors. Ethiopia, an emerging Today, Cambodia, Ethiopia, Myanmar, and other countries textile and apparel player, is already reaping benefits and that are geographically well positioned and that have an spillovers from industrialization. abundance of low-wage workers are motivated to develop an industrial foundation to nudge out the previous generation of The experience of these and other countries shows how the low-wage countries and develop a foothold in the industry. textile and apparel sector—with low barriers to entry that The pattern has been repeated over and over. When Japan’s do not require skilled labor, resources, or significant capital workforce became too expensive in the late 1960s, Korean or technical know-how—can become the pathway to greater manufacturers took their place. When Korea grew too industrialization. That said, the benefits of entering the apparel expensive, China, India, and Bangladesh filled the void. segment can quickly dissipate if diversification is not pursued. 5 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. In Bangladesh, for example, market inefficiencies are proving Employment in the sector followed a similar pattern. In 1977, to be a challenge to growth. The textile and apparel sectors 13 percent of Chinese workers were employed in the sector. By contribute more than 10 percent of GDP and more than 2001, textile and apparel manufacturing employed 20 percent four-fifths of export earnings, making Bangladesh the second of Chinese workers. But as Chinese manufacturing diversified biggest apparel exporter after China. Bangladeshi textile and into more complex industries such as plastics, computers, and apparel manufacturers employ more than 4.5 million people— automobiles, textile and apparel employment dropped to 11 mostly women—and contribute to the employment of some percent. Similar examples of diversification and complexity 10 million workers in ancillary industries. The sector has can be seen at the corporate level. grown dramatically since the early 1980s when it employed The Singapore-based Indorama Corporation, which started about 276,000 workers. By 2018, the country was exporting in 1975 as a cotton yarn spinning company, has steadily an astonishing $32.9 billion a year and recorded an average diversified over the decades, leveraging its early capabilities and 7 percent GDP growth rate for six consecutive years. The know-how to expand into higher complexity sectors. In 1991, 2017 McKinsey Apparel Purchasing Survey predicted that Indorama began producing polyester fibers from petrochemical Bangladesh would remain the preferred apparel sourcing derivatives, and today it operates in multiple sectors producing destination for international brands for at least five years. an array of products that include nitrogen fertilizers, phosphate But such heavy reliance on a single sector with no active fertilizers, polyethylene, polypropylene, polyester, polyester strategy for diversifying into new products, sectors, and value feedstocks, textiles, cotton fiber, and medical gloves. chains has exposed the country’s economic vulnerabilities. The In 2019, Indorama was one of Asia’s leading chemical holding COVID-19 pandemic has amplified the issues that Bangladeshi companies, with eight affiliate companies. Today, it operates over apparel manufacturers face: fracturing the supply chain of raw 70 manufacturing sites in more than 30 countries and employs materials and fabrics from China, diminishing overall consumer more than 30,000 people worldwide, having dramatically evolved demand for clothing during the pandemic lockdown, and to become a far more diversified and complex manufacturer. shifting fashion trends to leisure and exercise clothing made from synthetic instead of natural fabrics. Three Levels of Complexity and a Path Forward In China, a consistent strategy to adopt more complex The complexity concept as developed by Ricardo Haussmann and production processes and produce increasingly complex César A. Hidalgo8 has been adapted by IFC into a framework products has paid off. Between 1977 and 1981, China’s of categorizing countries into three pillars that reflect the share of textile and apparel output steadily rose, reaching a sophistication and diversity of their manufacturing base and their peak of 20 percent of its total manufacturing output. As the integration into regional and global value chains. Within each country continued to industrialize and diversify into different pillar, specific growth and complexity opportunities exist. This manufacturing sectors, textile and apparel fell as a percentage framework of categorizing into pillars has been developed by of the country’s total manufacturing output even as the sector IFC’s Manufacturing team and is applicable across manufacturing continued to grow in real numbers. value chains including textile and apparel. The framework can 25% help map where countries in the value chain currently lie and what pathways they can adopt to improve complexity and growth. 20% Pillar One: Emerging economies Country classification: These economies generally operate on 15% a small industrial scale; have few industrial standards; face challenging social and environmental issues; lack economic 10% diversity; employ mostly low-skilled and unskilled workers; rely on base materials; have limited resources; and depend 5% on imported technology and engineering practices. These Textiles Output/Manufacturing Output countries have not achieved value chain sophistication. Textiles Employment/Manufacturing Employment 0% Opportunities: Pillar One countries should consider backward integration, and when not possible within their own borders, they should consider backward integration within regional FIGURE 5 China Textiles and Apparel Output and value chains. For example, by establishing mills to add value Employment Share of Total Manufacturing to raw fibers such as cotton, they can enhance both their Source: Manufacturing and Textile Deep Dive Team, IFC. process complexity and their value chain complexity. 6 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Goal: Lay the foundation for the industrial production of Between the early 1960s and the mid-1990s, the Asian textiles and apparel products. Public-private partnerships Tigers transformed their economies into textile and apparel are key to leveraging policies that encourage value chain powerhouses. They then turned their industry-building diversification. knowledge—including skills, education, and government policies, among others—to assembling what is arguably the Pillar Two: Developing economies that have most complex and important manufacturing region in the established an industrial base world, producing goods ranging from tee-shirts to satellites, Country classification: These economies have an established and generating enormous wealth for their economies and manufacturing base that continues to evolve. Pillar Two higher living standards for their people. The Asian Miracle countries also are strengthening their competitiveness to enter was a well-planned and well-executed project that numerous multiple global value chains. countries have attempted to emulate ever since. Opportunities: Cultivate backward and forward integration COVID-19—An Opportunity and a Concern and diversification into global value chains through more As the textile and apparel sector matures and the robust connections with brands, technology, skill-building, COVID-19 pandemic exposes inefficiencies in value chains, and investments in base-material industries. Support companies and countries have responded by accelerating production of complex materials such as synthetic fibers and investments in initiatives to reduce risks, improve encourage the upgrading of process technologies to improve sustainability. productivity, and leverage alternative products, processes, and markets. Goal: Expand and diversify the manufacturing base through textiles and apparel-based activities. The pandemic has made it clear that making fabric in China, shipping it to Bangladesh for assembly, and shipping Pillar Three: High complexity economies it to consumer markets in North America and Europe is not the most efficient strategy. It has also showed that lean Country classification: These economies have broad and inventories, while adequate and efficient during normal sophisticated industrial bases where technology, skills, and times, are inadequate and risky during times of crisis, and diversification drive growth via collective know-how and that there is a cost to focusing too heavily on efficiency and resilient industry networks. Pillar Three economies are not enough on resilience in business operations. characterized by their global competitiveness in multiple value chains and their high level of industrialization. Prior to COVID-19, higher digitalization levels and e-commerce penetration enhanced competitiveness Opportunities: Advance new technologies to harness growth, through forward and backward value chain integration. accelerate complexity, and support global sustainability goals Diversification and sustainability awareness were already through resource conservation and material efficiency. Pillar major trends in the sector; now they are being addressed Three economies are well integrated into global value chains with a greater urgency. and have developed sophisticated inter-industry linkages— including “servicification,” R&D leadership, and branding— Not only do virtual design, sampling, remote audits, and that can benefit the entire manufacturing ecosystem regardless remote inspections seem to be safer methods of operating of the level of complexity. These economies can be encouraged during the pandemic, they are also proving to be cost to support South-South investments, share technology efficient and easier to implement than once thought. The and knowledge, and support technological and product pandemic has indeed accelerated existing trends and advancements for use in multiple value chains. uncovered opportunities to invest in forward-looking strategies, technologies, and opportunities. Goal: Support more complex manufacturing using the textiles and apparel value chain. In some emerging economies in Africa, for example, textile and apparel manufacturers have used their experience, The past 65 years provide insights into the Pillar approach know-how, and skilled workforces to retool their operations through the experiences of many economies, none more to make PPE. Out of necessity, the pandemic has nudged dramatic than the Asian Tigers, which rebuilt and reimagined some manufacturers to transition from natural fibers into their postwar economies by mobilizing colossal numbers more complex synthetics that are used with PPEs. At the of low-skilled and low-paid textile workers; putting them same time, PPE production has opened the doors to more to work in efficient factories; developing modern ports that complex regional and global value chains, as demand for could deliver goods to important markets; and then weaving protective garments and equipment is not limited to any one together regional—and later global—value chains. market or region. 7 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Conclusion ACKNOWLEDGMENTS The authors would like to thank the following colleagues Today, textile and apparel value chains are more for their review and suggestions: Vally Khamisani, Principal interconnected and quicker to respond to market Investment Officer, MAS Global – Upstream, Manufacturing conditions than at any time prior. Advances in technology, Agribusiness, and Services, IFC; Hassan Kaleem, Senior telecommunications, systems analysis, logistics, predictive Operations Officer, Upstream Manufacturing, Agribusiness, technologies, and manufacturing processes have reduced the and Services – Africa, IFC; Gary Seidman, Consultant, Global time, energy, and effort it takes to bring a product to market. MAS, Manufacturing, Agribusiness and Services, IFC; Aliza Marcus, Senior Communications Officer, IFC; and Thomas An abundance of data collected, sorted, and analyzed Rehermann, Senior Economist, Thought Leadership. The by artificial intelligence applications provides insights on authors would also like thank the following colleagues for processes, products, and markets that were unimaginable their earlier contributions to the IFC Textile Deep Dive: a decade ago. Decisions can be made and communicated Sabine Schlorke; Sabine Hertveldt; Brian Casabianca; almost instantaneously. Technology that was once cost- Themba Jeremiah; Li Tu; Hassan Kaleem; Sumit Manchanda; prohibitive for developing economies has become affordable Joy Biswas; Eleonore Richardson; Jeremy Levin; Farzin and transferable and is now creating opportunities for Mirmotahari; Shari Friedman; Vally Khamisani; Elaine Reinke; companies and investors to integrate into increasingly Etienne Raffi; to the IFC Manufacturing Deep Dive : Sabine important value chains and markets. Schlorke; Brian Casabianca; Themba Jeremiah; Hassan Kaleem; R. Balaji; Emmanuel Pouliquen; Samu Salo; Mesut The products and machinery are different, but the Uyumazturk; Vally Khamisani; Li Tu; Sumit Manchanda; evolutionary trends of the Fourth Industrial Revolution are Etienne Raffi; Indradeep Kumar; Grégoire Nalet; and would familiar to students of past industrial revolutions. These like to thank the following colleagues for their contribution trends are driven by technological innovations that trickle to the graphs and charts: Themba Jeremiah, Investment down from the most advanced economies to developing Analyst, Manufacturing, Agribusiness, and Services Global – economies through dynamic value chains that span the Upstream, IFC; Brian A. Casabianca, Senior Strategy Officer, Corporate Strategy and Partnership, IFC. globe. It is a pattern that has been repeated for hundreds of years but is now moving faster than ever through textile and Please see the following additional reports and EM apparel value chains and is touching corners of the world Compass Notes about responses to COVID-19 and about that are only now beginning to industrialize and develop. reaching unserved and underserved populations in emerging markets: AI Investments Allow Emerging Markets As these trends take root, values that are important for to Develop and Expand Sophisticated Manufacturing Capabilities the health of the planet and the social and physical well- (Note 87, July 2020); Impacts of COVID-19 on the Private Sector in being of societies are being increasingly emphasized Fragile and Conflict-Affected Situations (Note 93, Nov 2020); How and memorialized in approaches pursued by clothing Natural Capital Approaches Can Support Sustainable Investments and manufacturers and international brands. Today, countries Markets (Note 92, October 2020); Leveraging Inclusive Businesses and companies must respect environmental and workplace Models to Support the Base of the Pyramid during COVID-19 (Note 84, May 2020); What COVID-19 Means for Digital Infrastructure in sustainability protocols to evolve into more complex Emerging Markets (Note 83, May 2020); Artificial Intelligence in the economies. They must consider both their bottom lines Power Sector (Note 81, April 2020); Accelerating Digital Connectivity and the welfare of their communities and the communities Through Infrastructure Sharing (Note 79, February 2020); Artificial they interact with through their value chains. As this latest Intelligence and 5G Mobile Technology Can Drive Investment industrial revolution proceeds at a breakneck pace, it is Opportunities in Emerging Markets (Note 76, December 2019); The instilled with a consciousness about the safekeeping of the Role of Artificial Intelligence in Supporting Development in Emerging natural world. Markets (Note 69, July 2019). 1 World Bank. 2019. “How Much Do Our Wardrobes Cost to the Environment?” Sept 23, 2019. https://www.worldbank.org/en/news/feature/2019/09/23/costo-moda- medio-ambiente 2 See website: https://atlas.cid.harvard.edu/what-is-the-atlas 3 McKinsey. 2020. “Survey: Consumer Sentiment on Sustainability in Fashion.” July 17, 2020. https://www.mckinsey.com/industries/retail/our-insights/survey- consumer-sentiment-on-sustainability-in-fashion# 4 Qantis. 2018. “Measuring Fashion – Environmental Impact of the Global Apparel and Footwear Industries Study.” 5 Global Fashion Agenda – Boston Consulting Group. 2017. “Pulse of the Fashion Industry.” https://static1.squarespace.com/static/5810348d59cc68e529b7d9ba/t/5 96454f715d5db35061ea63e/1499747644232/Pulse-of-the-Fashion-Industry_2017.pdf 6 Better Work. 2017. “Amplifying Impact—2018–22 Strategy.” 7 Better Work Program estimates. 8 Hidalgo, César A., Ricardo Hausmann. 2009. “The Building Blocks of Economic Complexity.” CID Working Paper No. 186, September 2009. https://www.hks.harvard. edu/centers/cid/publications/faculty-working-papers/building-blocks-economic-complexity 8 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group.