Foreign Investment and Upgrading in the Garment Sector in Africa and Asia

Abstract

In many developing countries, the apparel industry is seen as a ‘stepping stone’ towards industrialisation. Countries rely on foreign investment to enter the garment sector by engaging in simple assembly production and aim to gradually upgrade along the value chain by building their networks and capabilities. By comparing case studies in Africa and Asia, this article shows that foreign investors contribute differently to upgrading and creating linkages. The study reviews the historical experiences of Bangladesh, Cambodia, Lesotho and Madagascar to understand the roles played by various types of foreign investors in contributing to upgrading. The model of production of these investors and their embeddedness in the host countries’ markets shape their contribution towards upgrading. This has important policy implications, suggesting that government policies aiming to develop the garment sector beyond the assembly stage need to correctly identify and attract the investors that are most likely to be or become ‘embedded’. The case studies also highlight the importance of creating a domestic class of entrepreneurs that can actively contribute to the development of the garment industry.

Guideline and Strategies of Textile Industry on the Sustainable Development of Benin

“…For example, in Bangladesh, the government played an active role in the sector's development by lifting limitations on foreign investment. More specifically, the study reviews [71] the historical experiences of Bangladesh, Cambodia, Lesotho, and Madagascar, and explains the roles played by various foreign investors in contributing to upgrading. This has important policy implications, suggesting that government policies aiming to develop the garment sector beyond the assembly stage must correctly identify and attract the most likely to be or become embedded investors.…”