the international competitiveness of asian economies … · the international competitiveness of...

ECONOMICS AND RESEARCH DEPARTMENT

ERD WORKING PAPER SERIES NO. 5

Gary Gereffi

February 2002

Asian Development Bank

The International

Competitiveness of Asian

Economies in the Apparel

Commodity Chain

ERD Working Paper No. 5

THE INTERNATIONAL COMPETITIVENESS OF ASIAN

ECONOMIES IN THE APPAREL COMMODITY CHAIN

Gary Gereffi

February 2002

Gary Gereffi is a professor of sociology at Duke University. This paper was prepared for RETA 5875:International Competitiveness of Asian Economies: A Cross-country Study.

Asian Development BankP.O. Box 7890980 ManilaPhilippines

2002 by Asian Development BankFebruary 2002ISSN 1655-5252

The views expressed in this paperare those of the author(s) and do notnecessarily reflect the views or policiesof the Asian Development Bank.

Foreword

The ERD Working Paper Series is a forum for ongoing and recentlycompleted research and policy studies undertaken in the Asian Development Bankor on its behalf. The Series is a quick-disseminating, informal publication meantto stimulate discussion and elicit feedback. Papers published under this Seriescould subsequently be revised for publication as articles in professional journalsor chapters in books.

Contents

I. The Apparel Commodity Chain 3

II. Big Buyers and Global Sourcing 6

III. The Asian Connection in the Apparel Commodity Chain 9A. Shifting Patterns of Asian Competitiveness:

American, European, and Japanese Variationsin Apparel Sourcing 12

IV. Regional Divisions of Labor in Asia: A CommodityChains Interpretation 20

V. Industrial Upgrading in Asia’s Apparel Commodity Chain 22A. Triangle Manufacturing and the Internationalization

of Asian Production Networks 23B. Upgrading Within the Chain: The Export Shift

from Apparel to Textiles and Fibers 28

VI. Conclusion 31

References 32

1

Apparel is one of the oldest and largest export industries in the world. Most nations producefor the international textile and apparel market (Dickerson 1995, 6), making this oneof the most global of all industries. Apparel is the typical “starter” industry for countries

engaged in export-oriented industrialization, and played the leading role in East Asia’s earlyexport growth. Many questions have been raised, however, concerning the degree to whichinternational trade can be the fulcrum for sustained economic growth for developing nations.Under what conditions can trade-based growth become a vehicle for genuine industrial upgrading,given the frequent criticisms made of low-wage, low-skill, assembly-oriented export activities?Do Asia’s accomplishments in trade-led industrialization contain significant lessons for otherregions of the world?

This paper addresses these and related questions using a global commodity chainsframework. A commodity chain refers to the whole range of activities involved in the design,production, and marketing of a product. A critical distinction in this approach is between buyer-driven and producer-driven commodity chains. Japan in the 1950s and 1960s, the East Asiannewly industrializing economies (NIEs) during the 1970s and 1980s, and People’s Republic ofChina (PRC) in the 1990s became world-class exporters primarily by mastering the dynamicsof buyer-driven commodity chains, which supply a wide range of labor-intensive consumer productssuch as apparel, footwear, toys, and sporting goods. The key to success in East Asia’s buyer-drivenchains was to move from the mere assembly of imported inputs (traditionally associated withexport processing zones) to a more domestically integrated and higher value-added form ofexporting known alternatively as full-package supply or OEM (original equipment manufacturing)production.1 Subsequently, Japan and some firms in the East Asian NIEs pushed beyond theOEM export role to original brand name manufacturing (OBM) by joining their production expertisewith the design and sale of their own branded merchandise in domestic and overseas markets.Apparel thus embodies two contrasting production systems characteristic of buyer-driven chains:the assembly and the OEM models. Whereas the assembly model is a form of industrialsubcontracting in which manufacturers provide the parts for simple assembly to garment sewingplants, the OEM model is a form of commercial subcontracting in which the buyer-seller linkagebetween foreign merchants and domestic manufacturers allows for a greater degree of local learningabout the upstream and downstream segments of the apparel chain.

1 Throughout this report, OEM production, specification contracting, and full-package supply will be used as broadlysynonymous terms. In addition, assembly, production sharing, and outward processing refer to similar processes,even though a specific term may be favored in a particular region.

ERD Working Paper No. 5THE INTERNATIONAL COMPETITIVENESS OF ASIAN ECONOMIES IN THE APPAREL COMMODITY CHAIN

2

From a global commodity chains perspective, East Asia’s transition from assembly to full-package supply derives in large measure from its ability to establish close linkages with a diversearray of lead firms in buyer-driven chains. Lead firms are the primary sources of material inputs,technology transfer, and knowledge in these organizational networks. In the apparel commoditychain, different types of lead firms use different networks and source from different parts of theworld. Retailers and marketers tend to rely on full-package sourcing networks, in which theybuy readymade apparel primarily from Asia, where manufacturers in places like Hong Kong,China; Republic of Korea (henceforth Korea); and Taipei,China have historically specialized inthis kind of production. As wage levels in those economies have gone up, East Asian manufacturershave tended to develop multilayered global sourcing networks where low-wage assembly can bedone in other parts of Africa, Asia, and Latin America, while the NIE manufacturers play a criticalcoordinating role in the full-package production process. Branded manufacturers, by contrast,tend to create production networks that focus on apparel assembly using imported inputs. Whereasfull-package sourcing networks are generally global, production networks established by brandedmanufacturers are predominantly regional. Manufacturers in the United States (US) go to Mexicoand the Caribbean Basin; European Union (EU) firms look to North Africa and eastern Europe;and Japan and the East Asian NIEs look to lower-wage regions within Asia.

The organization of this paper is as follows. In the first section, the global commoditychains framework will be outlined, with an emphasis on the structure and dynamics of buyer-driven chains. In the second section, each of the big buyers (retailers, marketers, andmanufacturers) involved in global sourcing networks in the apparel commodity chain will behighlighted. The third section will assess the role of Asian exporters in the distinct apparel sourcingconfigurations that characterize North America, Europe, and Japan. Asian sourcing to each regionhas moved beyond assembly production to the full-package model, but in North America and Europestrong competition is emerging from nearby low-cost suppliers that are establishing regionallyintegrated apparel supply chains. The Japanese pattern of apparel sourcing, in contrast to theAmerican and European patterns, is highly concentrated in a few suppliers, and the differenceswill be traced to trade policy. In the fourth section, overlapping regional divisions of labor inAsia that put nations on different industrial upgrading trajectories are explored. The fifth sectionof the paper identifies several main upgrading approaches in apparel. Industrial upgrading inthe Asian context involves the process of building, extending, coordinating, and completinginternational production and trade networks. These networks are resilient forms of social capitalthat are a valuable competitive asset in the global economy. However, the East Asian NIEs havehad to develop new strategies for upgrading within the apparel commodity chain to maintain aleadership role. The final section of the report will offer conclusions regarding upgrading optionswithin the global apparel industry.

3

Section IThe Apparel Commodity Chain

I. The Apparel Commodity Chain

In global capitalism, economic activity is not only international in scope, it is also globalin organization. “Internationalization” refers to the geographic spread of economic activities acrossnational boundaries. As such, it is not a new phenomenon. Indeed, it has been a prominent featureof the world economy since at least the 17th century when colonial empires began to carve upthe globe in search of raw materials and new markets for their manufactured exports.“Globalization” is much more recent than internationalization because it implies functionalintegration between internationally dispersed activities.

Globalization has been promoted by industrial and commercial firms alike, which haveestablished two distinct types of international economic networks that have been called “producer-driven” and “buyer-driven” global commodity chains, respectively (Gereffi 1994a, 1999). Acommodity chain refers to the whole range of activities involved in the design, production, andmarketing of a product (see Gereffi and Korzeniewicz 1994 for an overview of this framework).Producer-driven commodity chains are those in which large, usually transnational, manufacturersplay the central roles in coordinating production networks (including their backward and forwardlinkages). This is characteristic of capital- and technology-intensive industries such as automobiles,aircraft, computers, semiconductors, and heavy machinery. Buyer-driven commodity chains, onthe other hand, refer to those industries in which large retailers, marketers, and brandedmanufacturers play the pivotal roles in setting up decentralized production networks in a varietyof exporting countries, typically located in the third world. This pattern of trade-ledindustrialization has become common in labor-intensive, consumer goods industries such asgarments, footwear, toys, handicrafts, and consumer electronics. Tiered networks of Third Worldcontractors that make finished goods for foreign buyers carry out production. Large retailersor marketers that order the goods supply the specifications.

Firms that fit the buyer-driven model, including retailers like Wal-Mart, Sears Roebuck,and J.C. Penney; athletic footwear companies like Nike and Reebok; and fashion-oriented apparelcompanies like Liz Claiborne, The Gap, and The Limited, generally design and/or market—butdo not make—the branded products they order. They are “manufacturers without factories” thatseparate the physical production of goods from the design and marketing stages of the productionprocess. Profits in buyer-driven chains derive not from scale, volume, and technological advancesas in producer-driven chains, but rather from unique combinations of high-value research, design,sales, marketing, and financial services that allow the retailers, designers, and marketers to actas strategic brokers in linking overseas factories and traders with evolving product niches intheir main consumer markets (Gereffi 1994a).

Profitability is greatest in the relatively concentrated segments of global commodity chainscharacterized by high barriers to the entry of new firms. In producer-driven chains, manufacturersmaking advanced products like aircraft, automobiles, and computers are the key economic agentsnot only in terms of their earnings, but also in their ability to exert control over backward linkageswith raw material and component suppliers, and forward linkages into distribution and retailing.


4

The lead firms in producer-driven chains usually belong to international oligopolies. Buyer-drivencommodity chains, by contrast, are characterized by highly competitive and globally decentralizedfactory systems with low barriers to entry in production.2 The companies that develop and sellbrand-named products exert substantial control over how, when, and where manufacturing willtake place, and how much profit accrues at each stage of the chain. Thus, whereas producer-driven commodity chains are controlled by large manufacturers at the point of production, themain leverage in buyer-driven industries is exercised by marketers and merchandisers at thedesign and retail ends of the chain.3

The apparel industry is an ideal case for examining the dynamics of buyer-drivencommodity chains. The relative ease of setting up apparel firms, coupled with the prevalenceof developed country protectionism in this sector, has led to the unparalleled diversity of garmentexporters in the Third World. Furthermore, the backward and forward linkages from garmentproduction are extensive, and help to account for the large number of jobs associated with aflourishing apparel industry (see Appelbaum, Smith, and Christerson 1994).

The apparel commodity chain is organized around five main segments: raw material supply,including natural and synthetic fibers; provision of components, such as yarns and fabricsmanufactured by textile companies; production networks made up of garment factories, includingtheir domestic and overseas subcontractors; export channels established by trade intermediaries;and marketing networks at the retail level (see Figure 1). Each of these segments in the apparelcommodity chain encompasses a variety of differences in terms of factors such as geographicallocation, labor skills and conditions, technology, and scale and type of enterprises. Thesecharacteristics also affect the distribution of power and profits throughout the commodity chain.

In the apparel commodity chain, entry barriers are low for most garment factories, althoughprogressively higher as one moves upstream to textiles and fibers; brand names and stores arealternative competitive assets firms can use to generate significant economic rents. The lavishadvertising budgets and promotional campaigns required to create and sustain global brands,and the sophisticated and costly information technologies employed by today’s mega-retailersto develop “quick response” programs that increase revenues and lower risks by getting suppliersto manage inventory (Abernathy et al. 1999), illustrate recent techniques that have allowed retailersand marketers to displace traditional manufacturers as the leaders in many consumer goodsindustries.

2 In intermediate products where scale is critical, such as steel and cement, there are high barriers to entry inproduction. Because marketing tends to be relatively unimportant in these industries, firms generally are verticallyintegrated.

3 Buyer-driven chains have also penetrated the computer industry. Dell Computer Corporation pioneered a newbusiness model that radically substitutes pull for push in its production paradigm. Bypassing the small computerdealerships and discount or specialist retailers, Dell sells its personal computers directly to consumers. Dell’sInternet site, which accounts for up to half of its transactions, offers more than 10 million computer configurations(Gereffi 2001, 1632 and fn. 8).

5

Section IThe Apparel Commodity Chain

Na

tura

l

Fib

ers

Syn

theti

c

Fib

ers

Cott

on

,W

ool,

Sil

k,

etc

.

Oil

,N

atu

ral

Ga

s

Ya

rn

(Sp

inn

ing)

Petr

och

em

ica

ls

Fa

bri

c

(wea

vin

g,

kn

itti

ng,

fin

ish

ing)

Syn

theti

c

Fib

ers

US

Ga

rmen

tF

act

ori

es

(desi

gn

ing,

cutt

ing,

sew

ing,

bu

tton

holi

ng,

iron

ing)

Dom

est

ica

nd

Mexic

an

/Ca

rib

bea

n

Ba

sin

Su

bco

ntr

act

ors

Asi

a

Asi

an

Ga

rmen

t

Con

tra

ctors

Dom

est

ica

nd

Overs

ea

s

Su

bco

ntr

act

ors

Overs

ea

sB

uyin

g

Off

ices

Tra

din

g

Com

pa

nie

s

Bra

nd

-na

med

Ap

pa

rel

Com

pa

nie

s

Dep

art

men

tS

tore

s

Sp

eci

alt

yS

tore

s

Ma

ssM

erc

ha

nd

ise

Ch

ain

s

Dis

cou

nt

Ch

ain

s

Off

-Pri

ce,

Fa

ctory

Ou

tlet,

Ma

ilO

rder

Oth

ers

All

Reta

il

Ou

tlets

All

Reta

ilO

utl

ets

Nort

hA

meri

ca

TE

XT

ILE

CO

MP

AN

IES

AP

PA

RE

LM

AN

UF

AC

TU

RE

RS

RE

TA

ILO

UT

LE

TS

CO

MP

ON

EN

T

NE

TW

OR

KS

RA

WM

AT

ER

IAL

NE

TW

OR

KS

PR

OD

UC

TIO

N

NE

TW

OR

KS

EX

PO

RT

NE

TW

OR

KS

MA

RK

ET

ING

NE

TW

OR

KS

Fig

ure

1.T

he

Ap

pa

re

lC

om

mo

dit

yC

ha

in


6

One of the major hypotheses of the global commodity chains approach is that developmentrequires linking up with the most significant “lead firms” in an industry. These lead firms arenot necessarily the traditional vertically integrated manufacturers, nor do they even need to beinvolved in making finished products. They can be located upstream or downstream frommanufacturing (such as the fashion designers or private label retailers in apparel), or they canbe involved in the supply of critical components (such as microprocessor companies like Inteland software firms like Microsoft in the computer industry). What distinguishes lead firms fromtheir followers or subordinates is that they control access to major resources (such as productdesign, new technologies, brand names, or consumer demand) that generate the most profitablereturns in the industry.

II. Big Buyers and Global Sourcing

A fundamental restructuring is under way in the retail sector in the US and other developedeconomies. The global retailing industry is dominated by large organizations that are movingtoward greater specialization by product (the rise of specialty stores that sell only one item, suchas clothes, shoes, or office supplies) and price (the growth of high-volume, low-cost discount chains).Furthermore, the process of filling the distribution pipeline is leading these retailers to developstrong ties with global suppliers, particularly in low-cost countries (Management Horizons 1993).Nowhere are these changes more visible than in apparel, which is the top merchandise categoryfor most consumer goods retailers. Between 1987 and 1991, the five largest softgoods chains inthe US increased their share of the national apparel market from 35 to 45 percent (Dickerson1995, 452). By 1995, the five largest US retailers—Wal-Mart, Sears, Kmart, Dayton Hudson,4

and JC Penney—accounted for 68 percent of all apparel sales in publicly held retail outlets. Thenext top 24 retailers, all billion dollar corporations, represented an additional 30 percent of thesesales (Finnie 1996, 22). The two top discount giants, Wal-Mart and Kmart, by themselves controlone quarter of all apparel (by unit volume, not value) sold in the US.

Although the degree of market power that is concentrated in large US retailers may beextreme, owing to the recent spate of mergers and acquisitions in this sector, a similar shift inpower from manufacturers to retailers and marketers appears to be under way in most developednations. Retailing across the European Union (EU) has been marked by substantial concentrationin recent years. In Germany, the five largest clothing retailers (C&A, Quelle, Metro/Kaufhof,Kardstadt, and Otto) in 1992 accounted for 28 percent of the EU’s largest national economy, whilethe United Kingdom’s (UK) two top clothing retailers (Marks & Spencer and the Burton Group)controlled over 25 percent of the UK market in 1994 (OETH 1995, 11-13). Marks & Spencer,Britain’s largest and most successful retailing firm with over 260 stores in the UK plus stores

4 Dayton Hudson Corporation owns Target, Mervyn’s, Dayton’s, Hudson’s, and Marshall Field.

7

in other parts of Canada and Europe, itself buys about 20 percent of all the clothing made inBritain (Dickerson 1995, 472). In both France and Italy, the role of independent retailers in theclothing market has declined since 1985, while the share of specialty chains, franchise networks,and hypermarkets is rising rapidly. In Japan, the 1992 revision of the Large Retail Store Law,which liberalized restrictions on the opening of new retail outlets, has caused a rapid increasein the number of large-volume retailers and suburban chain stores. The Japanese governmentpredicts there will be 20 percent fewer retailers in Japan in the year 2000 than in 1985, mainlydue to attrition among the small and medium retail stores (Japan Textile News 1996).

From the vantage point of buyer-driven commodity chains, the major significance of growingretailer concentration is its tendency to augment global sourcing. As each type of organizationalbuyer in the apparel commodity chain has become more actively involved in offshore sourcing,the competition between retailers, marketers, and manufacturers has intensified, leading to ablurring of the traditional boundaries between these firms and a realignment of interests withinthe chain.

Retailers. In the past, retailers were the apparel manufacturers’ main customers, butnow they are increasingly becoming their competitors. As consumers demand better value, retailershave increasingly turned to imports. In 1975, only 12 percent of the apparel sold by US retailerswas imported; by 1984, retail stores had doubled their use of imported garments (AAMA 1984).According to unpublished data from the US Customs Service’s Net Import File, retailers accountedfor 48 percent of the total value of imports of the top 100 US apparel importers in 1993 (whocollectively represent about one quarter of all 1993 apparel imports). US apparel marketers, whichperform the design and marketing functions but contract out the actual production of apparelto foreign or domestic sources, represented 22 percent of the value of these imports; and domesticproducers made up an additional 20 percent of the total5 (Jones 1995, 25-26). The picture inEurope is strikingly similar. European retailers account for fully one half of all apparel imports,and marketers or designers add roughly another 20 percent (Scheffer 1994, 11-12).

In the 1980s, many retailers began to compete directly with the national brand namesof apparel producers and marketers by expanding their sourcing of “private label” (or store-brand)merchandise. This is sold more cheaply than the national brands but it also is more profitableto the retailers since they eliminate some of the middlemen in the chain. Private label programshave led a growing number of merchants to take on the entrepreneurial functions of normal apparelmanufacturers, such as product design, fabric selection and procurement, and garment productionor sourcing. Private label goods, which constituted about 25 percent of the total US apparel marketin 1993 (Dickerson 1995, 460), can curtail the business of both manufacturers and well-knowndesigner lines.

5 These figures do not include the production sharing activities of US apparel firms in Mexico and in the CaribbeanBasin, which also have been expanding very rapidly (USITC 1997).

Section IIBig Buyers and Global Sourcing


8

Branded Marketers. One of the most notable features of buyer-driven chains is thecreation since the mid-1970s of prominent marketers whose brands are extremely well known,but that carry out no production whatsoever. These “manufacturers without factories” includecompanies like Liz Claiborne, Nike, and Reebok, which literally were born global since theirsourcing has always been done overseas. As pioneers in global sourcing, branded marketers wereinstrumental in providing overseas suppliers with knowledge that later allowed them to upgradetheir position in the apparel chain.

In order to deal with the influx of new competition, branded marketers have adopted severalstrategic responses that will alter the content and scope of their global sourcing networks: theyare discontinuing certain support functions (such as pattern grading, marker making, and samplemaking), and reassigning them to contractors. They are also instructing the contractors whereto obtain needed components, thus reducing their own purchase and redistribution activities.They are shrinking their supply chains, using fewer but more capable manufacturers; are adoptingmore stringent vendor certification systems to improve performance; and are shifting the geographyof their sourcing configuration from Asia to the western hemisphere. In essence, marketers nowrecognize that overseas contractors have the capability to manage all aspects of the productionprocess, which restricts the competitive edge of marketers to designs and brands.

Branded Manufacturers. Given that foreign production can often provide similarquantity, quality, and service as domestic producers, but at lower prices, apparel manufacturersin developed countries have been caught in a squeeze. They are responding in several differentways. In Europe and the US, an “If you can’t beat them, joint them” attitude has evolved amongmany smaller and midsized apparel firms, who feel they cannot compete with the low cost offoreign-made goods and thus are defecting to the ranks of importers.

The decision of many larger manufacturers in developed countries is no longer whetherto engage in foreign production, but how to organize and manage it. These firms supplyintermediate inputs (cut fabric, thread, buttons, and other trim) to extensive networks of offshoresuppliers, typically located in neighboring countries with reciprocal trade agreements that allowgoods assembled offshore to be re-imported with a tariff charged only on the value added by foreignlabor. This kind of international subcontracting system exists in every region of the world. Itis called the 807/9802 program or “production sharing” in the US (USITC 1997), where the sourcingnetworks of US manufacturers are predominantly located in the Caribbean, Central America,and Mexico. In Europe, this is known as outward processing trade (OPT), and the principalsuppliers are located in North Africa and Eastern Europe (OETH 1995). In Asia, manufacturersfrom relatively high-wage economies like Hong Kong, China have outward processing arrangements(OPA) with the PRC and other low-wage nations (Birnbaum 1993).

A significant countertrend is emerging among established apparel manufacturers, however,who are deemphasizing their production activities in favor of building up the marketing sideof their operations by capitalizing on both brand names and retail outlets. Sara Lee Corporation,one of the largest apparel producers in the US, announced its plans to “de-verticalize” its consumer-

9

products divisions, a fundamental reshaping that would move it out of making the brand-namegoods it sells (Miller 1997). Other well-known apparel manufacturers like Phillips-Van Heusenand Levi Strauss & Co. are also emphasizing the need to build global brands, frequently throughacquisitions of related consumer products lines, while many of their production facilities are beingclosed or sold to offshore contractors.

III. The Asian Connection in the Apparel Commodity Chain

The world textile and apparel industry has undergone several migrations of productionsince the 1950s and they all involve Asia. The first migration of the industry took place fromNorth America and Western Europe to Japan in the 1950s and early 1960s, when Western textileand clothing production was displaced by a sharp rise in imports from Japan. The second supplyshift was from Japan to the “Big Three” Asian apparel producers (Hong Kong, China; Taipei,China;and Korea), which permitted the latter group to dominate global textile and clothing exports inthe 1970s and 1980s. During the past 10 to 15 years, there has been a third migration ofproduction—this time from the Asian Big Three to a number of other developing economies. Inthe 1980s, the principal shift was to the PRC, but it also encompassed several Southeast Asiannations and Sri Lanka. In the 1990s, the proliferation of new suppliers included South Asianand Latin American apparel exporters (Khanna 1993, Gereffi 1998).

This most recent shift is seen in sharp relief in Table 1, which looks at apparel importsto the US, the world’s largest market, from 1983 to 1999. In 1983, the Asian Big Three plus thePRC were responsible for two thirds of US apparel imports; by 1999, this share had dropped to30 percent. Table 1 highlights two main trends in US apparel imports: (i) a shift within Asiafrom the Big Three to the growing importance of successive waves of exporters: first the PRC,followed by Southeast Asia and then South Asia; and (ii) a growth in non-Asian sources of apparelsupply, especially the importance of Central America and the Caribbean as a region (which nearlydoubled its share of US apparel imports from 8 percent in 1990 to 15 percent in 1999) and, mostnotably, Mexico (which multiplied its share of US apparel imports nearly fivefold from 3 to 14percent in the same period).

How can we explain these trade shifts in the apparel commodity chain? Neoclassicaleconomics has the simplest explanation: The most labor-intensive segments of the apparelcommodity chain will be located in countries with the lowest wages. Both push and pull factorsinfluence relocation decisions. The push factors in developed countries include relatively highlabor costs, unionization, and strict environmental standards, especially for textile firms. Thepull factors in many developing nations include substantial reserves of low-wage labor, weakor nonexistent unions, lax environmental standards, bureaucratic coordination, financial incentives,infrastructure, and political stability. A favorable transborder regulatory regime, such as UScustom items 807/9802, also facilitates offshore shifts.

Section IIIThe Asian Connection in the Apparel Commodity Chain


10

Table 1. Trends in US Apparel Imports by Region and Country, 1983-1999

1983 Value 1986 Value 1990 Value 1994 Value 1996 Value 1999 Value

Source US$mn Percent US$mn Percent US$mn Percent US$mn Percent US$mn Percent US$mn Percent

Northeast AsiaPRC 759 1,661 3,439 6,338 6,340 7,351Hong Kong, China 2,249 3,392 3,977 4,393 3,998 4,341Taipei,China 1,800 2,621 2,489 2,269 2,066 2,076Korea 1,685 2,581 3,342 2,245 1,531 2,256Macao 132 229 417 605 761 1,024

Subtotal 6,625 68 10,483 60 13,663 54 15,850 43 14,696 35 17,048 30

Southeast AsiaIndonesia 75 269 645 1,182 1,505 1,816Philippines 319 473 1,083 1,457 1,569 1,812Thailand 125 213 483 1,006 1,243 1,774Malaysia 93 257 604 1,051 1,242 1,280Singapore 193 386 621 472 327 327

Subtotal 806 8 1,598 9 3,436 13 5,168 14 5,887 14 7,009 12

South AsiaIndia 220 344 636 1,309 1,350 1,650Bangladesh 7 154 422 885 1,125 1,682Sri Lanka 126 257 426 871 1,059 1,304Pakistan 32 92 232 508 642 810

Subtotal 385 4 847 5 1,716 7 3,573 10 4,175 10 5,446 10

Central America and the CaribbeanDominican Republic 139 287 723 1,600 1,773 2,355Honduras 20 32 113 650 1,241 2,198El Salvador 7 11 54 398 721 1,328Guatemala 4 20 192 600 809 1,244Costa Rica 64 142 384 686 706 828Jamaica 13 99 235 454 505 344Other CBI 142 207 284 151 321 591

Subtotal 389 4 797 5 1,985 8 4,538 12 6,076 15 8,349 15

Mexico 199 2 331 2 709 3 1,889 5 3,850 9 7,845 14

All Other Countries 1,328 14 3,283 19 4,009 16 5,859 16 6,996 17 10,679 19

GRAND TOTAL 9,731 100 17,341 100 25,518 100 36,878 100 41,679 100 56,376 100

Source: Compiled from official statistics of the US Department of Commerce, US imports for consumption, customs value.

11

This account is supported by the sequential relocation of textile and apparel productionfrom the US and Western Europe to the Asian Big Three, PRC, and Japan, , given that eachnew tier of entrants to the production hierarchy had significantly lower wage rates than theirpredecessors. The cheap-labor argument does not hold up as well, however, when we get to theproliferation of new Asian and Caribbean suppliers, whose US market share expanded even thoughtheir wage rates are often considerably higher than the PRC’s. Furthermore, although the shareof US apparel exports represented by the Asian Big Three has declined during the past decade,these NIEs still rank among Asia’s top apparel exporters to the US in 1997, despite having thehighest apparel labor costs in the region, excluding Japan (see ILO 1995, 35-36).

The statist perspective, which argues that government policies will play a major role inshaping the location of apparel export activities, helps to explain these discrepancies. A criticalfactor in the sharp decline of Taipei,China’s and Korea’s apparel exports in the late 1980s wasnot only their rising wage rates, but the sharp appreciation of their local currencies vis-à-visthe US dollar after the Plaza Agreement was signed in 1985. Between 1985 and 1987, the Japaneseyen was revalued by close to 40 percent, the New Taiwan dollar by 28 percent, and from 1986to 1988 the Korean won appreciated by 17 percent.

The most important policies that shape US apparel imports from Asia, the Caribbean,and elsewhere, however, are quotas and preferential tariffs. Quotas on apparel and textiles itemscontinue to be regulated by the Multifiber Arrangement (MFA) of the early 1970s. The MFA hasbeen used by the Canada, various European nations, and the US to impose quantitative limitson imports in a wide variety of product categories. Although the clear intent of these policieswas to protect developed-country firms from a flood of low-cost imports that threatened to disruptmajor domestic industries, the result was exactly the opposite: protectionism heightened thecompetitive capabilities of developing country manufacturers, who learned to make sophisticatedproducts that were more profitable than simple ones. Protectionism by core countries alsodiversified the scope of foreign competition, as an ever-widening circle of exporters was neededto meet booming North American and European demand. In recent years, the creation of theEuropean Union and the North American Free Trade Agreement (NAFTA) has led to the impositionof preferential tariffs within regional markets, which has generated a major shift in the globalsourcing dynamics of these regional markets.

The ability of the East Asian NIEs to sustain their export success over several decades,and to develop a multilayered sourcing hierarchy within Asia, is only partially related to wagerates and state policies. From a commodity chain perspective, East Asia must be viewed as partof an interrelated regional economy (Gereffi 1998). The apparel export boom in the less developedsouthern tier of Asia has been driven to a significant extent by the industrial restructuring ofthe northern tier East Asian NIEs. As Northeast Asian firms began moving their productionoffshore, they devised ways to coordinate and control their sourcing networks. Ultimately, theyfocused on the more profitable design and marketing segments within the apparel commoditychain to sustain their competitive edge. This transformation can be conceptualized as a processof industrial upgrading, based in large measure on building various kinds of economic and socialnetworks between buyers and sellers. This theme is further elaborated on in the fifth section.



12

A. Shifting Patterns of Asian Competitiveness: American, European, and JapaneseVariations in Apparel Sourcing

During the 1990s, the Northeast Asian NIEs began to lose market share within their majorexport markets because of their high relative costs and limited quotas, along with the rapidincursion of new entrants into the apparel commodity chain. South and Southeast Asian apparelexporters became prominent participants in the global sourcing game. During this period, regionalsourcing structures became more consolidated as neighboring countries to the European Union,Japan, and US began to take advantage of their geographical proximity (which cut transportationcosts and lead time for deliveries) as well as their ability to move from assembly to the OEM orfull-package model. These patterns can be illustrated by a series of concentric circle diagramsused to map imports.

The US Market. Between 1990 and 1998, US apparel imports rose from $24.7 to $50.4billion. Figure 2 is an import map that helps to identify trade shifts among the main suppliersto the US apparel market. Those nations in the innermost circle each account for 10 percent ormore of the total value of US clothing imports in 1998, while each of those in the outer ring makesup only 1.0-1.9 percent of total imports. In other words, as we move from the inner rings to theouter ones in this import map, the relative importance of national apparel exporters decreases.

Several key aspects of the direction and magnitude of change in US apparel trade arerevealed in Figure 2. First, there are striking regional differences in the pattern of US apparelimports. The NIEs in Northeast Asia are becoming much less important in US apparel sourcing;South and Southeast Asia are growing slowly or not at all; and imports from PRC, Mexico, andto a lesser degree the Caribbean Basin are booming. Second, despite considerable mobility duringthe 1990s, there is a strong core-periphery pattern that dominates the geography of export activityin the US apparel sourcing matrix. Only four economies (PRC; Hong Kong, China; Korea; andMexico) were core US suppliers during the past decade, and only the PRC and Mexico currentlyhold that distinction. There is a wide dispersion of 13 apparel suppliers in the outer two rings(indicating a 1 to 4 percent share of the US apparel market), with just six nations in the innerthree rings. Third, while for most countries the degree of change from 1990 to 1998 has beenrelatively modest (they changed their position by one ring or not at all), only Mexico has improvedits position substantially, moving from outside the circle (less than 1 percent of US apparel imports)in 1990 to the core (over 10 percent of US imports) in less than a decade. Nonetheless, inwardshifts of even one ring may be quite significant for smaller economies, given the substantial overallgrowth of US apparel imports in the past decade.

However, an important feature of US apparel sourcing is not revealed by this chart. Thereare two contending production systems reflected in US apparel sourcing: export-processingassembly (production sharing) and full-package supply (OEM production). The countries thathave penetrated the US apparel market most deeply either have been experts at OEM supply(the Asian Big Three) or they are currently trying to develop full-package capabilities (the PRCand Mexico). All of the other countries on this list are relegated to simple assembly.

13

Pakistan

India

Turkey

Italy

Bangladesh

Sri Lanka

Malaysia

Indonesia

Thailand

Philippines

Singapore

Taipei,China

PRC Mexico

Korea Dominican

Republic

Hong

Kong,

China

Canada

Central America

and the Caribbean

(2)

Costa

Rica

Northeast

Asia

(4)

North America (2)

Southeast

Asia (5)

South Asia (4)

Europe (2)

Source: World Trade Analyzer, based on United Nations data for SITC 84 (“Article of apparel and

clothing accessories“).

The rings indicate the share of total

U.S. imports in U.S. dollars by

partner country:

1. 10% + 4.2.0% 3.9%

2. 6.0% 9.9% 5.1.0% 1.9%

3. 4.0% 5.9%

Total value of U.S. clothing

imports was $24.7 billion in 1990

and $50.4 billion in 1998.

–

– –

–

5

4

3

2

1

Figure 2. Shifts in the Regional Structure of U.S. Apparel Imports from 1990 to 19981

1The 1998 position corresponds to the ring where the country’s name is located; the 1990 position,

if different, is indicated by a small circle. The arrows represent the magnitude and direction of

change over time.



14

The European Union. Outward-processing trade (OPT) in the European clothing sectoris the practice by which companies export fabrics, or parts of garments, to be further processedin a third country and then re-imported as finished garments in an EU country.6 OPT is analogousto the US production sharing system (known as 807 or 9802 trade) and similar outward-processingarrangements that cover a portion Hong Kong, China’s trade regime in apparel with the PRC.OPT, which has been regulated within the EU since 1982, is widely recognized as acceleratingthe process of delocalization, or the shift of apparel production to low-wage countries. Trade policydiscourages textile firms from delocalization, however. If non-EU fabrics are used in OPT, theyare penalized by a tariff of 14 percent levied on their re-imports. The level of tariff duties offsetsthe advantage of lower production costs.

The main lure of OPT is to reduce labor costs, which account for up to 60 percent ofproduction costs in the clothing industry. In 1995, OPT accounted for 14 percent of total EU clothingimports. This is considerably less than the 80 to 90 percent of US imports from Mexico and theCaribbean Basin countries that qualify as production sharing or 9802 trade. However, the extentof OPT trade is much more significant than this overall figure of 14 percent might indicate. Morethan 80 percent of OPT imports in clothing are concentrated in only four member states of theEU: France, Germany, Italy, and UK. The share of OPT in total clothing imports is highest inGermany (21 percent), followed by Italy (17 percent), France (7 percent), and the UK (5 percent)(OETH 1996, 51-52). By 2000, it was predicted that through a combination of OPT garments andimported apparel secured by large volume retailers, imports will account for 70 percent of EUapparel consumption (Dickerson 1995, 188).

If we examine the regional pattern of Europe’s apparel imports in the 1990s, we see asourcing map that looks very similar in size and structure to that of the US. Figure 3 shows theshifts in European apparel imports from 1990 to 1998.7 The total value of European clothingimports was $24.6 billion in 1990 and $48.9 billion in 1998—virtually identical to the values ofUS apparel imports in the same years (see Figure 2). Among the Asian suppliers, only the PRCand Hong Kong, China played central roles in 1998, with most of the Northeast and SoutheastAsian economies losing European market share since 1990. However, three sets of additionalcountries now play prominent roles as apparel exporters to Europe: Morocco, Tunisia, and Turkeyin North Africa; and a spate of Eastern European economies plus the former Soviet Union.

All of these economies are geographically proximate to the European Union, but they havedifferent kinds of capabilities. Turkey is a full-package supplier with a strong set of verticallyintegrated textile and apparel firms, whose strongest ties are to Germany. Tunisia and Moroccoare outward-processing sites that mainly assemble apparel for firms located in France and Italy.Eastern Europe and the former Soviet Union also do outward processing of apparel for EU buyers,but as relatively mature industrialized economies, they are reliable full-package suppliers for

6 When foreign production or sourcing does not involve the temporary export of fabrics, then importation occursunder a regime of “direct imports.”

7 Figure 3 excludes intra-European apparel trade among the original 12 member states of the European Union,as well as the three new member states (Austria, Finland, and Sweden).

15

different types of apparel items. In addition, there probably is considerable interest among someof the more advanced East European apparel firms to embark on the transition from OEM toOBM production.

Japan. The apparel import maps for Europe and the US contrast sharply, however, withthat of Japan (see Figure 4). Unlike the relatively dense networks of 20-25 major apparel supplierswe saw in Figures 2 and 3, only 11 countries had at least a 1 percent share of the Japanese marketin either 1990 or 1998. However, even this is deceiving because only three countries have playedmajor roles as apparel suppliers to Japan. In 1990, Korea was the leader with 29 percent of Japan’sapparel imports, but by 1998 it had just over 6 percent of the market. Although Hong Kong, Chinahad nearly 12 percent of Japanese apparel imports in 1998, the big winner was the PRC, whoseimport share soared from 19 percent to 55 percent between 1990 and 1998. Why is the Japaneseapparel sourcing structure so different than that found in Europe and the US? The answer lieswith the MFA system that has prevailed from the early 1970s through the mid-1990s in themultilateral trade regime. Japan does not employ the apparel and textile quotas permitted bythe MFA under the General Agreement on Tariffs and Trade. However, when the World TradeOrganization was established in 1995, it was agreed that the MFA preference scheme would beeliminated by 2005. Thus, the PRC’s dominance in Japan’s apparel exports may be showing therest of the world what the future will look like when MFA is phased out in several more years.

The World Market. A closer look at the world’s leading apparel exporters in the 1980sand 1990s reveals both a broadening and deepening of global sourcing networks. If we take$1 billion of apparel exports as a threshold for major players in the global industry, Table 2 showsa striking stair-step pattern of market entry. In 1980, only PRC; Hong Kong, China; Korea;Taipei,China, and US were major global apparel exporters. By 1990, Indonesia, Malaysia, andThailand in Southeast Asia were added to the list, along with India and Pakistan in South Asia,and Tunisia in North Africa (Ramaswamy and Gereffi 2000). The largest apparel newcomer in1990 was Turkey, whose total of $3.4 billion in clothing exports placed in fifth in the world behindonly the four Northeast Asian powerhouses. In 1998, new members of the billion-dollar club ofapparel exporters included the Philippines and Viet Nam in Southeast Asia, Bangladesh andSri Lanka in South Asia, Mauritius and Morocco in Africa, and four nations from Eastern Europe.Mexico had a meteoric rise from less than $0.1 billion in 1990 to $7 billion eight years later. Thetop four apparel exporters in 1998 were PRC ($31.4 billion); Hong Kong, China ($22.4 billion);Turkey ($7.3 billion); and Mexico ($7.0 billion).

Notwithstanding these high absolute levels of apparel shipments, the world’s 25 leadingapparel suppliers vary widely in the relative importance of apparel as an export item. The countriesmost reliant on apparel exports are Bangladesh (75 percent), Mauritius (57 percent), and SriLanka (52 percent). In the Dominican Republic and Tunisia, apparel represents more than 40percent of total national exports, and clothing accounts for between a third and a quarter of allexports in Morocco, Romania, and Turkey (see Table 2).



16

Mauritius

Figure 3. Shifts in the Regional Structure of European Apparel Imports from 1990 to 19981 2


European imports in US dollars by

partner country:

1. 10% 4.2% 3.9%

2. 6.0% 9.9% 5.1.0% 1.9%

3. 4.0% 5.9%

Total value of European clothing

imports was $24.6 billion in 1990

and $48.9 billion in 1998.

–

– –

–

TunisiaMorocco

US

Former

USSR

Czech

Republic

Bulgaria

PolandHungary

Former

Yugoslavia

Romania

PRC

TurkeyHong

Kong,

China

Korea

Indonesia

Malaysia

India

Thailand

Viet Nam

Bangladesh

Sri Lanka

Pakistan

Switzerland

Taipei,China

Other Europe

(2)

Eastern Europe

and ex-USSR

(7)

North American

(1)

Africa

(3)

South Asia

(4)

Southeast

Asia

(4)

Northeast Asia

(4)5

4

3

2

1

Source: World Trade Analyzer, based on United Nations data for SITC 84 (“Article of Apparel and

Clothing Accessories“).

1This chart excludes intra-European trade among the original 12 member states of European Union

(Belgium, Denmark, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain,

and the United Kingdom), as well as the 3 new member states (Austria, Finland, and Sweden).

Total apparel imports are for the entire European region, but exclude the former USSR.

The 1998 position corresponds to the ring where the country’s name is located; the 1990 position,


change over time.

17

Figure 4. Shifts in the Regional Structure of Japanese Apparel Imports from 1990 to 19981

North

America

(1)

Southeast

Asia (3)

Northeast

Asia (4)

Europe

(3)

5

4

3

2

1

France

Italy

United

Kingdom

Taipei,China

KoreaHong

Kong,

ChinaPRC

USThailand

Viet Nam

Indonesia


Japanese imports in US dollars by

partner country

1. 25% + 4.2.0% 3.9%

2. 10.0% 24.9% 5.1.0% 1.9%

3. 4.0% 9.9%

Total value of Japanese clothing

imports was $8.6 billion in 1990 and

$14.5 billion in 1998.

–

– –

–

N.B.: From 1990 to 1998, Korea’s share of Japan’s apparel imports fell from 29 to 6.4 percent,

while the PRC’s import share of the Japanese apparel market grew from 19.3 to 54.7 percent.

Source: World Trade Analyzer, based on United Nations data for SITC 84 (“Article of Apparel and

Clothing Accessories“).

The 1998 position corresponds to the ring where the country’s name is located; the 1990 position,


change over time.

1



18

Table 2. World’s 25 Leading Apparel Exporters, 1980-1998

Hourlyapparel

labor costsRegion/Country Popula- GNP GNP/ Total national Apparel exports to Apparel as % of (wages &

tion (US$ capita exports the world market total national fringe(millions) billions) (US$) (US$ billions) (US$ billions) exports benefits)

US$,1998a 1998a 1998a 1980b 1990b 1998b 1980b 1990b 1998b 1980b 1990b 1998b 1998c

Northeast AsiaPRC 1,239 924 750 19 65 191 1.7 10.2 31.4 8.6 15.7 16.4 0.43Hong Kong, China 7 158 23,660 21 84 176 5.3 15.7 22.4 25.4 18.7 12.7 5.20Korea 46 399 8,600 18 66 140 3.1 8.3 4.8 17.0 12.4 3.4 2.69Taipei,China 22d 285d 13,200d 21 71 135 2.6 4.2 3.4 12.3 5.8 2.5 4.68

Southeast AsiaIndonesia 204 131 640 24 28 52 0.6 2.9 4.5 2.4 10.3 8.6 0.16Thailand 61 132 2,160 7 24 62 0.3 2.9 3.4 4.2 12.2 5.5 0.78Malaysia 22 81 3,670 14 31 75 0.2 1.4 2.4 1.2 4.5 3.2 1.30Philippines 75 79 1,050 6 8 30 0.3 0.7 2.4 4.9 8.4 8.0 0.76Vietnam 77 27 350 0 1 9 0.01 0.1 1.3 7.3 5.0 14.7 0.22

South AsiaIndia 980 427 440 8 19 41 0.6 2.6 4.8 7.9 14.2 11.9 0.39Bangladesh 126 44 350 1 1 5 0.0 0.6 3.9 0.2 42.0 75.0 0.30Sri Lanka 19 15 810 1 2 4 0.1 0.7 2.3 10.5 33.9 51.8 0.44Pakistan 132 61 470 3 6 9 0.1 1.1 2.0 4.2 18.5 22.6 0.24

Central and Eastern EuropeTurkey 63 201 3,160 3 13 28 0.1 3.4 7.3 4.6 25.9 26.3 1.84Poland 39 151 3,910 15 12 29 0.6 0.4 2.5 4.2 3.0 8.5 2.77Romania 23 31 1,360 12 6 9 0.4 0.4 2.1 3.1 7.6 24.0 1.04Hungary 10 46 4,510 9 10 24 0.3 0.4 1.3 4.0 3.8 5.5 2.12Czech Republic 10 53 5,150 12 7 40 0.4 0.3 1.3 3.3 3.5 3.2 1.85

AfricaTunisia 9 19 2,060 2 3 6 0.3 1.1 2.6 15.7 32.9 43.7 0.98e

Mauritius 1 4 3,730 0 1 2 0.1 0.6 1.0 17.2 50.9 57.4 1.03Morocco 28 34 1,240 2 4 8 0.1 0.7 2.6 4.6 17.2 33.5 1.36

Caribbean BasinDominican Rep. 8 15 1,770 1 2 5 0.0 0.8 2.4 0.0 35.7 48.0 1.48Costa Rica 4 10 2,770 1 2 6 0.02 0.1 0.7 1.9 3.7 12.2 2.52

North AmericaUS 270 7,903 29,240 240 418 727 1.3 2.7 9.4 0.1 0.6 1.3 10.12Mexico 96 368 3,840 16 29 125 0.1 0.1 7.0 0.3 0.4 5.6 1.51

World Totals 5,897 28,835 4,890 2,014 3,471 5,692 39.6 110.6 198.3 2.0 3.2 3.5 na

aWorld Bank, World Development Report 1998/99 (World Bank 1999, 190-91).bWorld Trade Analyzer, based on United Nations trade data. Apparel is defined as SITC 84.cWerner International, Inc.d1997 data from Taiwan Statistical Data Book 1999, Council for Economic Planning and Development.e1996.

19

Table 3 provides information on whether apparel has risen or fallen in rank among theleading export items (measured at the two-digit SITC level) of the world’s 25 biggest apparelexporters. In Northeast and Southeast Asia, apparel tends to have declined in relative importance,except in the PRC where it remains the top export item. However, in Africa, the Caribbean Basin,Central and Eastern Europe, and South Asia, apparel tends to be the leading export product,and largely has held that status for a decade or more.

Table 3. Position of Apparel Among Leading Export Items, 1980-1998

Top Export Item, 1998 Trends in ApparelApparel Rankb Ranking

US$ % of totalExporting Country SITCa Description billions exports 1980 1990 1998 1980-90 1990-98

Northeast AsiaPRC 84 Apparel 31.3 16 4 1 1 Up SameHong Kong, China 89 Misc. manufactures 22.8 13 1 1 2 Same DownKorea 77 Electrical machinery 25.0 18 1 1 9 Same DownTaipei,China 75 Office machines 25.1 19 1 5 9 Down Down

Southeast AsiaIndonesia 33 Petroleum 4.4 8 6 4 4 Up SameThailand 75 Office machines 9.2 15 8 1 4 Up DownMalaysia 77 Electrical machinery 18.7 25 9 6 6 Up SamePhilippines 77 Electrical machinery 15.1 50 6 1 4 Up DownViet Nam 85 Footwear 1.6 17 4 5 3 Down Up

South AsiaIndia 66 Nonmetallic mineral mfg 5.3 13 4 2 3 Up DownBangladesh 84 Apparel 3.9 75 13 1 1 Up SameSri Lanka 84 Apparel 2.3 52 4 1 1 Up SamePakistan 65 Textile yarn & fabrics 4.4 51 4 2 2 Up Same

Central and Eastern EuropeTurkey 84 Apparel 7.3 26 6 1 1 Up SamePoland 84 Apparel 2.5 8 6 10 1 Down UpRomania 84 Apparel 2.1 24 3 4 1 Down UpHungary 71 Power generating equip. 2.9 12 8 9 4 Down UpCzech Republic 78 Road vehicles 6.0 15 10 7 7 Up Same

AfricaTunisia 84 Apparel 2.6 44 2 1 1 Up SameMauritius 84 Apparel 1.0 57 2 1 1 Up SameMorocco 84 Apparel 2.6 33 7 1 1 Up Same

Caribbean BasinDominican Rep. 84 Apparel 2.4 46 34 1 1 Up SameCosta Rica 05 Vegetables & fruit 1.1 20 9 7 3 Up Up

North AmericaUS 77 Electrical machinery 79.4 11 38 37 19 Up UpMexico 78 Road vehicles 20.8 17 27 35 6 Down Up

World Totals 78 Road vehicles 524.0 9 15 9 8 Up Up

aSITC refers to Standard International Trade Classification categories.bRankings are based on the position of apparel in each economy’s total world exports, using two-digit SITC categories.Source: World Trade Analyzer, based on United Nations trade data.



20

IV. Regional Divisions of Labor in Asia: A Commodity Chains Interpretation

There is a paucity of literature on regional divisions of labor in the East Asian context.Bernard and Ravenhill (1995) have written an important article that provides several salientcritiques of the flying geese and product cycle approaches initially popularized by the Japaneseand American economists, Kaname (1961) and Vernon (1971), respectively. The standard amalgamof Akamatsu’s and Vernon’s ideas claims that the development experience of Japan will bereplicated in a series of economic sectors and countries throughout East Asia. Imports, domesticproduction, and exports are expected to follow one another in strict succession, as the productcycle is repeated for increasingly sophisticated goods. According to this state-centric view, therise and fall of products mirrors the rise of national economies, which the flying geese modeltakes as the appropriate unit of analysis for understanding economic change. Product cycle theory,in turn, posits an essentially “ahistoric” flow of individual products in isolation from largerindustrial structures. Consequently, it omits the backward and forward linkages involving diversenetworks of firms within economic sectors, and it overlooks differences in company strategiesthat can be used to alter the dynamics of product cycles.

Technological diffusion in East Asia has only been partial, at best, and is linked to ongoingJapanese innovation of components, machinery, and materials. Thus Korea and Taipei,Chinaremain technologically dependent on Japan, which has never really exited the so-called “mature”industries. In key sectors like electronics and automobiles, Japan has revitalized core technologiesand restricted exports of finished products from the East Asian NIEs back into Japan. SoutheastAsia, unlike Korea and Taipei,China, lacked a substantial foundation of import-substitutingindustrialization, leading to a heavy dependence on transnational subsidiaries for theirmanufactured exports (Bernard and Ravenhill 1995, 196). Without an ISI base, indigenous capitalgoods sectors in Southeast Asia are weak, resulting in limited backward linkages and a foreign-dominated export sector.

From a commodity chains perspective, there are overlapping, and at times conflicting,networks involved in East Asia’s export-oriented development. Producer-driven and buyer-drivenchains coexist in each of the tiers of the Asian regional division of labor. While all the nationsin the region have pursued strategies of EOI, the timing, products, and linkages involved havevaried across the region.(i) Japan was a significant exporter to the United States in buyer-driven commodity chains

(BDCCs) such as apparel and footwear in the 1950s and 1960s, but then switched in the1970s to producer-driven commodity chains (PDCCs) like automobiles, electrical machinery,and computers. Japan used its large trading companies (sogo shosha) to transfer BDCCsto the East Asian NIEs, while Japanese transnationals were the main mechanism employedin setting up and maintaining PDCCs in Southeast Asia.

(ii) The East Asian NIEs became successful exporters in the late 1960s and 1970s primarilyby mastering the dynamics of BDCCs. Apparel was a leading export sector for each of

21

the four NIEs, toys for all but Singapore, footwear for Korea and Taipei,China, and soon. These countries moved quickly from assembly to OEM production in BDCCs. UnlikeSoutheast Asia, however, the East Asian NIEs (with the exception of Singapore) are makingthe transition to PDCCs on the basis of exports by domestically owned firms, nottransnational companies.

(iii) Southeast Asia launched a different form of EOI than that of the East Asian NIEs.Southeast Asia’s initial export industries—automobiles and electronics (semiconductors,disk drives, and computers)—were organized in the 1970s and early 1980s as PDCCs. Thedrivers in these chains were Japanese, European, and US transnationals. In the 1980s,a second generation of export industries was set up in Southeast Asia: these were theBDCCs (apparel, footwear, toys) that were no longer cost-competitive in the East AsianNIEs because of currency appreciation, rapid wage increases, and difficulty in hiringworkers domestically for labor-intensive production, even at prevailing high wage rates.Instead of core country transnationals (as in PDCCs) or European and US buyers (as inthe first-generation BDCCs set up in the NIEs), the main organizing agents in SoutheastAsia’s buyer-driven chains were investors from the East Asian NIEs who set up trianglemanufacturing networks in the region to take advantage of lower labor costs and, in thecase of apparel, available quotas.

(iv) The People’s Republic of China has emerged as the region’s dominant player in BDCCsin the 1990s, but it currently has only a minor role in PDCCs. The PRC is the world’sbiggest volume exporter of a wide range of consumer goods, including clothes, shoes, toys,watches, bicycles, and so on. The PRC’s presence as a leading exporter in these globalcommodity chains is vulnerable to economic and political shifts. These range from economicrecession in the European and North American economies that are the major marketsfor the PRC’s exports, to the possibility that the US government will fail to renew thePRC’s most-favored-nation trade status. As a result, production in the PRC is likely tobe increasingly directed at Asian and other nonquota markets in the latter half of the1990s.

The interaction of producer-driven and buyer-driven commodity chains within East Asia’sregional political economy gives rise to overlapping and competing regional divisions of laborin East Asia that are based on different network structures. Producer-driven commodity chainstransfer the hierachical relations between transnational core firms and their subsidiaries intovertical, investment-based networks within East Asia; conversely, the core commercial companies(retailers and designers) in buyer-driven commodity chains convert their specification contractingor OEM relationship with suppliers in Asia into horizontal, trade-based networks that establisha distinctive division of labor within and between global regions.

Section IVRegional Divisions of Labor in Asia: A Commodity Chains Interpretation


22

V. Industrial Upgrading in Asia’s Apparel Commodity Chain

Countries are connected to global commodity chains through the goods and services theysupply in the world economy. These trade linkages can be conceptualized as a set of five majorexport roles: (i) primary product exports, including processed “industrial commodities” andnontraditional agricultural exports; (ii) the export-oriented assembly of traditional manufacturedgoods, such as apparel and electronics items, using imported components; (iii) the productionof components for export in relatively advanced industries, such as automobiles and computers,using substantial local inputs; (iv) original equipment manufacturing (OEM), whereby contractorsmake goods to be sold under another company’s brand name; and (v) original brand namemanufacturing (OBM), whereby manufacturers make goods for export and sale under their ownlabel (Gereffi 1994b, 222-4; 1995).

These export roles are not mutually exclusive. In fact, most nations are tied to the worldeconomy in multiple ways. The East Asian NIEs employed all five export roles from the 1960sto the mid-1990s, although they currently are focusing almost exclusively on component-supplymanufacturing, OEM, and OBM. Most of the countries in Southeast Asia and Latin Americaare involved in the first three roles, the bulk of exports in South Asia and Sub-Saharan Africafit the first two roles, and many nations from Africa and the Middle East only have primaryproduct exports.

The East Asian NIEs are generally taken as the archetype for industrial upgrading amongdeveloping countries. Hong Kong, China; Korea; Singapore; and Taipei,China appear to havemoved smoothly and rapidly from assembly to component production to OEM to OBM. Each exportrole is progressively more difficult to establish because it implies a higher degree of domesticintegration and local entrepreneurship; thus industrial upgrading is enhanced as countriesmove along this trajectory. However, a closer look at the experiences of the East Asian nationsreveals considerable diversity in the sequences, content, and organizational dynamics of theseexport roles.

The East Asian NIEs made a rapid transition from the initial assembly phase of exportgrowth (typically utilizing export processing zones located near major ports) to a more generalizedsystem of incentives that applied to all export-oriented factories in their economies (Chen 1994).The next stage for Hong Kong, China; Korea; Singapore; and Taipei,China was OEM production.Original equipment manufacturing, also known as specification contracting, has the followingfeatures: the supplying firm makes a product according to the design specified by the buyer; theproduct is sold under the buyer’s brand name; the supplier and buyer are separate firms; andthe supplier lacks control over distribution. East Asian firms became full-range “package suppliers”for foreign buyers, and thereby forged an innovative entrepreneurial capability that involvedthe coordination of complex production, trade, and financial networks.

The OEM export role has many advantages. It enhances the ability of local entrepreneursto learn the preferences of foreign buyers, including international standards for the price, quality,and delivery of export merchandise. It also generates substantial backward linkages in the domestic

23

economy because OEM contractors are expected to develop reliable sources of supply for manyinputs. Moreover, expertise in OEM production increases over time and spreads across differenttypes of activities. The OEM supplier learns much about the downstream and upstream segmentsof the apparel commodity chain from the buyer. This tacit knowledge can later become a powerfulcompetitive weapon.

Particular places such as the East Asian NIEs thus retain an enduring competitive edgein export-oriented development. However, East Asian producers confront intense competitionfrom lower-cost exporters in various parts of the Third World, and the price of their exports toWestern nations has been further elevated by sharp currency appreciations between 1985 to 1997.Under these circumstances, it is advantageous to establish forward linkages to developed-countrymarkets, where the biggest profits are made in buyer-driven commodity chains. Therefore, anumber of firms in the East Asian NIEs that pioneered OEM are now pushing beyond it to theOBM role by integrating their manufacturing expertise with the design and sale of their ownbranded merchandise.

Korea is the most advanced of the East Asian NIEs in OBM production, with Korean brandsof automobiles (Hyundai), electronic products (Samsung), and household appliances (Samsungand Goldstar), among other items, being sold in North America, Europe, and Japan. Companiesin Taipei,China have pursued OBM in computers, bicycles, sporting equipment, and shoes, butnot in apparel. In Hong Kong, China, clothing companies have been the most successful in makingthe shift from OEM to OBM. The women’s clothing chain Episode, controlled by Hong Kong, China’sFang Brothers Group, one of the foremost OEM suppliers for Liz Claiborne in the 1970s and 1980s,has stores in 26 countries, only a third of which are in Asia. Giordano, Hong Kong, China’s mostfamous clothing brand, has added to its initial base of garment factories some 200 stores in thePRC and Hong Kong, China, and another 300 retail outlets scattered across Korea and SoutheastAsia. Hang Ten, a less-expensive line, has 200 stores in Taipei,China, making it the largest foreign-clothing franchise on the island (Granitsas 1998).

A. Triangle Manufacturing and the Internationalization of Asian ProductionNetworks

To keep OEM profitable under conditions of intense wage competition among developingcountries and protectionism in Western markets, East Asian NIE companies have set up elaborateoffshore production networks. The key to profitability in OEM production for East Asian NIEsis manufacturing expertise (including substantial spending in research and development), andlearning how to flexibly manage overseas production networks. This can be seen in Hong Kong,China’s apparel manufacturers, Taipei,China’s footwear companies, and Singapore’s computerfirms. Network flexibility thus has become one of the major organizational assets utilized by theNIEs in their internationalization strategies.

One of the most important mechanisms facilitating the shift to higher-value-added activitiesfor mature export industries like apparel in East Asia is the process of triangle manufacturing

Section VIndustrial Upgrading in Asia’s Apparel Commodity Chain


24

(Gereffi 1999). The essence of triangle manufacturing, which was initiated by textile and apparelsuppliers in the East Asian NIEs in the 1970s and 1980s, is that US (or other overseas) buyersplace their orders with the NIE manufacturers they have sourced from in the past, who in turnshift some or all of the requested production to affiliated offshore factories in low-wage countries(e.g., PRC, Guatemala, or Indonesia). These offshore factories can be wholly owned subsidiariesof the NIE manufacturers, joint-venture partners, or simply independent overseas contractors.The triangle is completed when the finished goods are shipped directly to the overseas buyerunder the US import quotas issued to the exporting nation. Triangle manufacturing thus changesthe status of NIE manufacturers from established suppliers for US retailers and designers to“middlemen” in buyer-driven commodity chains that can include as many as 50 to 60 exportingcountries.

In the case of apparel, US buyers initially established direct OEM links with producersin Hong Kong, China; Korea; and Taipei,China. Eventually the PRC and the nations of Southeastand South Asia were incorporated into the chain as lower-cost Asian production sites, with HongKong, China and Taipei,China employing their cultural ties with the overseas Chinese businesscommunities throughout the region to establish the three-tiered networks used in trianglemanufacturing. The intermediary role of the NIEs continued to evolve. In addition to supplyinga growing number of regional exporters with apparel orders, fibers, textiles, financing, and quotabrokerage services, the NIEs moved from OEM to OBM by developing their own brands of clothingfor production and sale within Asia. Apparel has now become a leading export sector for nationsat lower levels in Asia’s regional production hierarchy, such as Bangladesh, PRC, Indonesia,Pakistan, Sri Lanka, and Thailand,. As new countries turn to apparel to launch their export-oriented development strategies, the regional hierarchy deepens.

A stylized portrayal of the multifaceted pattern of industrial upgrading followed especiallyby East Asian nations in the apparel commodity chain is presented in Figure 5. The vertical axisrepresents the hierarchical networks established by Japan and the East Asian NIEs in orderto expand the Asian supply base for the apparel commodity chain in the second half of the 20thcentury. New groups of countries became incorporated as garment exporters in successive decades.However, entry into the apparel commodity chain as a garment exporter is only the first stepin the industrial upgrading process. As the search for cheap labor and increased quota droveEuropean and US buyers to search for additional low-wage apparel export platforms, the originaland more developed apparel exporters began to shift their emphasis from labor-intensive apparelproduction to the more capital-intensive phases of the commodity chain: textiles, fibers, andmachinery. We will examine this upgrading process in two stages: first, we will look at the factorsthat led to the international expansion of textile and apparel production networks in Asia; andsecond, we will look at how Japan and the East Asian NIEs upgraded by moving their exportproduction upstream from garments to textiles.

In each of the East Asian NIEs, a combination of domestic supply side constraints (laborshortages, high wages, and high land prices) and external pressures (currency revaluation, tariffs,and quotas) led to the internationalization of the textile and apparel complex by the late 1980s

25

and early 1990s. Typically, the internationalization of production was sparked first by quotas,but the process was greatly accelerated as supply-side factors became adverse. Quotas determinedwhen the outward shift of production began, while preferential access to overseas markets andsocial networks determined where the firms from the East Asian NIEs went. In this internationaldivision of labor, skill-intensive activities were retained in East Asia8 and labor-intensive activitieswere relocated.

8 In the apparel sector, the activities associated with OEM production that tended to remain in the NIEs werejobs such as product design, sample making, quality control, packing, warehousing, transportation, quotatransactions, and local financing through letters of credit. These provided relatively high gross margins or profits.

Japan

Level

of

Develo

pm

en

t

PRC

Indonesia

Thailand

India

Pakistan

Hong Kong, China

Korea

Taipei,China

Viet Nam

Sri Lanka

Bangladesh

Low High

Value-added

Garments

Mid-1990s

Garments

Late 1980s

Garments

Late 1960s, 1970s,

and early 1980s

Garments

1950s and

early 1960s

Textiles Fibers Machinery

(spinning, weaving,

cutting, sewing)

1960s onward

1970s onward

Textiles Fibers

late 1980s and 1990s

Textiles

1990s

Figure 5. Stylized Model of Industrial Upgrading in the Asian Apparel Commodity Chain

Countries Segments of Apparel Commodity Chain

Notes: Dotted arrows refer to the sequence of production and export capabilities within economies.

Solid arrows refer to the direction of trade flows between economies.

Dates refer to a country’s peak years for exports of specific products.



26

The internationalization of Hong Kong, China’s firms was triggered by textile importrestrictions imposed by the UK in 1964, which led Hong Kong, China manufacturers in the late1960s to shift production to Macau; Singapore; and Taipei,China. The Chinese population in thesethree countries had cultural and linguistic affinities with Hong Kong, China investors. In addition,Macau benefited from its proximity to Hong Kong, China while Singapore qualified forCommonwealth preferences for imports into the UK. In the early 1970s, Hong Kong, China apparelfirms targeted Malaysia Mauritius, and Philippines. This second round of outward investmentsagain was prompted by quota restrictions, coupled with specific host-country inducements includingthe provision of export processing zone facilities in Southeast Asia and elsewhere. For example,Mauritius established an export-processing zone in an effort to lure Hong Kong, China investors,particularly knitwear manufacturers who directed their exports to European markets that offeredpreferential access in terms of low tariffs.

The greatest spur to the internationalization of Hong Kong, China’s textile and apparelcompanies was the opening of the PRC economy in 1978. At first, production was subcontractedto state-owned factories, but eventually an elaborate outward-processing arrangement with thePRC was set up that relied on a broad assortment of manufacturing, financial, and commercialjoint ventures. The relocation of industry to the PRC led to a hollowing out of Hong Kong, China’smanufacturing sector during the late 1980s and early 1990s. In 1991, 47,000 factories in HongKong, China were employing 680,000 workers, a figure 25 percent below the peak of 907,000manufacturing jobs recorded in 1980 (Khanna 1993, 19). The decline was particularly severe intextiles and apparel. Employment in the textile industry fell from 67,000 in 1984 to 36,000 in1994—a drop of 47 percent. Meanwhile, clothing jobs plummeted from 300,000 in 1984 to 137,000in 1994—a decrease of 56 percent in a single decade (De Coster 1996a, 65). In 1995, Hong Kong,China entrepreneurs operated more than 20,000 factories employing an estimated four-and-a-half to five million workers in the Pearl River Delta alone in the neighboring Chinese provinceof Guangdong (De Coster 1996b, 96). Considering that total employment in Hong Kong, Chinahad shrunk to 386,000 in 1995, or just over 15 percent of the workforce (Berger and Lester 1997,9), manufacturers in effect increased their domestic labor force well over tenfold through theiroutward processing arrangement with the PRC.

While manufacturing declined, trading activities in Hong Kong, China grew to encompassapproximately 70,000 firms and 370,000 jobs in 1991, a fivefold increase in the number of firmsand a fourfold increase in the number of workers in the trading sector compared to 1978 (Khanna1993, 19). Thus, trading companies to a large extent have replaced factories as the key economicagent in Hong Kong, China’s export-oriented growth.

This extreme reliance of apparel manufacturers on low-cost Chinese labor has severalsources of vulnerability that may undermine the viability of this model in the future (Bergerand Lester 1997, 158-62). First, although Guangdong province was once a zone of low wages andan abundant workforce, both wages and land costs have been rising rapidly. As costs in Guangdong

27

go up, Hong Kong, China manufacturers who wish to retain this PRC-based production systemwill have to move their facilities deeper and deeper inland, where they will once again encounterbad roads, inadequate water and power systems, and lack of commercial infrastructure. Second,as production moves inland, it will be increasingly difficult to maintain an adequate supply ofmanagers from Hong Kong, China. Rather than trying to replicate the Pearl River Delta patternon a large scale further inland, it probably would be better to try to upgrade the operations inthe Guangdong plants. Third, new low-cost apparel exporting nations are emerging in Asia—India, Indonesia, Myanmar, Sri Lanka, Viet Nam, and others—while Mexico and the CaribbeanBasin economies loom as cheap production sites with closer proximity to the large US market.Hong Kong, China has no special advantages in many of these locations, which suggests thatit should avoid being locked into low-wage offshore manufacturing networks and instead takefuller advantage of the global trend toward service-enhanced manufacturing where Hong Kong,China retains a strong competitive edge.

As in Hong Kong, China, the internationalization of Korea’s and Taipei,China’s apparelproducers began as a response to quota restrictions. Korean garment firms lacking sufficient exportquotas initially set up offshore production in quota-free locations like Saipan, a US territory inthe Mariana Islands. More recent waves of internationalization have been motivated by thedomestic constraints of rising wages and worker shortages. The low-wage regions that haveattracted the greatest number of Korean companies are Latin America, and Southeast and SouthAsia. The preference of Korean firms for investment in Latin America (Dominican Republic,Guatemala, Honduras, etc.) is stimulated by its proximity to the US market and easy quota access.The pull of Asian nations such as Bangladesh, Indonesia, and Sri Lanka comes mainly from theirwage rates, which are among the lowest in the world.

When Taipei,China firms moved offshore in the early 1980s, they also confronted bindingquotas. While Taipei,China’s wages in the late 1970s and early 1980s were still relatively low,quota rents were high. Firms had to buy quotas (whose value in secondary markets fluctuatedwidely) in order to be able to expand exports, thereby causing a decrease in profitability for firmswithout sufficient quota (Appelbaum and Gereffi 1994). This led to a growing emphasis on nonquotamarkets by its textile and apparel exporters. Quota markets (Canada, the European Community,andthe US) accounted for over 50 percent of its textile and apparel exports in the mid-1980s,but this ratio declined to 43 percent in 1988 and fell further to 35 percent in 1991. The US, whichhad been Taipei,China’s largest export market for years, claimed one quarter of textile and apparelexports in 1991, the European Community at 8 percent, and Canada just 2 percent. The mainnonquota markets, which absorbed nearly two thirds of Taipei,China’s textile and apparel exportsin the early 1990s, were Hong Kong, China (30 percent); Japan (6 percent); and Singapore (3percent) (Khanna 1993, 29-30). Hong Kong, China, now Taipei,China’s leading export market,is mainly a conduit for shipping yarns, fabrics, and clothing to the PRC for further processingand re-export.



28

B. Upgrading Within the Chain: The Export Shift from Apparel to Textilesand Fibers

During the 1980s, the worldwide apparel exports of Korea and Taipei,China grew steadily,but slumped in the 1990s. Hong Kong, China’s apparel exports also rose during the 1980s, butthen expanded even more rapidly in the 1990s because Hong Kong, China had a more diversifiedset of export partners than did Korea and Taipei,China. However, the PRC was Asia’s starperformer as an apparel exporter since 1989, topping $30 billion in export revenues in 1997 and1998 (see Figure 6).The East Asian NIEs as well as Japan countered the slowdown in theirworldwide apparel exports in the 1990s through the growth of textile and fiber exports, whichaccelerated sharply from the mid-1980s until 1997 (see Figure 7).

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Japan Korea Taipei,China Hong Kong, China PRC

30,000

10,000

20,000

15,000

5,000

Figure 6. Apparel Exports to the World (SITC 84)

US$ millions

Japan0

35,000

Taipei,China

Korea

Hong Kong, China

PRC

25,000

The increased emphasis on textile and fiber exports by Japan and the East Asian NIEsis an intrinsic part of triangle manufacturing throughout the region. Hong Kong, China; Korea;and Taipei,China perform several different tasks when they act as intermediaries in trianglemanufacturing networks: they carry export orders and their specifications from European andUS buyers to garment factories throughout Asia; they facilitate transportation logistics, exportfinancing, and quality control monitoring; and they generally supply the other African, Asian,and Latin American apparel exporters with textiles that are used in their export production.Thus, revenues lost by the East Asian NIEs in declining apparel exports are compensated bythe growth in higher value-added textile and fiber exports. Japan is also the major supplier of

29

sewing machines to apparel exporters throughout Asia and much of the developing world. Thus,Japan and the East Asian NIEs do not exit the apparel commodity chain, rather they upgradetheir position within the chain in a variety of ways: the limited apparel exports they retain typicallyinclude the most expensive and profitable garments; they export relatively capital-intensive textilesand fibers to their partners in triangle manufacturing networks; and in the case of Japan, it isalso a major machinery supplier for apparel factories.9

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Japan Korea Taipei,China Hong Kong, China PRC

16,000

12,000

10,000

4,000

8,000

6,000

2,000

Figure 7. Fiber and Textile Exports to the World (SITC 26 and 65)

US$ millions

Japan

0

14,000

18,000

Taipei,China

Korea

Hong Kong, China

PRC

The trade-off between apparel versus textile and fiber exports can be seen in the followingfigures. In 1991, Korea’s textile and fiber exports became greater than its worldwide apparelexports, while the crossover point for Taipei,China was several years earlier in 1988 (see Figures8 and 9). The PRC shows the opposite pattern. It had been a traditional exporter of textile productssince the early 1980s, but overseas apparel sales were at a very low level. Once the PRC’s apparelexports took off in 1989, they quickly became the leading export item in the country’s textileand apparel sector.

9 Other developed countries are also important participants at the high-value end of the apparel commodity chain.The US is the primary manufacturer of laser cutting machines found in many advanced garment plants, Germanysupplies the chemicals used in textile dyestuffs, Japan has some of the best finishing technology in the world,and of course Europe and the US are home to most of the leading fashion designers in the world.



30

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Fibers and Textiles (SITC 26 & 65)

Apparel (SITC 84)

16,000

12,000

10,000

4,000

8,000

6,000

2,000

Figure 8. Korea: Apparel versus Fiber and Textile Exports

US$ millions

Apparel

Textiles

and Fibers

0

14,000

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Fibers and Textiles (SITC 26 & 65)

Apparel (SITC 84)

14,000

12,000

10,000

4,000

8,000

6,000

2,000

0

Figure 9. Taipei,China: Apparel versus Fiber and Textile Exports

US$ millions

Apparel

Textiles

and Fibers

31

VI. Conclusion

This report uses the global commodity chains framework to explain the transformationsin production and trade networks, as well as corporate strategies, which have altered the globalapparel industry over the past decades and changed the prospects for developing countries toenter and move up these chains. The apparel industry is identified as a buyer-driven commoditychain that contains three types of lead firms: retailers, marketers, and branded manufacturers.As apparel production became globally dispersed and competition between these firms intensified,each type of lead firm developed extensive global sourcing capabilities. While “de-verticalizing”out of production, they have fortified their activities in the high value-added design and marketingsegments of the apparel chain.

Industrial upgrading for apparel exporters is primarily associated with the shift fromassembly to full-package production. Compared with the mere assembly of imported inputs, full-package production fundamentally changes the relationship between buyer and supplier in adirection that gives far more autonomy and learning potential for industrial upgrading to thesupplying firm. Full-package production is needed because the retailers and marketers that orderthe garments do not know how to make them. Particular places such as the PRC and East AsianNIEs of Hong Kong, China; Korea; and Taipei,China have used the full-package role to createan enduring edge in export-oriented development. However, the North American Free TradeAgreement between the US and Mexico, along with a relative decline in the importance of EastAsian apparel exports to the US, has now created favorable conditions for the extension of full-package production to the North American setting. Prominent apparel suppliers to Europe suchas Turkey and several East European economies also appear to be adopting the full-package model.

There has been a dramatic consolidation of the retailer segment of buyer-driven commoditychains in the US, and a growth in the strength of retailers versus apparel manufacturers in theEuropean Union and Japan as well. While retailing and marketing are becoming moreconcentrated, manufacturing is splintering. Because they themselves do not have productionexperience, however, the retailers in buyer-driven chains are dependent upon the suppliers intheir global sourcing networks. In Asia, some manufacturers are integrating forwardfrom specification contracting (the OEM role) to developing and selling their own brands (theOBM role).

How does the structure of buyer-driven commodity chains affect industrial upgrading inAsia? First, comparison of apparel imports to the EU and US reveals distinct regional patternsof sourcing. While both source heavily out of Asia, they each have nearby sourcing bases as well:the Caribbean, Central America, and Mexico for the US; and North Africa and East-Central Europefor the EU. More importantly, these different regional supply bases for apparel are organizedin terms of different kinds of networks. Intra-Asian sourcing is done on the basis of direct importsand OEM production, while the Caribbean Basin and Mediterranean Basin sourcing patternsboth utilize forms of international subcontracting where European and US textiles are sent tonearby low-wage countries for assembly into garments. The possibilities for integrated local

Section VIConclusion


32

industrial development are greater in the OEM model where Asian manufacturers have developedan important form of social capital in the guise of multifaceted and dense networks utilized infull-package supply. In the outward-processing or production-sharing “assembly” pattern, theproduction networks are anchored in low-cost countries and they do not foster the kinds of locallinkages and knowledge transfers that are needed for successful upgrading strategies.

References

AAMA, 1984. Apparel Manufacturing Strategies. American Apparel Manufacturers Association,Arlington, VA.

Abernathy, F., H., J. T. Dunlop, j. H. Hammond, and D. Weil, 1999. A Stitch in Time: Lean Retailingand the Transformation of Manufacturing—Lessons from the Apparel and Textile Industries.New York: Oxford University Press.

Akamatsu, K., 1961. “A Theory of Unbalanced Growth in the World Economy.” WeltwirtschaftlichesArchiv 86(2):196-217.

Appelbaum, R. P., and G. Gereffi, 1994. “Power and Profits in the Apparel Commodity Chain.”In E. Bonacich et al., eds., Global Production: The Apparel Industry in the Pacific Rim.Philadelphia, PA: Temple University Press.

Appelbaum, R., D. Smith, and B. Christerson, 1994. “Commodity Chains and IndustrialRestructuring in the Pacific Rim: Garment Trade and Manufacturing.” In G. Gereffi andM. Korzeniewicz, eds., Commodity Chains and Global Capitalism. Westport, CT: Praeger.

Berger, S., and R. K. Lester, 1997. Made By Hong Kong. New York: Oxford University Press.Bernard, M., and J. Ravenhill, 1995. “Beyond Product Cycles and Flying Geese: Regionalization,

Hierarchy, and the Industrialization of East Asia.” World Politics 47(2, January):171-209.Birnbaum, D., 1993. Importing Garments through Hong Kong. Hong Kong: Third Horizon Press.Chen, X. M., 1994. “The Changing Roles of Free Economic Zones in Development: A Comparative

Analysis of Capitalist and Socialist Cases in East Asia.” Studies in Comparative InternationalDevelopment 29(3, Fall):3-25.

De Coster, J., 1996a. “Hong Kong and China: The Joining of Two Giants in Textiles and Clothing.”Textile Outlook International 68(November):63-79.

———, 1996b. “Productivity: A Key Strategy of the Hong Kong Textile and Clothing Industry.”Textile Outlook International 68(November):80-97.

Dickerson, K. G., 1995. Textiles and Apparel in the Global Economy, 2nd ed. Englewood Cliffs,NJ: Prentice Hall.

Finnie, T. A., 1996. “Profile of Levi Strauss,” Textile Outlook International 67(September):10-37.

Gereffi, G., 1994a. “The Organization of Buyer-Driven Global Commodity Chains: How U.S.Retailers Shape Overseas Production Networks.” In G. Gereffi and M. Korzeniewicz, eds.,Commodity Chains and Global Capitalism. Westport, CT: Praeger.

33

———, 1994b. “The International Economy and Economic Development.” In N. J. Smelser andR. Swedberg, eds., The Handbook of Economic Sociology. Princeton, NJ: Princeton UniversityPress.

———, 1995. “Global Production Systems and Third World Development.” In B. Stallings, ed.,Global Change, Regional Response: The New International Context of Development. NewYork: Cambridge University Press.

———, 1998. “Commodity Chains and Regional Divisions of Labor in East Asia.” In E. M. Kim,ed., The Four Asian Tigers: Economic Development and the Global Political Economy. SanDiego, CA: Academic Press.

———, 1999. “International Trade and Industrial Upgrading in the Apparel Commodity Chain.”Journal of International Economics 48(1, June):37-70.

———, 2001. “Shifting Governance Structures in Global Commodity Chains, with Special Referenceto the Internet.” American Behavioral Scientist 44(10, June):1616-37.

Gereffi, G., and M. Korzeniewicz, eds., 1994. Commodity Chains and Global Capitalism. Westport,CT: Praeger.

Granitsas, A., 1998. “Back in Fashion: Hong Kong’s Leading Garment Makers Are Going Global–Learning to Add Value and High Technology.” Far Eastern Economic Review 21 May, pages52-54.

ILO, 1995. Recent Developments in the Clothing Industry, Report I. International LaborOrganization, Geneva.

Japan Textile News, 1996. “Japan’s Distribution and Retail Industry.” JTN Quarterly 2(2):14-30.

Jones, J., 1995. “Forces Behind Restructuring in U.S. Apparel Retailing and Its Effect on theU.S. Apparel Industry.” Industry, Trade, and Technology Review March:23-7.

Khanna, S. R., 1993. “Structural Changes in Asian Textiles and Clothing Industries: The SecondMigration of Production.” Textile Outlook International 49(September):11-32.

Management Horizons, 1993. Global Retailing 2000. Columbus, OH: Management Horizons,Division of Price Waterhouse.

Miller, J. P., 1997. “Sara Lee Plans ‘Fundamental Reshaping.’” Wall Street Journal 15 September,pages A3, A10.

OETH, 1995. The EU Textile and Clothing Industry 1993/94. L’Observatoire Européen du Textileet de l’Habillement, Brussels.

———, 1996. The EU Textile and Clothing Industry 1995. L’Observatoire Européen du Textileet de l’Habillement, Brussels.

Ramaswamy, K. V., and G. Gereffi, 2000. “India’s Apparel Exports: The Challenge of GlobalMarkets.” The Developing Economies 38(2, June):186-210.

Scheffer, M., 1994. The Changing Map of European Textiles: Production and Sourcing Strategiesof Textile and Clothing Firms. L’Observatoire Européen du Textile et de l’Habillement,Brussels.

References


34

USITC, 1997. Production Sharing: Use of U.S. Components and Materials in Foreign AssemblyOperations, 1992-1995. USITC Publication 3032, United States International TradeCommission, Washington, D.C. USITC.

Vernon, R., 1971. Sovereignty at Bay: The Multinational Spread of U.S. Enterprises. New York:Basic Books.

35

Asi

an F

ootw

ear

Exp

orts

to

the

Wor

ld, 1

990-

1998

Val

ue

(000

)

85-F

ootw

ear

1990

1991

1992

1993

1994

1995

1996

1997

1998

Sin

gapo

re70

,251

86,4

5987

,879

88,6

4490

,086

124,

167

171,

618

168,

393

100,

531

Mal

aysi

a10

0,71

310

9,27

412

2,98

111

7,56

511

6,06

610

7,55

010

9,12

691

,310

68,9

66

Tha

iland

767,

448

901,

645

981,

413

1,06

2,09

61,

485,

063

2,10

8,33

51,

279,

505

1,07

0,71

789

4,55

6

Phi

lipp

ines

81,1

2111

8,29

712

0,63

714

6,04

217

5,88

015

4,63

017

4,04

417

2,86

115

1,48

7

Indo

nesi

a60

0,27

41,

027,

316

1,35

4,71

41,

690,

251

1,88

1,41

22,

048,

457

2,24

4,95

61,

557,

163

1,24

5,15

2

Vie

t N

am2,

147

7,42

535

,425

164,

081

337,

036

569,

596

923,

711

1,43

4,97

81,

553,

106

Lao

PD

R15

5954

615

,003

7,68

61,

238

Sri

Lan

ka10

,219

13,5

3617

,718

25,9

4137

,811

25,8

1346

,424

57,2

8654

,586

PR

C2,

080,

970

2,44

3,86

74,

324,

658

5,28

1,87

25,

712,

282

6,32

1,48

57,

044,

628

8,44

0,73

48,

413,

217

Kor

ea,

Rep

. of

4,29

9,56

93,

765,

772

3,11

6,95

52,

178,

740

1,55

7,52

31,

251,

223

915,

052

618,

352

492,

153

Tai

pei,C

hina

2,59

9,41

72,

324,

091

1,78

2,60

01,

321,

058

1,05

6,70

392

0,41

483

5,36

179

8,35

558

0,78

8

Tot

al M

arke

t29

,344

,690

30,5

60,1

5234

,542

,364

37,0

87,7

8439

,662

,904

43,1

82,8

5645

,331

,456

45,9

87,6

4042

,852

,972

Sou

rce:

W

orld

Tra

de A

nal

yzer

.


36

Asi

an F

ootw

ear

Exp

orts

to

the

Wor

ld, 1

980-

1989

Tot

al M

ark

etV

alu

e (0

00)

85-F

ootw

ear

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

Sin

gapo

re36

,442

40,1

0727

,890

20,5

2217

,753

14,3

8017

,678

35,8

9949

,485

54,7

47M

alay

sia

44,2

5833

,699

25,7

4819

,437

20,1

2721

,573

23,6

7035

,985

51,1

2171

,326

Tha

iland

18,4

4045

,054

61,6

5276

,414

86,8

8689

,316

121,

485

228,

455

368,

770

511,

215

Phi

lippi

nes

72,4

1076

,400

66,9

1857

,125

47,9

3841

,643

33,0

8561

,626

46,3

4593

,519

Indo

nesi

a2,

599

4,76

43,

398

3,93

55,

651

10,2

6713

,869

30,6

2894

,358

231,

543

Vie

t N

am2,

247

897

589

1,06

82,

545

1,28

493

91,

025

1,31

34,

508

Lao

PD

R73

8741

227

67

Sri

Lan

ka22

767

01,

759

2,05

95,

055

4,29

14,

255

6,05

96,

795

7,32

5P

RC

200,

510

264,

470

265,

368

263,

594

259,

457

286,

287

383,

437

537,

595

840,

579

1,17

0,73

8K

orea

, R

ep.

of92

9,69

31,

058,

727

1,22

6,61

41,

273,

344

1,38

6,46

01,

617,

670

2,17

2,29

52,

864,

430

3,77

6,57

93,

590,

362

Tai

pei,C

hina

1,50

9,39

51,

502,

407

1,57

0,31

11,

874,

509

2,23

6,62

22,

387,

990

3,13

8,74

63,

250,

093

3,64

9,60

43,

316,

239

Tot

al M

arke

t12

,284

,173

12,1

18,4

5012

,614

,094

12,8

60,7

0513

,891

,462

15,3

08,6

4818

,644

,308

21,2

78,2

0423

,347

,734

24,7

12,2

52

Sou

rce:

W

orld

Tra

de A

nal

yzer

.

37

Asi

an A

pp

arel

Exp

orts

to

the

Wor

ld, 1

980-

1989

Tot

al M

ark

etV

alu

e (0

00)

84-A

rtic

les

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

of a

pp

arel

Sin

gapo

re44

9,62

147

8,64

348

0,63

348

7,75

956

4,37

956

0,43

370

7,99

91,

025,

049

1,25

1,09

21,

430,

169

Mal

aysi

a16

6,01

316

9,42

119

1,12

822

4,37

730

0,84

034

8,08

643

6,92

663

6,67

385

0,81

91,

111,

016

Tha

iland

289,

406

358,

749

400,

294

424,

890

569,

398

610,

715

875,

652

1,56

0,24

71,

971,

109

2,54

1,61

1P

hili

ppin

es30

1,13

336

3,66

732

9,04

533

2,11

125

6,97

428

3,84

231

0,25

81,

026,

840

450,

572

1,41

3,96

0In

done

sia

559,

459

539,

986

600,

230

618,

998

825,

467

916,

227

1,22

4,81

21,

548,

496

1,80

3,50

12,

282,

740

Vie

t N

am13

,278

7,63

39,

333

11,7

105,

433

9,55

816

,377

18,3

6412

,888

40,3

54L

ao P

DR

763

122

398

154

1964

1197

51,

322

2,23

5S

ri L

anka

117,

119

157,

470

177,

338

208,

787

301,

799

297,

217

346,

563

440,

109

438,

849

485,

977

PR

C1,

668,

701

2,15

6,21

62,

423,

137

2,67

4,64

82,

601,

203

2,09

1,78

03,

187,

987

3,99

9,21

46,

834,

082

6,50

8,60

6K

orea

, R

ep.

of3,

131,

928

3,99

4,85

03,

999,

981

3,81

9,83

84,

606,

743

4,67

9,10

15,

786,

021

7,82

8,90

79,

027,

099

9,54

5,18

3T

aipe

i,Chi

na2,

588,

770

2,95

2,47

83,

081,

540

3,08

3,65

83,

865,

885

3,71

1,10

34,

486,

549

5,20

0,45

04,

953,

923

5,00

3,22

5

Tot

al M

arke

t39

,621

,244

40,9

58,6

8840

,534

,432

40,2

60,2

5645

,979

,564

48,4

75,8

4861

,719

,896

78,3

16,0

5687

,092

,096

95,5

94,5

92

Sou

rce:

W

orld

Tra

de A

nal

yzer

.


38

Asi

an A

pp

arel

Exp

orts

to

the

Wor

ld, 1

990-

1998

Val

ue

(000

)

84-A

rtic

les

of a

pp

arel

1990

1991

1992

1993

1994

1995

1996

1997

1998

Sin

gapo

re1,

629,

830

1,77

5,43

71,

847,

190

1,57

4,61

61,

514,

352

1,46

8,07

61,

432,

537

1,51

5,18

21,

457,

920

Mal

aysi

a1,

368,

369

1,57

7,53

61,

944,

983

2,01

2,75

42,

076,

408

2,28

1,22

42,

464,

673

2,39

8,76

22,

378,

842

Tha

ilan

d2,

913,

992

3,76

7,52

43,

892,

924

4,30

6,42

54,

542,

371

5,09

1,69

53,

892,

040

3,80

6,44

83,

439,

952

Phi

lipp

ines

707,

499

732,

749

876,

553

890,

027

924,

794

1,09

7,18

42,

493,

329

1,23

5,54

92,

425,

825

Indo

nesi

a2,

877,

551

3,49

5,15

34,

536,

456

4,76

2,82

54,

474,

366

4,85

0,02

95,

377,

239

4,88

0,42

14,

471,

542

Vie

t N

am70

,268

141,

593

353,

801

509,

704

663,

892

872,

334

1,15

3,71

41,

335,

708

1,31

0,54

1L

ao P

DR

6,06

123

,837

37,1

7657

,835

69,1

2587

,898

120,

362

108,

984

108,

408

Sri

Lan

ka66

9,02

81,

098,

615

1,23

6,08

21,

390,

611

1,48

4,39

41,

143,

135

1,92

8,27

32,

165,

102

2,27

0,18

5P

RC

10,1

71,1

3813

,323

,887

17,5

07,4

8019

,285

,610

23,8

13,7

9224

,291

,622

26,3

14,0

7632

,925

,922

31,3

62,7

14K

orea

, R

ep.

of8,

267,

355

7,71

1,11

57,

053,

023

6,37

6,97

25,

694,

152

5,00

2,79

44,

357,

567

4,28

9,47

94,

784,

791

Tai

pei,C

hina

4,15

7,77

74,

775,

267

4,25

2,37

33,

858,

928

3,66

9,57

43,

510,

034

3,40

1,98

13,

603,

811

3,44

1,43

8

Tot

al M

arke

t11

0,60

3,84

012

3,30

8,73

614

2,27

2,17

614

4,33

4,54

415

5,61

8,01

616

9,42

1,28

017

7,35

3,44

019

4,48

9,92

019

8,27

5,47

2

Sou

rce:

W

orld

Tra

de A

nal

yzer

.

39

PUBLICATIONS FROM THEECONOMICS AND RESEARCH DEPARTMENT

No. 8 Shadow Exchange Rates and StandardConversion Factors in Project Evaluation—Peter Warr, September 1982

No. 9 Small and Medium-Scale ManufacturingEstablishments in ASEAN Countries:Perspectives and Policy Issues—Mathias Bruch and Ulrich Hiemenz,

January 1983No. 10 A Note on the Third Ministerial Meeting of GATT

—Jungsoo Lee, January 1983No. 11 Macroeconomic Forecasts for the Republic

of China, Hong Kong, and Republic of Korea—J.M. Dowling, January 1983

No. 12 ASEAN: Economic Situation and Prospects—Seiji Naya, March 1983

No. 13 The Future Prospects for the DevelopingCountries of Asia—Seiji Naya, March 1983

No. 14 Energy and Structural Change in the Asia-Pacific Region, Summary of the Thirteenth

No. 1 ASEAN and the Asian Development Bank—Seiji Naya, April 1982

No. 2 Development Issues for the Developing Eastand Southeast Asian Countriesand International Cooperation—Seiji Naya and Graham Abbott, April 1982

No. 3 Aid, Savings, and Growth in the Asian Region—J. Malcolm Dowling and Ulrich Hiemenz,

April 1982No. 4 Development-oriented Foreign Investment

and the Role of ADB—Kiyoshi Kojima, April 1982

No. 5 The Multilateral Development Banksand the International Economy’s MissingPublic Sector—John Lewis, June 1982

No. 6 Notes on External Debt of DMCs—Evelyn Go, July 1982

No. 7 Grant Element in Bank Loans—Dal Hyun Kim, July 1982

ERD WORKING PAPER SERIES (WPS)(Published in-house; Available through ADB Office of External Relations; Free of Charge)

No. 1 Capitalizing on Globalization—Barry Eichengreen, January 2002

No. 2 Policy-based Lending and Poverty Reduction:An Overview of Processes, Assessmentand Options—Richard Bolt and Manabu Fujimura

January 2002No. 3 The Automotive Supply Chain: Global Trends

and Asian Perspectives—Francisco Veloso and Rajiv Kumar

January 2002

No. 4 International Competitiveness of Asian Firms:An Analytical Framework—Rajiv Kumar and Doren Chadee

February 2002No. 5 The International Competitiveness of Asian

Economies in the Apparel Commodity Chain—Gary Gereffi

February 2002

MONOGRAPH SERIES(Published in-house; Available through ADB Office of External Relations; Free of charge)

EDRC REPORT SERIES (ER)

ERD TECHNICAL NOTE SERIES (TNS)(Published in-house; Available through ADB Office of External Relations; Free of Charge)

No. 1 Contingency Calculations for EnvironmentalImpacts with Unknown Monetary Values—David Dole February 2002

40

Pacific Trade and Development Conference—Seiji Naya, March 1983

No. 15 A Survey of Empirical Studies on Demandfor Electricity with Special Emphasis on PriceElasticity of Demand—Wisarn Pupphavesa, June 1983

No. 16 Determinants of Paddy Production in Indonesia:1972-1981–A Simultaneous Equation ModelApproach—T.K. Jayaraman, June 1983

No. 17 The Philippine Economy: EconomicForecasts for 1983 and 1984—J.M. Dowling, E. Go, and C.N. Castillo,

June 1983No. 18 Economic Forecast for Indonesia

—J.M. Dowling, H.Y. Kim, Y.K. Wang,and C.N. Castillo, June 1983

No. 19 Relative External Debt Situation of AsianDeveloping Countries: An Applicationof Ranking Method—Jungsoo Lee, June 1983

No. 20 New Evidence on Yields, Fertilizer Application,and Prices in Asian Rice Production—William James and Teresita Ramirez, July 1983

No. 21 Inflationary Effects of Exchange RateChanges in Nine Asian LDCs—Pradumna B. Rana and J. Malcolm Dowling, Jr., December 1983

No. 22 Effects of External Shocks on the Balanceof Payments, Policy Responses, and DebtProblems of Asian Developing Countries—Seiji Naya, December 1983

No. 23 Changing Trade Patterns and Policy Issues:The Prospects for East and Southeast AsianDeveloping Countries—Seiji Naya and Ulrich Hiemenz, February 1984

No. 24 Small-Scale Industries in Asian EconomicDevelopment: Problems and Prospects—Seiji Naya, February 1984

No. 25 A Study on the External Debt IndicatorsApplying Logit Analysis—Jungsoo Lee and Clarita Barretto, February 1984

No. 26 Alternatives to Institutional Credit Programsin the Agricultural Sector of Low-IncomeCountries—Jennifer Sour, March 1984

No. 27 Economic Scene in Asia and Its Special Features—Kedar N. Kohli, November 1984

No. 28 The Effect of Terms of Trade Changes on theBalance of Payments and Real NationalIncome of Asian Developing Countries—Jungsoo Lee and Lutgarda Labios, January 1985

No. 29 Cause and Effect in the World Sugar Market:Some Empirical Findings 1951-1982—Yoshihiro Iwasaki, February 1985

No. 30 Sources of Balance of Payments Problemin the 1970s: The Asian Experience—Pradumna Rana, February 1985

No. 31 India’s Manufactured Exports: An Analysisof Supply Sectors—Ifzal Ali, February 1985

No. 32 Meeting Basic Human Needs in AsianDeveloping Countries—Jungsoo Lee and Emma Banaria, March 1985

No. 33 The Impact of Foreign Capital Inflowon Investment and Economic Growthin Developing Asia—Evelyn Go, May 1985

No. 34 The Climate for Energy Developmentin the Pacific and Asian Region:Priorities and Perspectives—V.V. Desai, April 1986

No. 35 Impact of Appreciation of the Yen on

Developing Member Countries of the Bank—Jungsoo Lee, Pradumna Rana, and Ifzal Ali,

May 1986No. 36 Smuggling and Domestic Economic Policies

in Developing Countries—A.H.M.N. Chowdhury, October 1986

No. 37 Public Investment Criteria: Economic InternalRate of Return and Equalizing Discount Rate—Ifzal Ali, November 1986

No. 38 Review of the Theory of Neoclassical PoliticalEconomy: An Application to Trade Policies—M.G. Quibria, December 1986

No. 39 Factors Influencing the Choice of Location:Local and Foreign Firms in the Philippines—E.M. Pernia and A.N. Herrin, February 1987

No. 40 A Demographic Perspective on DevelopingAsia and Its Relevance to the Bank—E.M. Pernia, May 1987

No. 41 Emerging Issues in Asia and Social CostBenefit Analysis—I. Ali, September 1988

No. 42 Shifting Revealed Comparative Advantage:Experiences of Asian and Pacific DevelopingCountries—P.B. Rana, November 1988

No. 43 Agricultural Price Policy in Asia:Issues and Areas of Reforms—I. Ali, November 1988

No. 44 Service Trade and Asian Developing Economies—M.G. Quibria, October 1989

No. 45 A Review of the Economic Analysis of PowerProjects in Asia and Identification of Areasof Improvement—I. Ali, November 1989

No. 46 Growth Perspective and Challenges for Asia:Areas for Policy Review and Research—I. Ali, November 1989

No. 47 An Approach to Estimating the PovertyAlleviation Impact of an Agricultural Project—I. Ali, January 1990

No. 48 Economic Growth Performance of Indonesia,the Philippines, and Thailand:The Human Resource Dimension—E.M. Pernia, January 1990

No. 49 Foreign Exchange and Fiscal Impact of a Project:A Methodological Framework for Estimation—I. Ali, February 1990

No. 50 Public Investment Criteria: Financialand Economic Internal Rates of Return—I. Ali, April 1990

No. 51 Evaluation of Water Supply Projects:An Economic Framework—Arlene M. Tadle, June 1990

No. 52 Interrelationship Between Shadow Prices, ProjectInvestment, and Policy Reforms:An Analytical Framework—I. Ali, November 1990

No. 53 Issues in Assessing the Impact of Projectand Sector Adjustment Lending—I. Ali, December 1990

No. 54 Some Aspects of Urbanizationand the Environment in Southeast Asia—Ernesto M. Pernia, January 1991

No. 55 Financial Sector and EconomicDevelopment: A Survey—Jungsoo Lee, September 1991

No. 56 A Framework for Justifying Bank-AssistedEducation Projects in Asia: A Reviewof the Socioeconomic Analysisand Identification of Areas of Improvement—Etienne Van De Walle, February 1992

No. 57 Medium-term Growth-StabilizationRelationship in Asian Developing Countriesand Some Policy Considerations

41

—Yun-Hwan Kim, February 1993No. 58 Urbanization, Population Distribution,

and Economic Development in Asia—Ernesto M. Pernia, February 1993

No. 59 The Need for Fiscal Consolidation in Nepal:The Results of a Simulation—Filippo di Mauro and Ronald Antonio Butiong,

July 1993No. 60 A Computable General Equilibrium Model

of Nepal—Timothy Buehrer and Filippo di Mauro,

October 1993No. 61 The Role of Government in Export Expansion

in the Republic of Korea: A Revisit—Yun-Hwan Kim, February 1994

No. 62 Rural Reforms, Structural Change,and Agricultural Growth inthe People’s Republic of China

—Bo Lin, August 1994No. 63 Incentives and Regulation for Pollution Abatement

with an Application to Waste Water Treatment—Sudipto Mundle, U. Shankar,and Shekhar Mehta, October 1995

No. 64 Saving Transitions in Southeast Asia—Frank Harrigan, February 1996

No. 65 Total Factor Productivity Growth in East Asia:A Critical Survey—Jesus Felipe, September 1997

No. 66 Foreign Direct Investment in Pakistan:Policy Issues and Operational Implications—Ashfaque H. Khan and Yun-Hwan Kim,

July 1999No. 67 Fiscal Policy, Income Distribution and Growth

—Sailesh K. Jha, November 1999

No. 1 International Reserves:Factors Determining Needs and Adequacy—Evelyn Go, May 1981

No. 2 Domestic Savings in Selected DevelopingAsian Countries—Basil Moore, assisted by

A.H.M. Nuruddin Chowdhury, September 1981No. 3 Changes in Consumption, Imports and Exports

of Oil Since 1973: A Preliminary Survey ofthe Developing Member Countriesof the Asian Development Bank—Dal Hyun Kim and Graham Abbott,

September 1981No. 4 By-Passed Areas, Regional Inequalities,

and Development Policies in SelectedSoutheast Asian Countries—William James, October 1981

No. 5 Asian Agriculture and Economic Development—William James, March 1982

No. 6 Inflation in Developing Member Countries:An Analysis of Recent Trends—A.H.M. Nuruddin Chowdhury and

J. Malcolm Dowling, March 1982No. 7 Industrial Growth and Employment in

Developing Asian Countries: Issues andPerspectives for the Coming Decade—Ulrich Hiemenz, March 1982

No. 8 Petrodollar Recycling 1973-1980.Part 1: Regional Adjustments andthe World Economy—Burnham Campbell, April 1982

No. 9 Developing Asia: The Importanceof Domestic Policies—Economics Office Staff under the direction

of Seiji Naya, May 1982No. 10 Financial Development and Household

Savings: Issues in Domestic ResourceMobilization in Asian Developing Countries—Wan-Soon Kim, July 1982

No. 11 Industrial Development: Role of SpecializedFinancial Institutions—Kedar N. Kohli, August 1982

No. 12 Petrodollar Recycling 1973-1980.Part II: Debt Problems and an Evaluationof Suggested Remedies—Burnham Campbell, September 1982

No. 13 Credit Rationing, Rural Savings, and FinancialPolicy in Developing Countries—William James, September 1982

No. 14 Small and Medium-Scale ManufacturingEstablishments in ASEAN Countries:Perspectives and Policy Issues—Mathias Bruch and Ulrich Hiemenz, March 1983

No. 15 Income Distribution and EconomicGrowth in Developing Asian Countries—J. Malcolm Dowling and David Soo, March 1983

No. 16 Long-Run Debt-Servicing Capacity ofAsian Developing Countries: An Applicationof Critical Interest Rate Approach—Jungsoo Lee, June 1983

No. 17 External Shocks, Energy Policy,and Macroeconomic Performance of AsianDeveloping Countries: A Policy Analysis—William James, July 1983

No. 18 The Impact of the Current Exchange RateSystem on Trade and Inflation of SelectedDeveloping Member Countries—Pradumna Rana, September 1983

No. 19 Asian Agriculture in Transition: Key Policy Issues—William James, September 1983

No. 20 The Transition to an Industrial Economyin Monsoon Asia—Harry T. Oshima, October 1983

No. 21 The Significance of Off-Farm Employmentand Incomes in Post-War East Asian Growth—Harry T. Oshima, January 1984

No. 22 Income Distribution and Poverty in SelectedAsian Countries—John Malcolm Dowling, Jr., November 1984

No. 23 ASEAN Economies and ASEAN EconomicCooperation—Narongchai Akrasanee, November 1984

No. 24 Economic Analysis of Power Projects—Nitin Desai, January 1985

No. 25 Exports and Economic Growth in the Asian Region—Pradumna Rana, February 1985

No. 26 Patterns of External Financing of DMCs—E. Go, May 1985

No. 27 Industrial Technology Developmentthe Republic of Korea—S.Y. Lo, July 1985

No. 28 Risk Analysis and Project Selection:A Review of Practical Issues—J.K. Johnson, August 1985

No. 29 Rice in Indonesia: Price Policy and ComparativeAdvantage—I. Ali, January 1986

No. 30 Effects of Foreign Capital Inflows

ECONOMIC STAFF PAPERS (ES)

42

No. 1 Poverty in the People’s Republic of China:Recent Developments and Scopefor Bank Assistance—K.H. Moinuddin, November 1992

No. 2 The Eastern Islands of Indonesia: An Overviewof Development Needs and Potential—Brien K. Parkinson, January 1993

No. 3 Rural Institutional Finance in Bangladeshand Nepal: Review and Agenda for Reforms—A.H.M.N. Chowdhury and Marcelia C. Garcia,

November 1993No. 4 Fiscal Deficits and Current Account Imbalances

of the South Pacific Countries:A Case Study of Vanuatu—T.K. Jayaraman, December 1993

No. 5 Reforms in the Transitional Economies of Asia—Pradumna B. Rana, December 1993

No. 6 Environmental Challenges in the People’s Republicof China and Scope for Bank Assistance—Elisabetta Capannelli and Omkar L. Shrestha,

December 1993No. 7 Sustainable Development Environment

and Poverty Nexus—K.F. Jalal, December 1993

No. 8 Intermediate Services and EconomicDevelopment: The Malaysian Example—Sutanu Behuria and Rahul Khullar, May 1994

No. 9 Interest Rate Deregulation: A Brief Surveyof the Policy Issues and the Asian Experience—Carlos J. Glower, July 1994

OCCASIONAL PAPERS (OP)

on Developing Countries of Asia—Jungsoo Lee, Pradumna B. Rana,

and Yoshihiro Iwasaki, April 1986No. 31 Economic Analysis of the Environmental

Impacts of Development Projects—John A. Dixon et al., EAPI,

East-West Center, August 1986No. 32 Science and Technology for Development:

Role of the Bank—Kedar N. Kohli and Ifzal Ali, November 1986

No. 33 Satellite Remote Sensing in the Asianand Pacific Region—Mohan Sundara Rajan, December 1986

No. 34 Changes in the Export Patterns of Asian andPacific Developing Countries: An EmpiricalOverview—Pradumna B. Rana, January 1987

No. 35 Agricultural Price Policy in Nepal—Gerald C. Nelson, March 1987

No. 36 Implications of Falling Primary CommodityPrices for Agricultural Strategy in the Philippines—Ifzal Ali, September 1987

No. 37 Determining Irrigation Charges: A Framework—Prabhakar B. Ghate, October 1987

No. 38 The Role of Fertilizer Subsidies in AgriculturalProduction: A Review of Select Issues—M.G. Quibria, October 1987

No. 39 Domestic Adjustment to External Shocksin Developing Asia—Jungsoo Lee, October 1987

No. 40 Improving Domestic Resource Mobilizationthrough Financial Development: Indonesia—Philip Erquiaga, November 1987

No. 41 Recent Trends and Issues on Foreign DirectInvestment in Asian and Pacific DevelopingCountries—P.B. Rana, March 1988

No. 42 Manufactured Exports from the Philippines:A Sector Profile and an Agenda for Reform—I. Ali, September 1988

No. 43 A Framework for Evaluating the EconomicBenefits of Power Projects—I. Ali, August 1989

No. 44 Promotion of Manufactured Exports in Pakistan—Jungsoo Lee and Yoshihiro Iwasaki,

September 1989No. 45 Education and Labor Markets in Indonesia:

A Sector Survey—Ernesto M. Pernia and David N. Wilson,

September 1989No. 46 Industrial Technology Capabilities

and Policies in Selected ADCs

—Hiroshi Kakazu, June 1990No. 47 Designing Strategies and Policies

for Managing Structural Change in Asia—Ifzal Ali, June 1990

No. 48 The Completion of the Single European Commu-nity

Market in 1992: A Tentative Assessment of itsImpact on Asian Developing Countries—J.P. Verbiest and Min Tang, June 1991

No. 49 Economic Analysis of Investment in PowerSystems

—Ifzal Ali, June 1991No. 50 External Finance and the Role of Multilateral

Financial Institutions in South Asia:Changing Patterns, Prospects, and Challenges—Jungsoo Lee, November 1991

No. 51 The Gender and Poverty Nexus: Issues andPolicies—M.G. Quibria, November 1993

No. 52 The Role of the State in Economic Development:Theory, the East Asian Experience,and the Malaysian Case—Jason Brown, December 1993

No. 53 The Economic Benefits of Potable Water SupplyProjects to Households in Developing Countries—Dale Whittington and Venkateswarlu Swarna,

January 1994No. 54 Growth Triangles: Conceptual Issues

and Operational Problems—Min Tang and Myo Thant, February 1994

No. 55 The Emerging Global Trading Environmentand Developing Asia—Arvind Panagariya, M.G. Quibria,

and Narhari Rao, July 1996No. 56 Aspects of Urban Water and Sanitation in

the Context of Rapid Urbanization inDeveloping Asia—Ernesto M. Pernia and Stella LF. Alabastro,

September 1997No. 57 Challenges for Asia’s Trade and Environment

—Douglas H. Brooks, January 1998No. 58 Economic Analysis of Health Sector Projects-

A Review of Issues, Methods, and Approaches—Ramesh Adhikari, Paul Gertler, and

Anneli Lagman, March 1999No. 59 The Asian Crisis: An Alternate View

—Rajiv Kumar and Bibek Debroy, July 1999No. 60 Social Consequences of the Financial Crisis in

Asia—James C. Knowles, Ernesto M. Pernia, and

Mary Racelis, November 1999

43

No. 10 Some Aspects of Land Administrationin Indonesia: Implications for Bank Operations—Sutanu Behuria, July 1994

No. 11 Demographic and Socioeconomic Determinantsof Contraceptive Use among Urban Women inthe Melanesian Countries in the South Pacific:A Case Study of Port Vila Town in Vanuatu—T.K. Jayaraman, February 1995

No. 12 Managing Development throughInstitution Building— Hilton L. Root, October 1995

No. 13 Growth, Structural Change, and OptimalPoverty Interventions—Shiladitya Chatterjee, November 1995

No. 14 Private Investment and MacroeconomicEnvironment in the South Pacific IslandCountries: A Cross-Country Analysis—T.K. Jayaraman, October 1996

No. 15 The Rural-Urban Transition in Viet Nam:Some Selected Issues—Sudipto Mundle and Brian Van Arkadie,

October 1997No. 16 A New Approach to Setting the Future

Transport Agenda

—Roger Allport, Geoff Key, and Charles MelhuishJune 1998

No. 17 Adjustment and Distribution:The Indian Experience—Sudipto Mundle and V.B. Tulasidhar, June 1998

No. 18 Tax Reforms in Viet Nam: A Selective Analysis—Sudipto Mundle, December 1998

No. 19 Surges and Volatility of Private Capital Flows toAsian Developing Countries: Implicationsfor Multilateral Development Banks—Pradumna B. Rana, December 1998

No. 20 The Millennium Round and the Asian Economies:An Introduction—Dilip K. Das, October 1999

No. 21 Occupational Segregation and the GenderEarnings Gap—Joseph E. Zveglich, Jr. and Yana van der MeulenRodgers, December 1999

No. 22 Information Technology: Next Locomotive ofGrowth?—Dilip K. Das, June 2000

No. 1 Estimates of the Total External Debt ofthe Developing Member Countries of ADB:1981-1983—I.P. David, September 1984

No. 2 Multivariate Statistical and GraphicalClassification Techniques Appliedto the Problem of Grouping Countries—I.P. David and D.S. Maligalig, March 1985

No. 3 Gross National Product (GNP) MeasurementIssues in South Pacific Developing MemberCountries of ADB—S.G. Tiwari, September 1985

No. 4 Estimates of Comparable Savings in SelectedDMCs—Hananto Sigit, December 1985

No. 5 Keeping Sample Survey Designand Analysis Simple—I.P. David, December 1985

No. 6 External Debt Situation in AsianDeveloping Countries—I.P. David and Jungsoo Lee, March 1986

No. 7 Study of GNP Measurement Issues in theSouth Pacific Developing Member Countries.Part I: Existing National Accountsof SPDMCs–Analysis of Methodologyand Application of SNA Concepts—P. Hodgkinson, October 1986

No. 8 Study of GNP Measurement Issues in the SouthPacific Developing Member Countries.Part II: Factors Affecting IntercountryComparability of Per Capita GNP—P. Hodgkinson, October 1986

No. 9 Survey of the External Debt Situationin Asian Developing Countries, 1985

—Jungsoo Lee and I.P. David, April 1987No. 10 A Survey of the External Debt Situation

in Asian Developing Countries, 1986—Jungsoo Lee and I.P. David, April 1988

No. 11 Changing Pattern of Financial Flows to Asianand Pacific Developing Countries—Jungsoo Lee and I.P. David, March 1989

No. 12 The State of Agricultural Statistics inSoutheast Asia—I.P. David, March 1989

No. 13 A Survey of the External Debt Situationin Asian and Pacific Developing Countries:1987-1988—Jungsoo Lee and I.P. David, July 1989

No. 14 A Survey of the External Debt Situation inAsian and Pacific Developing Countries: 1988-1989—Jungsoo Lee, May 1990

No. 15 A Survey of the External Debt Situationin Asian and Pacific Developing Countries: 1989-1992—Min Tang, June 1991

No. 16 Recent Trends and Prospects of External DebtSituation and Financial Flows to Asianand Pacific Developing Countries—Min Tang and Aludia Pardo, June 1992

No. 17 Purchasing Power Parity in Asian DevelopingCountries: A Co-Integration Test—Min Tang and Ronald Q. Butiong, April 1994

No. 18 Capital Flows to Asian and Pacific DevelopingCountries: Recent Trends and Future Prospects—Min Tang and James Villafuerte, October 1995

STATISTICAL REPORT SERIES (SR)

44

Edited by S.Ghon Rhee & Yutaka Shimomoto, 1999$35.00 (paperback)

9. Corporate Governance and Finance in East Asia:A Study of Indonesia, Republic of Korea, Malaysia,Philippines and ThailandJ. Zhuang, David Edwards, D. Webb,& Ma. Virginita CapulongVol. 1, 2000 $10.00 (paperback)Vol. 2, 2001 $15.00 (paperback)

10. Financial Management and Governance IssuesAsian Development Bank, 2000Cambodia $10.00 (paperback)People’s Republic of China $10.00 (paperback)Mongolia $10.00 (paperback)Pakistan $10.00 (paperback)Papua New Guinea $10.00 (paperback)Uzbekistan $10.00 (paperback)Viet Nam $10.00 (paperback)Selected Developing Member Countries $10.00 (paperback)

11. Guidelines for the Economic Analysis of ProjectsAsian Development Bank, 1997$10.00 (paperback)

12. Handbook for the Economic Analysis of Water SupplyProjectsAsian Development Bank, 1999$15.00 (hardbound)

13. Handbook for the Economic Analysis of Health SectorProjectsAsian Development Bank, 2000$10.00 (paperback)

1. Rural Poverty in Developing AsiaEdited by M.G. QuibriaVol. 1: Bangladesh, India, and Sri Lanka, 1994$35.00 (paperback)Vol. 2: Indonesia, Republic of Korea, Philippines,and Thailand, 1996$35.00 (paperback)

2. External Shocks and Policy Adjustments:Lessons from the Gulf CrisisEdited by Naved Hamid and Shahid N. Zahid, 1995$15.00 (paperback)

3. Gender Indicators of Developing Asianand Pacific CountriesAsian Development Bank, 1993$25.00 (paperback)

4. Urban Poverty in Asia: A Survey of Critical IssuesEdited by Ernesto Pernia, 1994$20.00 (paperback)

5. Indonesia-Malaysia-Thailand Growth Triangle:Theory to PracticeEdited by Myo Thant and Min Tang, 1996$15.00 (paperback)

6. Emerging Asia: Changes and ChallengesAsian Development Bank, 1997$30.00 (paperback)

7. Asian ExportsEdited by Dilip Das, 1999$35.00 (paperback)$55.00 (hardbound)

8. Mortgage-Backed Securities Markets in Asia

SPECIAL STUDIES, ADB (SS, ADB)(Published in-house; Available commercially through ADB Office of External Relations)

1. Improving Domestic Resource Mobilization ThroughFinancial Development: Overview September 1985

2. Improving Domestic Resource Mobilization ThroughFinancial Development: Bangladesh July 1986

3. Improving Domestic Resource Mobilization ThroughFinancial Development: Sri Lanka April 1987

4. Improving Domestic Resource Mobilization ThroughFinancial Development: India December 1987

5. Financing Public Sector Development Expenditurein Selected Countries: Overview January 1988

6. Study of Selected Industries: A Brief ReportApril 1988

7. Financing Public Sector Development Expenditurein Selected Countries: Bangladesh June 1988

8. Financing Public Sector Development Expenditurein Selected Countries: India June 1988

9. Financing Public Sector Development Expenditurein Selected Countries: Indonesia June 1988

10. Financing Public Sector Development Expenditurein Selected Countries: Nepal June 1988

11. Financing Public Sector Development Expenditurein Selected Countries: Pakistan June 1988

12. Financing Public Sector Development Expenditurein Selected Countries: Philippines June 1988

13. Financing Public Sector Development Expenditurein Selected Countries: Thailand June 1988

14. Towards Regional Cooperation in South Asia:ADB/EWC Symposium on Regional Cooperationin South Asia February 1988

15. Evaluating Rice Market Intervention Policies:Some Asian Examples April 1988

16. Improving Domestic Resource Mobilization ThroughFinancial Development: Nepal November 1988

17. Foreign Trade Barriers and Export Growth

September 198818. The Role of Small and Medium-Scale Industries in the

Industrial Development of the PhilippinesApril 1989

19. The Role of Small and Medium-Scale ManufacturingIndustries in Industrial Development: The Experienceof Selected Asian CountriesJanuary 1990

20. National Accounts of Vanuatu, 1983-1987January 1990

21. National Accounts of Western Samoa, 1984-1986February 1990

22. Human Resource Policy and EconomicDevelopment: Selected Country StudiesJuly 1990

23. Export Finance: Some Asian ExamplesSeptember 1990

24. National Accounts of the Cook Islands, 1982-1986September 1990

25. Framework for the Economic and Financial Appraisalof Urban Development Sector Projects January 1994

26. Framework and Criteria for the Appraisaland Socioeconomic Justification of Education ProjectsJanuary 1994

27. Guidelines for the Economic Analysis of ProjectsFebruary 1997

28. Investing in Asia1997

29. Guidelines for the Economic Analysisof Telecommunication Projects1998

30. Guidelines for the Economic Analysisof Water Supply Projects1999

SPECIAL STUDIES, COMPLIMENTARY (SSC)(Published in-house; Available through ADB Office of External Relations; Free of Charge)

45

1. Informal Finance: Some Findings from AsiaPrabhu Ghate et. al., 1992$15.00 (paperback)

2. Mongolia: A Centrally Planned Economyin TransitionAsian Development Bank, 1992$15.00 (paperback)

3. Rural Poverty in Asia, Priority Issues and PolicyOptionsEdited by M.G. Quibria, 1994$25.00 (paperback)

4. Growth Triangles in Asia: A New Approachto Regional Economic CooperationEdited by Myo Thant, Min Tang, and Hiroshi Kakazu1st ed., 1994 $36.00 (hardbound)Revised ed., 1998 $55.00 (hardbound)

5. Urban Poverty in Asia: A Survey of Critical IssuesEdited by Ernesto Pernia, 1994$18.00 (paperback)

6. Critical Issues in Asian Development:Theories, Experiences, and PoliciesEdited by M.G. Quibria, 1995$15.00 (paperback)$36.00 (hardbound)

7. From Centrally Planned to Market Economies:The Asian ApproachEdited by Pradumna B. Rana and Naved Hamid, 1995Vol. 1: Overview$36.00 (hardbound)Vol. 2: People’s Republic of China and Mongolia$50.00 (hardbound)

Vol. 3: Lao PDR, Myanmar, and Viet Nam$50.00 (hardbound)

8. Financial Sector Development in AsiaEdited by Shahid N. Zahid, 1995$50.00 (hardbound)

9. Financial Sector Development in Asia: Country StudiesEdited by Shahid N. Zahid, 1995$55.00 (hardbound)

10. Fiscal Management and Economic Reformin the People’s Republic of ChinaChristine P.W. Wong, Christopher Heady,and Wing T. Woo, 1995$15.00 (paperback)

11. Current Issues in Economic Development:An Asian PerspectiveEdited by M.G. Quibria and J. Malcolm Dowling, 1996$50.00 (hardbound)

12. The Bangladesh Economy in TransitionEdited by M.G. Quibria, 1997$20.00 (hardbound)

13. The Global Trading System and Developing AsiaEdited by Arvind Panagariya, M.G. Quibria,and Narhari Rao, 1997$55.00 (hardbound)

14. Rising to the Challenge in Asia: A Study of FinancialMarketsAsian Development Bank, 1999Vol. 1 $20.00 (paperback)Vol. 2 $15.00 (paperback)Vol. 3 $25.00 (paperback)Vols. 4-12 $20.00 (paperback)

SPECIAL STUDIES, OUP (SS,OUP)(Co-published with Oxford University Press; Available commercially through Oxford University PressOffices, Associated Companies, and Agents)

SERIALS(Co-published with Oxford University Press; Available commercially through Oxford University PressOffices, Associated Companies, and Agents)

1. Asian Development Outlook (ADO; annual)$36.00 (paperback)

2. Key Indicators of Developing Asian and Pacific Countries (KI; annual)$35.00 (paperback)

JOURNAL(Published in-house; Available commercially through ADB Office of External Relations)

1. Asian Development Review (ADR; semiannual)$5.00 per issue; $8.00 per year (2 issues)

the international competitiveness of asian economies … · the international competitiveness of...

Documents