South Asian textiles: End of a competitive advantage? A critical review of the French Treasury's quarterly letter

The quarterly letter published by the French Treasury offers a detailed diagnosis. The textile and apparel industry remains the industrial and social core of the economies of Bangladesh, India, Pakistan and Sri Lanka.

As a pillar of exports, a mass employer and a key driver of female employment, the sector has long relied on a simple competitive advantage. This advantage is an abundant, low-cost workforce dedicated to standardised, low-value-added production.

This model is now showing its limitations. Stricter European regulations, increasing environmental demands and the rise of more integrated, technologically advanced Asian competitors are creating new pressures. The apparent stability of global market shares conceals a more fragile reality: a mature production system exposed to a rapid reconfiguration of value chains.

This institutional analysis therefore merits further examination and, at times, questioning. The capacity of South Asian supply chains to navigate a simultaneous social, environmental and industrial transition appears uneven, costly and far from guaranteed.

Undeniable, yet concentrated and asymmetrical economic weight

The figures cited by the Treasury confirm the extreme dependence of certain countries on the textile and apparel industry. With 85 percent of its exports originating from the sector, Bangladesh displays a quasi-mono-industrial profile, unparalleled among major exporting nations. For comparison, data from the World Trade Organization (WTO) shows that textiles account for only around 20 percent of Vietnamese exports. This is despite the country's shift towards a more premium and technologically advanced position.

This sectoral concentration explains why the textile industry acts as a macroeconomic stabiliser, particularly for foreign currency reserves. It also constitutes a major structural vulnerability, as demonstrated by the mass order cancellations in 2020. The World Bank highlights that during the pandemic, Bangladesh saw its garment exports fall by nearly 18 percent in 2020. This revealed the fragility of a model overly dependent on a few Western buyers.

On a social level, the role of the textile industry as a driver for female employment is undeniable. The International Labour Organization (ILO) confirms that over 60 percent of the Bangladeshi textile workforce is female, a key factor in reducing urban poverty. This dependence, however, also presents a political challenge, as any contraction in the sector has an immediate impact on social stability.

Competitiveness still largely based on cost… running counter to global trends

The Treasury's analysis rightly emphasises the persistence of traditional competitive advantages: low wages; high labour intensity; and specialisation in standardised products. These levers are precisely the ones whose relevance is eroding most rapidly.

According to McKinsey's 'State of Fashion 2024' report, automation and digitalisation could reduce the labour-related cost advantage in standard ready-to-wear by 20 to 30 percent by 2030. This trend naturally favours countries capable of investing in advanced industrial infrastructure and technical upskilling. This is an area where Vietnam and China retain a significant lead.

A persistent dependence on cotton constitutes another point of fragility. Data from Textile Exchange shows that synthetic and man-made fibres now represent over 65 percent of global fibre consumption, compared with less than 40 percent in the early 2000s. With the partial exception of India, South Asia remains poorly positioned in these segments, limiting its capacity to capture future growth.

Sustainability: emerging competitive advantage or asymmetrical constraint?

The Treasury highlights the momentum of “green factories” in Bangladesh, with 268 LEED-certified sites, a figure confirmed by the U.S. Green Building Council. This is a genuine effort and places the country first globally for the number of certifications.

This performance should be put into perspective. These factories represent a minority of the total industrial base, which is estimated at over 4,000 units. Furthermore, as the Organisation for Economic Co-operation and Development (OECD) points out, environmental certification provides incomplete coverage of issues such as upstream traceability, chemical management and social conditions in indirect subcontracting workshops.

Additionally, new European regulations, such as due diligence requirements, the Ecodesign for Sustainable Products Regulation (ESPR) and the digital product passport, shift responsibility onto the buyers. A 2023 study by the European Commission estimates that nearly 40 percent of non-EU textile suppliers could struggle to comply with these new requirements without significant investment. This raises questions about the financial sustainability of this transition for South Asian suppliers, whose net margins often remain below 5 percent.

Value chains: is the reconfiguration truly benefiting South Asia?

The de-risking movement away from China and the 'China +2' strategy have certainly benefited Bangladesh and India. Foreign Direct Investment (FDI) flows, however, tell a more nuanced story. According to the United Nations Conference on Trade and Development (UNCTAD), Vietnam attracted nearly twice as much manufacturing FDI in the textile sector as India between 2018 and 2023. This was due to more comprehensive free-trade agreements and superior logistics.

Nearshoring to Turkey and Eastern Europe also presents structural competition. According to Eurostat, the average lead time from Turkey is 40 percent shorter than from South Asia. This is a decisive advantage in a market increasingly focused on reactivity and inventory reduction.

Finally, the rise of Chinese ultra-fast fashion, epitomised by Shein, illustrates a major contradiction. While Europe tightens its standards, volumes for high-turnover models continue to grow. This places traditional suppliers under pressure, caught between compliance demands and price compression.

Industrial pillar to be reinvented under geopolitical constraint

The French Treasury's letter correctly highlights the strategic importance of South Asian textiles for Europe. The analysis, however, reveals a paradox: the more indispensable the sector becomes, the more fragile its current model appears.

A transition towards a more sustainable, integrated and technologically advanced industry is inevitable. This transition will be neither linear nor uniform. Bangladesh will likely remain a global leader in low-cost volume; India will pursue a gradual move upmarket; and Sri Lanka will attempt to consolidate a premium niche. In contrast, Vietnam already embodies a more developed model of diversification and integration.

For the European Union and France, the challenge extends beyond merely securing supply chains. It involves avoiding the export of regulatory burdens without supporting productive investment, which risks destabilising a major economic and social pillar. Failure to do so could lead to a reconfiguration of value chains detrimental to South Asia, accelerating a shift towards less transparent but more agile players.

The trajectory of the South Asian textile industry is now heavily shaped by structural constraints. It does not, however, eliminate room for manoeuvre, which revolves around a central trade-off: the pace and cost of the transition.

This article was translated to English using an AI tool.

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