Industrial Restructuring and Export Competitiveness of the Textiles and Clothing Sector in SAARC in the Context of MFA Phase-Out

Abstract: Traditionally, the textiles and clothing industry has been considered as one of the relatively more labour-intensive manufacturing industries in which developing countries have had comparative advantage mainly on account of cheap labour. Through econometric explorations the present paper observes a situation characterized as factor intensity reversal in South Asian countries necessitated by structural transformation within the industry due to increasing use of their scarce factor. The paper argues that implementing such a change in the production process in these countries would not be easy, especially in the post-MFA regime and thus regional cooperation in this sector could be one of the ways of meeting the post-MFA challenges. In this context, the paper explores the prospects for horizontal specialization and industrial restructuring with the help of strengthening trade-investment linkages in this sector in the SAARC region along with adopting some other policy measures.