The textile and garment sector (T&G) is one of the major industries in most of the South Asian countries, contributing significantly to their economic growth, employment generation and export earnings. In recent times, South Asia’s competitiveness in T&G exports has been increasingly challenged by a multitude of factors including erosion of trade preferences enjoyed by the subregional countries in their major markets, emergence and consolidation of a number of new competitors, rising e-commerce and digital platform-based marketing, and disruption to global supply chains caused the COVID-19 outbreak. Graduating LDCs of the subregion with substantial stakes in T&G exports, such as Bangladesh and Nepal, are particularly threatened by impending loss of preferential market access and their inherent vulnerabilities and resource constraints.  

Against this backdrop, this paper dives deep to uncover the underlying drivers of change and attempts to assess the impact and implications of the emerging challenges for the T&G sector of South Asian countries. It analyses the pressures on competitiveness of the sector due to factors such as rising market competition, weaknesses in product diversification, emerge of e-commerce and digital transformation and LDC graduation. Based on this assessment, the paper puts forward a set of recommendations to address both domestic and external challenges facing the sector, including measures to enhance cost efficiency, improve investment climate, nurture entrepreneurship, raise productivity, promote product diversification and facilitate greater value addition. The paper calls for shift in focus from preferential market access-based competitiveness towards productivity and efficiency-based competitiveness in the T&G sector of South Asia.