Frequently Asked Questions

To know about Bangladesh please visit the below web link https://en.wikipedia.org/wiki/Bangladesh

There is no doubt that Bangladesh has emerged as a powerful garment manufacturing country in the past decade. What is it that brought Bangladesh’s apparel industry where it is today? Let’s find out!

Bangladesh is the world’s second largest Readymade Garment (RMG) exporter, just behind China. Country’s 81% of exports come from the RMG sector, and the textile and Apparel sector contributes around 20% to Bangladesh’s GDP. It employs around 20 million people in the country and is the major driving force of the country’s economy.

Bangladesh plans to get the middle-income country status by 2021, and RMG sector is going to play a major role in it. Bangladesh has set itself a target of achieving apparel exports worth $50 billion by 2021, and it seems to be on the right track. In the last financial year, FY18, the Export Promotion Bureau (EPB) states that Bangladesh’s overall exports grew by 5.81%, reaching $36.67 billion, owing to the growth in apparel exports. The garment exports as per EPB registered an 8.76% growth in this fiscal year, which was 1.51% higher than the set target.

Bangladesh’s RMG sector has many factors that attract global attention:

Quick Returns

The biggest factor being the quick returns this segment offers the investors. This is the only sector in the country that gives returns in 3 to 5 years. Also, being the second biggest apparel exporter globally, there are huge growth opportunities that the sector offers.

Share of Global Apparel Exporters (2016)

Moreover, China is losing ground, owing to its growing production costs, which opens an immense prospect for Bangladesh to seize more market share.

Labor Availability

The biggest strength that Bangladesh has over its competitors is its cheap and vast workforce. The minimum wage in Bangladesh is lower than that in China, Cambodia, India, and Vietnam

Also, there are around 37 private and public universities producing textile graduates in the country every year, further adding to the skilled manpower for the segment. Moreover, favourable government policies, bank facilities (for raw material purchase), and strengthening backward linkage supporting industries create a strong case for the sector.

Did you know that Bangladesh ranked 6th on the list of top apparel exporting countries back in 2006? And its share of the total apparel exports was just 2.8%?

The Duty-free Advantage

Bangladesh has Least Developed Country (LDC) status that qualifies it for duty-free market access or reduced tariff facilities to many developed and developing nations, globally. Bangladesh enjoys duty-free access to around 52 countries, including countries in the EU, the USA, Australia, Switzerland, Japan, Turkey, Russia, Norway, New Zealand, China, South Korea, Thailand, Malaysia, and India, for the trade of many products. Bangladesh has also signed many trade deals offering Bangladesh exports a preferential treatment, like SAARC Preferential Trading Arrangement, Asia-Pacific Trade Agreement, Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation, South Asian Free Trade Area, and the Trade Preferential System among the OIC member states.

Technology Adoption

Bangladesh has attracted many major global retail brands, and with the technology and quality compliance parameters has also seeped in Bangladesh’s apparel manufacturing systems. Moreover, Bangladeshi manufacturers and exporters have built excellent vertical capacities, which only China could offer before, which help global brands to ensure more transparency and coordination in their supply chains. The country has henceforth adopted the most sophisticated apparel manufacturing and management technologies to cater to their international customers. This has resulted in a substantially high rate of quality achievement and technical compliance in Bangladesh’s RMG sector.

The growing export numbers from the sector is a sound example of the same

Source: Export Promotion Bureau, Compiled by BGMEA

Future of Bangladesh’s RMG Sector

Bangladesh has three financial years left to match its annual apparel exports target of USD 50 Bn. This requires the sector to grow at a war footing at a rate above 60%.

The year 2016–17 showed a sluggish growth for the country, owing to the slowing down of trade with the US. The 2017–18 shows more promise, but the current trends make it difficult for Bangladesh to achieve the set target, but it is not yet impossible.

To achieve a USD 50 Bn target, an annual CAGR of 16.9% is needed, which can be achieved, provided Bangladesh keeps on capitalizing on available opportunities and its strengths.

What is holding Bangladesh Back?

After multiple incidents like Rana Plaza, Bangladesh came on global radar for its labor practices and safety standards. Since then, Bangladesh has come to a long way building green factories and meeting safety standards and compliance strictly.

What still worries industry experts is the fact that garment workers are still being paid one of the world’s lowest minimum wages in the country. Fashion industry thrives in the west but standing on the backbone of the workers from the third world countries like Bangladesh, which struggle every day to survive above the poverty line. The government’s vision of achieving USD 50 Bn worth of apparel exports by 2021, nowhere mentions of concerns itself with the well-being of its workers.

An Oxfam research has highlighted that for every garment sold in Australia; only 2% of its price goes to the factory worker who made it. Cheap labor is the main factor; Bangladesh’s apparel industry is capitalizing on when it comes to attracting big retail brands. Hence, the demand of raising the minimum wages substantially cannot be fulfilled, at least in the near future.

The Road Ahead

The numbers indicate a positive shift in Bangladesh’s apparel exports, after a sluggish FY17. Achieving the USD 50 Bn target in the next three years seems insurmountable at the first sight, but is not impossible. A fast and consistent growth in the sector, owing to the favorable government policies, and global attention will felicitate this feat. What needs to be kept in mind during this journey is to take the workers of the garment industry in the country along with the growth. The government will have to take stringent steps to ensure better living standards for its garment workers and their survival.

A technology advancement plan can also help, which also focuses on the skill development of the workers through regular training programs. This will enable the garment manufacturers and exporters to make more profits and pass on the benefits to the workers in the form of better pay.

Hence, the growth that Bangladesh’s apparel industry envisions needs to be a holistic growth to stay sustainable in the long run.

In Fiscal Year (FY) 2017-2018, export of readymade garments (RMG) products registered an 8.76 percent growth reaching to $30.61 billion. Exports to non-traditional markets have seen a nearly 10% rise to $4.67 billion which is more than 15% of total RMG export. With the current product mix of Bangladesh RMG industry, when major export markets are reaching to almost saturation point, growing in non-traditional market diversification has become even more important.

Figure 1: Bangladesh needs to diversify its markets for further RMG export growth.

To achieve 50 billion USD yearly apparel export by June 2021, Bangladesh has to increase its RMG export from $30.61 billion USD to 50 billion USD in three years, which is a growth of more than 60%. To achieve this target Bangladesh needs to get about 17% year on year average growth, according to the Textile Today June editorial. To achieve this growth, the sector needs to pay attention to the regular market and non-traditional market equally even though the contribution of the non-traditional market in the export basket is still very less.

Bangladesh’s apparel exports mainly depend on the European Union (EU), the United States, and Canada, as they are the main importers of apparel product from the country. The diversification of new export destinations is inevitable due to the entry of new competitors in traditional markets where Bangladesh has been enjoying an edge over others for many years. On the contrary market growth in traditionally is being restricted due to the economic slowdown

-The trend of RMG export to non-traditional markets

-Why non-traditional markets performed well

-Challenges in new markets

-How to grab more market share

Recently, the resurgence of a sort of protectionist attitude among a number of major importing countries has also emerged as an issue of great anxiety. We all know that Bangladesh does not get the United States’ generalized system of preference (GSP) through many rival countries are enjoying this benefit. On the other hand, the EU often threatens to suspend trade preferences. For substantial volume growth, it would be logical to look for economies with sizable markets.

On the other hand, the demand of apparel products, one of the most important basic needs of human being, is increasing rapidly due to many reasons, including fast fashion trends, in developed and developing countries.

Meanwhile, market growth is much higher in the non-traditional market than the traditional market of developing countries.  Therefore, there is no reason not to search the new market and already Bangladesh has made some progress in finding a few markets for its products beyond the traditional ones.

The trend of RMG export to non-traditional markets

Accept key export destinations such as the European Union, the United States, and Canada, other countries are defined as non-traditional markets. Non-traditional export markets include India, China, Russia, Japan, South Africa, Turkey, Brazil, Chile, Mexico, South Korea, Malaysia, Australia, New Zealand and any other countries for the Bangladeshi garment sector. These markets are being defined as the non-traditional market by the Bangladesh government. The government has been giving some advantages or incentives to the exporters to the nontraditional market.

RMG export to the non-traditional markets is increasing significantly. Among the non-traditional markets, Japan and India have contributed the highest to total exports earnings.

We mentioned earlier that garment exports to non-traditional markets have seen a nearly 10% rise to $4.67 billion in the last fiscal year.

As per the latest data of the EPB, Out of $1.13 billion export earnings from Japan in FY18, $846.73 million or 74.8% came from the RMG sector. And apparel exports to Japan has seen a 13.73% rise compared to previous year earnings of $744.48 million.

In fiscal 2017-18, Bangladesh’s RMG exports to India stood at $279.19 million, up by 115% compared to $129.81 million in the FY17.

Of the total amount exported to India, Knitwear products earned $71.05 million, which is 89.75% higher than the $37.44 in the same period a year ago. Woven products earned $207.62 million, up by 124.79%, compared to $92.35 million a year ago.

Why non-traditional markets performed well

In reducing higher dependency on the traditional market, government and private sector have taken initiative to explore the new export market, which acts as a catalyst.

Double-digit exports growth in non-traditional markets is a good sign for Bangladesh as it will pave the way to reduce higher dependency on traditional market and help the country to diversify export destination, Exporter Association of Bangladesh president Abdus Salam Murshedy said to Textile Today.

This is because of the government and the private sector initiative, taken to explore a new opportunity, said Salam, also a Former President of Bangladesh Garment Manufacturers and Exporters Association.

“Sharp rise in Japan and Indian market is opening a new opportunity for Bangladeshi manufacturers in the Asian region,” he added.

On the other hand, safety improvement in the apparel industry has also attracted more customers to source goods from here, he opined.

“The Bangladesh government is determined to tap the fullest opportunity in the non-traditional export market. The sharp rise in apparel exports growth in the non-traditional market is the reflection of efforts undertaken by the government to explore new destinations for RMG products,” Commerce Minister Tofail Ahmed said to Textile Today.

Currently, the government is providing a 3% cash incentive against export proceeds for garment exporters in the non-traditional market.

Our exporters are more concentrating on the traditional markets and they do not want to spend time and money exploring the market. I think apparel makers have to change the mindset and give efforts to explore new markets as the government is providing all-out support to this end, he added.

Challenges in new markets

Non-tariff barriers and products variation is a challenge in the way of taking more market share in the non-traditional export destinations. Trade analyst and the manufacturer urged the government to remove non-tariff barriers, especially with India to increase export to the country. India could be a big market for Bangladesh due to its largest population and proximity, they opined.

Nontraditional market’s sourcing network or stream is different than the traditional markets. An editorial of Textile Today May 2012 discussed the ways of approaching such markets. The report said, there are significant differences in Product design, size pattern, quality requirements, material content, and fashion trend to sourcing stream. The report suggested that business pattern to the manufacturing process and steps it would have a different way for these markets. The market is mostly covered by Indian and Chinese products. Bangladeshi manufacturers need to adapt itself with the sourcing and value chain structure of the market. Bangladesh needs to position itself rightly in this market.

While product quality and verity of products were also an important factor in gaining more market share in the non-traditional markets and now Bangladeshi entrepreneurs were making the investment to upgrade the quality of products.

How to grab more market share

As of now, the potential of non-traditional markets is huge and remains untapped. This is because of higher taxes, which eat up the competition, and non-tariff barriers in some of the potential markets such as India.

“In taping the opportunity of non-traditional exports markets, Bangladesh government has to come up with new steps to explore potential exports items,” Former Advisor to caretaker government AB Mirza Azizul Islam said.

“We also have to identify the products for the Asian market, as the dress pattern of this region is different from the European countries as well as in the American region,” said the economist.

In grabbing more from the pie in non-traditional markets, Bangladesh has to concentrate on products development for those markets, he added with saying “The government should move for a free trade agreement and bilateral trade relations.”

An earlier report of Textile Today told that proper product development and integrated marketing & sourcing plan will be keys to grab these markets. As our manufacturing base here has developed for quantity-based orders, it may require creating some brands for the wholesale market in the non-traditional market to create requirements of a sum of a good volume of garments.

Bangladeshi manufacturers need to invest in marketing and promotion as well. A part of the manufacturing base in Bangladesh can target these markets and reshape them. As a whole quick response system, capability of frequent style changes, cutting room automation, use of software for designing and ERP will increase the competitiveness of enterprises here to grab these potential markets.

Small segregated mode of production can work in place of composite vertical practice here only when good integration can be done by better communication within the industry. A good blend of sourcing partner and production partner will be needed to grab a potential part of the markets like Dubai, Malaysia, India, and South Korea etc. Similar approach can be useful for other non-traditional countries as well.

In fine, both the government and the RMG leaders should come up with proper strategy and footstep to diversify export markets.

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