Taking advantage of geo-political polarisation

The world is starkly divided today; on one hand, there is the Ukraine war that has superpowers firmly placed on opposing sides and then there is the long standing trade rivalry between the USA and China. While for the world economy, the ripples of the ongoing war in Europe are being felt more acutely now, in the long run, the trade related competition will overtake other geo political divisions.

It’s quite evident that globally, China is emerging as a main trade rival of USA which saw the steady fall of imports from China. As per a recent TBP report alluding to BGMEA data, the US imported 33.69 per cent of clothes from China in 2017, which later dropped to 24.03 per cent in 2021 and 20.68 per cent in the first half of 2022.

Therefore, it’s safe to say the USA is buying less from China although the demand has not shrunk. The data also states that in 2017, the US imported 14.41 per cent of clothes from Vietnam, which rose to 17.61 per cent in 2021, and 18.55 per cent in H1 this year.

The country imported 6.32 per cent of clothes from Bangladesh in 2017, which rose to 8.76 per cent in 2021 and 10.12 per cent in January-June 2022.

But trade is an area which is at the heart of every nation’s economic plan. It was the main driving force in the colonial times and remains so today. Any vacuum is filled up fast by a new player. For instance, in 2021, Indonesia’s import to USA was 5.08 per cent but in 2022 it rose to 6.05 per cent. The same applies for India. Indian clothes market share in the US increased from 4.59 per cent in 2017 to 5.14 per cent in 2021, and 6.45 per cent in H1 of 2022. The data indicated that the US is gradually reducing purchases from China, and shifting to Vietnam, Bangladesh, Indonesia and India.

Since global economy is passing through turbulent waters, Bangladesh must act fast to secure treaties with the USA so her export chunk becomes bigger.

However, there are some impediments: proper research, technology adoption, strong backward linkage, ease of doing business, energy crisis, and skilled manpower – need to be addressed for most of the apparel orders to shift to Bangladesh.

The low production cost, the biggest reason for placing orders is already something we possess. The ease of doing business means, Bangladesh must jettison most of the unnecessary bureaucratic procedures to attract foreign brands to either set up factories or engage with local manufacturers to place orders. As per the World Bank ease of doing business ranking, Bangladesh is placed at a disheartening 168 out of 190 nations. This can only improve when lengthy business procedures are curtailed to be limited within three to four easy steps.

Secondly, manpower must be given state of the art training on usage of modern technology. Reportedly, Bangladesh does not have non-cotton production know how, which deters developed nations from placing orders.

Lastly, it’s uninterrupted power supply which will attract buyers and ensure delivery of items within a stipulated time frame. Unfortunately, the country, at the moment, is faced with erratic power supply with load shedding becoming an everyday reality. In these circumstances, the government’s first priority is to ensure sooth power supply.

Other countries like Vietnam, India and Indonesia are not faced with these problems and their ease of doing business rankings are 70, 63 and 73 respectively. One does not need to be an economist to realise that with such a low doing business ranking, Bangladesh will have a tough job convincing buyers. Without doubt low production cost is appealing but it cannot eclipse the shortcomings.