Home ›› 19 Oct 2022 ›› Front
China’s apparel exports to the US market has been declining since 2017 owing to the rivalry between the two world superpowers, opening up opportunities for other apparel exporters to raise their market shares.
Bangladesh – the second largest readymade garment exporter in the world – is yet to capitalise fully on this opportunity to grab a significant market share, despite having the potential to boost its export volume to the western destinations.
Industry insiders and economists say though a significant amount of orders have already shifted to Bangladesh, due to the lack of adequate measures the country has yet to utilise their existing capacity.
If the barriers – proper research, technology adoption, strong backward linkage, ease of doing business, energy crisis, and skilled manpower – are resolved soon, most of the apparel orders shift to Bangladesh considering its experience and relatively low production costs here.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan told The Business Post, “The majority of the orders that shifted to Bangladesh are for cotton-based apparels.
“We are trying to boost our manufacturing capacity for non-cotton based clothes to cash in on this opportunity. We are observing and learning which types of products are shifting to Bangladesh, and preparing to capture more work orders.”
The Centre for Policy Dialogue (CPD) Chairman Rehman Sobhan said, “We have already seen that an opportunity has opened up for Bangladesh’s RMG industry.
“Bangladesh needs to ensure labour rights to comply with global standards and enhance productivity to tap the opportunity being created by the shifting of orders from China and many other markets.”
Who is dominating the US market?
BGMEA data shows 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.
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, and it rose to 8.76 per cent in 2021 and 10.12 per cent in January-June 2022.
Indonesia met 5.69 per cent the US clothes demand in 2017, and it has declined to 5.08 per cent in 2021. But in H1 of 2022, their market share in the US increased to 6.05 per cent.
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.
Research and Policy Integration for Development (RAPID) Chairman Mohammad Abdur Razzaque told The Business Post that due to the China-Western conflict, Chinese market share in western region is likely to decline up to 10 per cent more within ten years.
“Most of the orders will shift to South Asia, and Bangladesh has to prepare for it.”
How prepared is Bangladesh?
Most of the product orders that have been shifted away from China are for non-cotton based apparel items, and have high value, global media reports and industry insiders said.
However, only 26 per cent of Bangladesh’s total RMG exports are non-cotton-based, despite this particular type of item occupying 78 per cent share in the global market, BGMEA sources said.
Due to a lack of adequate knowledge and research, there are not many non-cotton-based readymade garment manufacturing factories in the country, and this is why Bangladesh lacks a strong non-cotton-based backward linkage.
On the issue, Team Group Managing Director Abdullah Hil Rakib said, “We need huge research and a big investment in the backward linkage industry to get more apparel orders.
“Indeed, it is not possible to receive all the orders shifting from, but it is also true that we have a chance to boost our exports.”
Skill manpower, backward linkage key issues
Industry insiders claimed that they have the capacity to export apparel goods worth $60 billion annually, but due a lack of skilled manpower and high lead time, they cannot fully utilise this capacity.
Bangladesh has to spend on average 25 days of additional time for exports, as the country is yet to set up man-made fibre manufacturing factories. For this reason many buyers, especially the new ones, are suffering a lack of confidence to place orders in Bangladesh.
But considering the country’s experience, relatively low production cost, and existing capacity, the relocated buyers are choosing Bangladesh as an alternative.
Industry insiders claimed that if Bangladesh could set up man-made fibre factories, their lead time will be reduced and more orders will come to Bangladesh.
Another major issue is the skilled workforce. When Bangladesh started receiving a large volume of orders in Q1 2021, the apparel sector started facing workers shortage.
BGMEA director Faisal Samad said, “To get more orders, the industry needs skilled workers. The apparel sector is facing skilled manpower shortage, even though we are able to employ one million workers.”
“The country has no professional institutes to train workers. Although we are training freshers, it is not enough to handle more orders.”
Bangladesh lagging behind in modern tech
A number of apparel manufacturers said Bangladesh is receiving mostly low-value work orders due to a lack of modern technology, despite China losing a big chunk of their high-values orders.
Basically, Bangladesh has a fewer number of apparel factories that feature modern technology. Even though Bangladesh has yet to set up many new types of machinery, China and Vietnam have already been using those.
Bangladesh Garment Buying House Association (BGBA) President Kazi Iftekhar Hossain said, “Our apparel industry needs a big investment to set up high tech machinery, but entrepreneurs are failing to get such investments.
“Many apparel makers do not even have any idea about such type machinery. For this reason, we are losing work orders shifting from China worth billions of USD.”
TEAM Group Managing Director Abdullah Hil Rakib said, “We are installing such machines and sharing the experience with others. Most of the reputed buyers are currently placing orders in Bangladesh, which will help in receiving the orders shifting from China.”
Energy crisis another major hurdle
Industry insiders and economists said one of the main reasons for buyers leaving China is its energy crisis. But Bangladesh is now also navigating through the same problem.
The apparel sector is facing load-shedding on average 50 per cent of total production hours. Factories are continuing production by running diesel-run generators, which has increased their production costs.
On the other hand, textile, dyeing and washing millers failed to supply raw materials on time due to the low pressure of natural gas in the national grid.
Nipa Group Managing Director Khosru Chowdhury said, “We failed to send shipments on schedule due to the crisis, why would buyers give us more orders amid the ongoing situation?
“Uninterrupted power and energy supply is very important for attracting buyers, and the government should ensure it.”
What does BGMEA think?
The BGMEA set a goal to export $100 billion in apparel goods in 2030 and capture a 10 per cent global market share in 2025, which is now 8 per cent. In FY22, Bangladesh exported clothes worth $42.61 billion to the global market, shows data from the Export Promotion Bureau (EPB).
Responding to a query, BGMEA President Faruque Hassan said, “We are focusing on the Asian market, and expecting that the orders shifting from China will help us to meet our goal.”
BGMEA Vice-President and Classic fashion Concept Managing Director Shahidullah Azim said, “We have many limitations, but some manufacturers are already making high-value man-made fibre-based clothes.”
“As our growth of non-cotton products continues, local and foreign investors will come to Bangladesh to set up man-made fibre factories.”
RAPID’s Abdur Razzaque said, “To achieve the goal and take full benefits from the US-China conflict, industry leaders need a combined master plan with all stakeholders.
“The government should take short and long-term policies, and entrepreneurs should focus on research and development.”
