Did you know that Bangladesh ranked 6th on the list of top apparel exporting countries back in 2006? What is it that brought Bangladesh’s apparel industry where it is today?
Bangladesh's RMG Sector Drives Economy But Faces Challenges In Achieving USD 50 Bn Target By 2021
1.
2. Bangladesh's Garment Industry
• 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.
3. 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.
– Moreover, China is losing ground, owing to its growing production costs, which
opens an immense prospect for Bangladesh to seize more market share.
4. Factors That Attract Global Attention:
• 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 [2] private and public universities producing textile
graduates in the country every year, further adding to the skilled manpower
for the segment.
– Moreover, favorable government policies, bank facilities (for raw material
purchase), and strengthening backward linkage supporting industries create a
strong case for the sector.
5. Factors That Attract Global Attention:
• 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.
6. Factors That Attract Global Attention:
• 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.
7. Factors That Attract
Global Attention:
• Technology Adoption:
– The growing export numbers from
the sector is a sound example of
the same:
8. 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.
9. Future of Bangladesh’s RMG Sector:
Expected Apparel
Exports 2017-18
(USD Bn)
Target 2018-19 (USD
Bn)
Target 2019-20 (USD
Bn)
Target 2020-21 (USD
Bn)
31.12 36.38 42.53 49.71
Required CAGR 16.9%
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.
10. 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.
11. What is holding Bangladesh Back?
• 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% [5] 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.
12. 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.
• 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 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.