The readymade garment (RMG) sector of Bangladesh tells an impressive story of Bangladesh’s successful transition towards an export-oriented economy. From an almost unknown entity in the early 1980s, the RMG sector has become a major share of export earnings and has strengthened its base in the country’s export structure over time. RMG export demonstrated considerable growth from a meager US$ 31 million in 1983 to a steadfast figure of over USD 28.15 billion by the end of 2016-2017 (July 2016 to June 2017) fiscal year.
The industry has become the country’s main source of foreign currency earnings accounting for more than 81.23% of total exports. With the rapid expansion of the industry over the last three decades the export markets did not expand relatively rather remained mostly concentrated on few major markets.
The two major markets for Bangladesh garment exports have been the North America (U.S.A. and Canada) and the European Union countries (predominately Germany, United Kingdom, Spain, France, Italy, Netherlands, Belgium, Japan, and Poland). Market diversification has always been limited, with exports to these main markets accounting for as much as 84.91% of the total garment exports. The United States of America holds 18.49% share whereas EU as a region holds 63.06% share of our total apparel exports. Canada is the third largest market having only 3.36% of the share.
This is quite encouraging to notice that over the past ten years a remarkable progress has been achieved in diversifying our exports to non-traditional markets. The share of our apparel export to markets other than EU and North America was 4.74% in 2007-2008 fiscal year which has increased to 15.09% in the 2016-2017 fiscal year amounting an export turnover of 4.25 billion dollars. Significant improvement has taken place in export to Chile, China & Russia.
economic growth andsustainable These are some of the new and emerging markets for Bangladesh. Export to Turkey has amounted to USD 381.37 million in FY2016-17 though the amount was USD 622.37 million in FY2013-14. This dent in exports to Turkey is caused by the imposition of safeguard duty by Turkish Government on their apparel imports. Among the Asian countries China showed robust growth of 14.76%. Exports to Japan reached to USD744.48 million last fiscal year, 3.87% less than previous year. The Latin American market seems to be highly promising for us. Export to Brazil has more than doubled from USD 39.57 million in FY2008-09 to USD100 million in FY2016-17. Chile is another promising country for our apparel. Exports to Chile increased from USD 6.41 million in FY2008-09 to USD 58.87 million in FY2016-17.
The variation of the seasonal cycle in Latin America because of its location in the Southern Hemisphere creates a unique advantage for us to utilize the lean periods of winter products. Russia, the CIS countries, Australia, Mexico and the Gulf counties are also highly potential for Bangladesh’s apparel.
The growth in non-traditional markets in recent years has been possible for a number of policy supports and initiatives taken by the Government and the industry. The Government of Bangladesh provides special policy incentives in favor of the exports to non-traditional countries for the last 8 years and still continuing. There was no Embassy of Bangladesh in any Latin American countries before 2011, nor any Latin Embassy in Bangladesh; As a result of BGMEA’s persuasion with the present Government, the Government of Bangladesh opened embassy in Brazil and Mexico. Brazil has also opened their Embassy in Dhaka, so the visa process and travel to these countries has become easier.
Market access and commercial diplomacy will be vital for us. The European Union simplified the GSP rules of origin from ‘two-stage’ to ‘one-stage’ from the 1st of January 2011. Norway and Switzerland has also adopted the revised rule of EU from 1st of April and 1st of May 2011 respectively. Japan – the second largest clothing importing country in the world with USD 30 billion imports in a year – also relaxed its GSP rules of origin. We have got duty free export in India and Chile. China, South Korea and Malaysia have also granted duty free access to selected RMG products. All these policy adjustments will give a new leap to our exports. We have to discuss and negotiate with Russia and the USA for duty free issues, as well as we need to engage in discussions with United Kingdom on post BREXIT market access issues. Besides, strong steps are needed to pursue duty free with Turkey, South Africa and the Latin American countries like Brazil, Mexico, Argentina and Colombia.
While talking about market diversification, it becomes relevant to highlight the importance of product diversification as well. Important to note that the majority (around 80%) of our export items are concentrated in five basic products – trouser, t-shirt, sweater, shirts, and jackets mostly made of cotton. In recent years export is being expanded to other items like – suits/blazers, lingerie, active-wear/sports-wear and outerwear, and non-cotton items. We already made a breakthrough in Denim as we are the largest Denim trouser exporter to EU markets. We are taking strategies to ensure long-term growth through penetrating higher market segments, fashion and innovation. Bangladesh is gearing up to cater the high-end and branded fashion segments.
Moreover, most of our items are cotton based, which is fact, and we have opportunities in man-made fibre based apparel, especially fabrics made of man-made fibre like viscose, rayon, spandex, polyester, etc where Bangladesh has a huge market, but almost no production capacity. If we can bring more investments – local or foreign – in these items well, this will benefit us tremendously.
Though the world clothing exports could not keep positive growth in 2015 and also 2016, it is estimated that the market will reach USD650 billion by 2020 which is now at USD 444 billion. We have the possibility to grab a share of this growth. The demographic advantage of Bangladesh coupled with duty free quota free market access enjoyed as an LDC and increasing capacity of backward linkage industries are indicating a bright future of the industry ahead. Market diversification and moving to high value added segment are going to be critical to pursue the next big opportunities.
As we are pursuing a higher growth strategy, our priority now is to go for higher value addition, product diversification, and most importantly research, innovation and modernization of our factories. Our factories are increasingly moving from semi-automatic to more automatic industry using sophisticated machines, technologies and software to facilitate the fast and vast growth of RMG and textile industry. Low liquor dyeing machine, Ozone washing machines, auto trimming, Jaquard machine, SAP, ERP like technologies have already become popular. Most of our new generation factories are equipped with sophisticated technologies, able to handle top quality products of diverse styles, making the product price competitive as well.