Need product, market diversification now: WB warns RMG industry

BDApparelNews Desk
5 October 2018  

A worker at a garment factory in Bangladesh.

A worker at a garment factory in Bangladesh.

World’s second largest apparel exporter, Bangladesh risks losing its footing in the global market with the competitive edge it was holding on to for the past few years and need immediate efforts towards product and market diversification. 

The warning and suggestion concerning the biggest export sector of the country, which occupies over 82 per cent of the total export basket, were made at a report of the World Bank, titled ‘Bangladesh Development Update: Powering the Economy Efficiently’, released in Dhaka on October 2.

The report said, Bangladesh’s garments industry may suffer external shocks in the form of reduced demand, higher price of cotton imports, or higher tariff in Europe. It also observed, Bangladesh’s current advantages, namely cheap labour cost, which it has been using to come atop competition against India, Vietnam, Pakistan and Sri Lanka, is “thinly based”.

Bangladesh may soon start losing market share as trade alliances and tariff preferences shift. The cost of labour is increasing and will increase further as the living wage movement gains ground. Improved compliance has also raised cost of production, the report said.

The World Bank also observed that initiatives towards export and market diversification have failed to yield visible results for Bangladesh. Also, at the same, the export of a promising item – leather – is also suffering setbacks due to mass factory relocation and other issues.

It also observed that Bangladesh was weak in taking advantage of China’s displacement and that it benefitted others. As an example, it cited that Bangladesh’s growth in US market was only 2.3 per cent, which was over 7 per cent for Vietnam, 5.3 per cent for Mexico and 1.19 per cent for India.

As recommendations, the World Bank said product and market diversification are critical for building resilience in the readymade garments industry. Also, going forward, “sector-specific targeted programmes and more emphasis on research and development (R&D) will be needed.”

Notably, Bangladesh’s apparel industry is heavily reliant on the export of a few items. The industry, which raked in over US $30 last fiscal, risks losing it all as only five products fetched 75 per cent of the sum; namely shirts, t-shirts, trousers, jackets and sweaters.

Also, export data and industry stakeholders say, an overwhelming over 84 per cent of overseas apparel export was within three major destinations – the European Union, United States, and Canada. These markets are happy to source the traditional woven and knitted apparel items from Bangladesh.