By the end of the current fiscal year in June 2018, Bangladesh will have three financial years remaining to take its yearly apparel export to USD 50 billion.
In the editorial of Textile Today May 2018 issue we have identified 10 reasons why Bangladesh will be able to achieve the target. This article, on the contrary, will talk about the reasons why the country won’t be able to achieve the target.
Table 1 shows that strategic apparel/RMG export target is 30.16 billion USD for the FY 2017-18. At the end of first 11 months, Apparel exports increased 9.77 percent year-on-year to $28.12 billion. Knitwear exports rose by 11.48 percent to $13.94 billion and woven garments exports were up by 8.15 percent to $14.18 billion.
The country achieved $28.12 billion USD in 11 months which is 3.24 % higher than the strategic target of the same period. That means if the country can continue to do export in the similar pace at the end of the year RMG export will be around 31.14 billion USD.
To achieve 50 billion USD early apparel export by June 2021, Bangladesh has to increase its RMG export from 31.14 billion USD to 50 billion USD in three years, which is a growth of more than 60%. To achieve this target Bangladesh needs to get 16.9% year on year average growth as shown in table 2.
After the sluggish financial year 2016-17, if we keep all the current positive happenings in mind the sector again can hope that Bangladesh may be able to make it happen. However, if we look at the growth pattern of the last ten years as shown in the cover story of June issue, it won’t convince us that we can gain a consistent 16 percent or more growth in upcoming 3 years in a row. Meanwhile one may say that Bangladesh has future potential to achieve the target as per the May editorial; however, there are potential reasons why Bangladesh won’t be able to achieve this or even get close.
If somebody asks, why Bangladesh will not be able to achieve this? We can meTable 2: Target growth to be achieved in coming years in an expected CAGR of 16.9%ntion 10 strong reasons why the country will not be able to achieve 50 billion targets.
- Increasing cost of doing business: Because of the fast fashion trend, the apparel industry has become a very low-profit People are increasing volume to save pennies. With current financial happenings in Bangladesh, companies are struggling with maintaining the cost of doing business. To cope up with the increasing government expenditure, GoB is imposing more and more taxes, vats and other tariffs on the people and businesses, it is creating great pressure on apparel manufacturers. Cost of fuel and power is also increasing drastically. Transportation cost, wages, and system losses everything is increasing rapidly. The overall situation is discouraging further investments in the sector.
- Depleting natural resources: Apparel industry is a resource hungry industry. Historically it moved to the places where resources like water, energy, and manpower have been widely available and cheap. Bangladesh apparel industry is quickly depleting its natural resources. Once the country was known that it is floating on gas and oil, now the country is becoming dependent not only for oil but also for gas. If this trend continues, the cost of resources will continue to grow. And then businesses will look for value-adding other options for using their resources. Textile and apparel industry will suffer if it can’t make sure transforming as a high-value The industry is polluting Bangladesh weather rapidly which has a great cost as well.
- Slow business processes: The apparel world moves very fast with the concept of fast fashion. Companies who were planning 1 year or 6 months ahead now wants to refill their stores in every 2 or 3 weeks. And so ‘Speed of businesses has become very crucial now. To reduce lead time of shipment, Bangladesh needs to expedite its commercial and logistics processes. Even though companies reduce manufacturing lead time drastically, they are suffering from slow business processes in management within the company and out of the company activities. Slow government services are affecting greatly.
- Lack of global integration: Bangladesh is a good place for foreigners in getting the job And that’s why many global companies have opened their offices and operations here to manufacture things they have selected for Bangladesh. The engagement is still very unilateral. The country could not yet set a comprehensive vision, that’s why could not help her to build trustworthy meaningful relationships with key international countries. And Bangladesh could not decide what the country will do and don’t know how it will do that. Most of the time country only went with the trend. As per as the apparel industry is concerned, it is the need for global apparel brands that helped to build the sector. Bangladesh was never in the driving sit. So, in the future, if any major change comes in the global arena, the country won’t be able to drive itself to its target. If Bangladesh had a trustworthy consistent and respected partnership with some countries, the country could achieve some strategic partnership and investments that could help the country in mitigating raw materials and other backward and forward supply challenges.
- Poor infrastructure: Even though currently Bangladesh is investing a lot in infrastructure projects, the country is far behind in infrastructure in compared to its competitor countries. Unless the country can remove its road and port congestions, it won’t be able to achieve the goal. Professionals and workers working in the apparel industry are wasting a considerable amount of time on the road for bad traffic.
- Lack of diversity: The country’s apparel export is not diversified. It heavily depends on few products and few countries. Bangladesh needs to invest a lot in doing both product and market diversification. Due to fast fashion trends, the country has to find out growth opportunities on the product ranges other than high volume low price products. Due to the uncertainties in Europe and the US, the country has to increase its export to the emerging Asian countries.
- Identity crisis: Bangladesh is known to the global arena that it is a place for producing volume orders at a low Due to this reputation, the country is not getting the right price for the value-added products. Unless the country has a planned and focused branding plan, the country won’t be able to attract high-value quality and fashionable items. To secure a radical growth, Bangladesh and its companies have to rebrand them with a deliberate control of reputation and market positioning.
- Political and economic instability: As the governments are being challenged in every 5 years, and as the country doesn’t have a strong stable and popular government, political uncertainties are very common in Bangladesh. It badly affects the growth as it affects the policies, economic movement, and
- Supply uncertainties for raw materials and intermediaries: Even though Bangladesh is in textile and apparel exports for about 40 years now, Bangladesh is heavily dependent to others for its key raw materials like cotton and other intermediaries like fabric and accessories. Now the country should increase its capacities in a non-cotton area where it could be able to build its own raw materials production. Bangladesh should invest more in transforming its jute into value-added textile and fashion products.
- Technology and management skills: Even though Bangladesh is producing a huge number of graduates every year in the area of textile and apparel, the quality of education is still a question. Even though about 4.5 million people are working in the sector the quality of management is yet to improve. Even though the country has installed state of the art technologies, the optimum application is yet to achieve.
As we have identified 20 points in this article and in the previous one. Now it is time to work very fast but effectively to take the country towards achieving 50 billion USD yearly apparel export within 2021.