Here is, how to achieve the target
With record export earnings of $42.61 billion in the fiscal year 2021-22, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), has set a target to earn $100 billion by 2030 from the clothing products. In attaining the target of $100 billion export target, the sector has to earn $7.17 billion each year. Against 35.47 per cent growth in FY22, the sector also has to post an 11.26% annual growth in export earnings till 2030. The ambitious target was set at a time when the global economies are bleeding due to the Covid-19 pandemic impacts and ongoing Russia-Ukraine war.
On the other hand, the LDC graduation in 2026 will be another challenge for the exporters. This is because of possible duty free benefits withdrawal by the importing countries in the post-graduation period. Several researches showed, Bangladesh will have to range from 9%-12% duty after Bangladesh’s graduation to a developing country.
But it is not impossible to reach the target despite having the crisis and challenges as the sector has experience of 40 years with a skilled and dedicated as well as technology adoptable workforce. What the sector needs is a strategic plan and continued government policy support in the next eight years to touch the peak of success to earn $100 billion.
Non-cotton goods, technical textile will be game changer
When the exporters’ platform set the vision its President Faruque Hassan stated that it is possible to achieve as they are diversifying the products and markets with focus on non-cotton products. Also upgrading machinery and giving priorities on scaling and recalling workers.
Non-cotton products are the future of fashion. In achieving the target, there is no alternative to penetrate this segment gradually. As about 75 per cent export earnings of Bangladesh is concentrated on cotton products, there is a huge opportunity to grow in this segment. As per market watch research data, the global NonCotton Fabrics market size was $27.48 billion in 2021 and it is expected to reach $45.85 billion by the end of 2027, with a Compound Annual Growth Rate (CAGR) of 7.1% during 2021-27.
Meanwhile, another report showed the global Non Cotton Fabrics Market Size was estimated at $27.51 billion in 2021 and is projected to reach $44.50 million by 2028, exhibiting a CAGR of 7.11%. In the global fast fashion industry, over 78% of items are made from MMF and only 22% from cotton fiber.
Bangladesh is in the opposite direction and it produces 74% cotton products and only 26% are MMF-based. Exporters are increasingly entering into manufacturing products from manmade fibre (MMF) and synthetic as the demands are growing very fast But the pace of growth is not enough to grab more shares from the $27.48 billion market of non-cotton products.
In achieving the $100 billion export target, Bangladesh will highly rely on three important products such as mid-range garment items, MMFmade items and technical clothes including uniforms used by healthcare professionals and professionals in other service sectors. For increasing exports of non-cotton products, Bangladesh has to make more investments in the primary textile sector to produce required fabrics and yarn. Foreign investment and joint ventures could be a great tool, which will help to acquire knowledge from others.
Balancing knitwear and woven good exports
In FY22, export earnings from apparel products rose sharply by 35.47 per cent to $42.61 billion, which was $31.45 billion in the previous year. The sector contributed 81.81 per cent to the national exports. Of the $42.61 billion, knitwear products fetched $23.21 billion, up by 36.88 per cent from last fiscal year’s $19.91 billion, while woven items earned $19.39 billion, registering a 33.82 per cent growth. Knitwear products contributed much better than woven products.
Knitwear products contributed 44.56 per cent, while woven products 37.23 per cent. For sustaining the growth and to earn the $100 billion from the sector, there is a strong need to bring balance between woven and knitwear products. Knitwear products did well as the sector has a strong backward linkage and it can meet 85% to 90% demands of raw materials from domestic sources.
On the other hand, the woven sector can meet around 50% raw materials from domestic sources, which is a barrier to growth. To reduce the gap between the woven and knitwear sector, the industry people have to come up with new investments to improve capacity to supply raw materials from local factories.
Cash incentive is a must
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) sent a letter to the Commerce Ministry, demanding a 10% cash incentive on the export of non-cotton garment items. Exporters are new in this area and they need policy support including incentives against exports. The government should offer at least 5 percent cash incentives against exports and more duty free benefits for importing raw materials for this sub sector.
A file from the Commerce Ministry was sent to the Finance Ministry a month ago, recommending at least 5% additional cash incentive for the shipment of non-cotton garment items, which are made from manmade fibre (MMF). At the same time, the government has to continue existing cash incentives against exports of apparel goods. But there is a need for assessing the impacts of cash incentives.
Based on the findings, the incentives can be offered to new items and the amount could be changed.
New market exploration very crucial
As many as 71.37 per cent of Bangladesh’s apparel exports earnings come from EU and US markets. And the crisis in these markets poses a threat our exports earnings. On the other hand, exports to non-traditional or new markets are nearly 15 per cent. Among the non-traditional markets, only exports to Japan reached the billion dollar mark, while India and Australia are very close to reach as exports stood at $715 million and $812 million in the last fiscal year.
So, there is scope to grow non-traditional markets. And the promising markets are Japan, Australia, Russia, India, Brazil, and Malaysia. Due to proximity, there is a huge opportunity to grow in the South Asian market as the culture and clothing pattern are the same and Bangladesh enjoys duty free benefits. In addition to these, Bangladesh has to focus on the Middle East market.
Manufacturers should focus on these markets and develop products for these markets. Against a $10 billion exports market in Gulf countries, Bangladesh exports to the region are only about 367.49 million. So, penetration to the export market of United Arab Emirates (UAE), Saudi Arabia, Qatar, Oman, Kuwait and Bahrain will be a great option for Bangladesh to enlarge export value and volume.
Capacity and productivity improvement needed
The existing capacity and productivity is not enough to earn $100 billion by 2030. Compared to our competitors, the productivity is low and it is hovering around 60%-70%, while Bangladesh’s competitors’ workers’ productivity is between 90% and 100% percent. In remaining competitive in the global exports market, there is no alternative to increase productivity.
The manufacturers have to retain the skilled workers by offering retirement and other benefits. In addition to this, semi-automation and technology up-gradation is very crucial for improving productivity and capacity. Workers should be trained to be capable of running technology.
Research and innovation (R&D) is a must
Fast fashion industry changes its pattern every day. Consumer taste also changes rapidly. So, the sector people have to have a dedicated team to cope up with the fancy trend and retain the global buyers. Industry and academia can join hands in research and innovation for the clothing sector to take it to a new height.
No compromise to compliance
After the Rana Plaza collapse, Bangladesh’s RMG sector turned into the safest one. This gave a boost to buyer’s confidence, which needs to be retained for further growth. If buyers remain with Bangladesh exporters, there will be no challenge in reaching the target as the export oriented sector is buyer driven and they can take Bangladesh to a new level.
Buyers’ has a role to play
Global brands, retailers and buyers have also a responsibility to help Bangladesh reach the $100 billion target. It was a good initiative by the buyers to increase prices of finished goods to adjust the soaring raw materials price. It gave a cushion against the rising production cost caused by supply chain disruption due to Covid-19 and ongoing RussiaUkraine war.
In the coming days, the global brands and retailers have to ensure better prices and follow ethical buying practices while quoting prices for goods. This will give an ease to owners to overcome the cost related challenges and offer a better wage for the workers. However, the exporters have to ensure timely shipment of goods and ensure product quality to retain buyers’ confidence.
Bangladesh has many stories such as safety standards, green factories and good practices, to tell the global buyers and consumers. These have to be presented to the new and existing buyers to grab more shares in the export market by acquiring more work orders. According to BGMEA data, there are 165 green factories in the RMG sector certified by US Green Building Council’s (USGBC).
Bangladesh’s RMG sector has taken the lead in green manufacturing with 50 in the platinum category, 101 in gold, 10 in silver, and another four LEED-certified factories. Bangladesh has another opportunity to grow further as a good number of investors are relocating business from China.
To cash the opportunities, we have to attract investors also focusing on manufacturing goods China is leaving. Foreign investment should be allowed in the high end products, which will help to acquire knowledge from their expertise. On the other hand, the government should offer plots in the special economic zones to the foreign investors to produce high valued clothing products. In addition, the political crisis in Sri Lanka, Myanmar is also an opportunity for Bangladesh, which needs to cash through improved communication with buyers.