Bangladesh’s RMG exports will decrease in the short term due to declining demand in the global market and various challenges in the local market. However, from next year, this sector will turn around again. Exports will grow at an average of 5.3 percent annually. In that, the export of RMG in 2026 will stand at $56 billion. This forecast has been highlighted in a research report of CAL Bangladesh, an investment banking and brokerage house in the country.
CAL is a leading Frontier Markets Investment Bank based in the UAE with its roots in Sri Lanka.
According to CAL Bangladesh’s forecast, RMG exports will decline by 9 percent this year. But next year there will be 8.4 percent growth. Export growth will be 7.2 percent and 6.7 percent respectively in the next two years.
Three factors will influence the growth of RMG exports from next year. These are; increased investment in man-made fiber apparel production, shifting orders from China, and market and product diversification.
73 percent of all clothing sold worldwide is made from man-made fibers (MMF) and the remaining 27 percent is cotton yarn. However, only 26 percent of Bangladesh’s exported garments are made of man-made fibers.
Although Bangladesh is moving fast to catch the market, investment in the textile sector in the production of synthetic fiber fabrics has increased by 10 percent from 2017 to 2020. Again, the import of artificial fibers increased at an average rate of 9.1 percent in the seven years before Corona.
On the other hand, foreign direct investment (FDI) is increasing along with domestic investment in synthetic fibers. In the last four years, South Korea invested $379 million, Hong Kong $368 million, and China $289 million in synthetic fibers.
Meanwhile, according to the report, buyers in the United States and Europe are reducing their dependence on China for various reasons including rising wages of garment workers, the trade war, and the zero Covid policy. In the five years from 2016 to 2021, China-made clothing lost 10.6 percent market share in the United States. On the contrary, the market share of Bangladesh and Vietnam increased by 2.2 percent and 4.2 percent respectively.
During the same period, the average export of Chinese-made garments to the European Union (EU) decreased by 1.7 percent. And Bangladesh increased by 3.2 percent. Vietnam’s garment exports increased by 3.7 percent.
The report also said, from 2012 to 2022, the wages of Chinese workers increased by 5.97 percent on average in 11 years. Last year, the minimum wage for workers in Shanghai, China was $375 a month. At the same time, the minimum monthly wage for garment workers in Vietnam was $198 and $75 in Bangladesh. That means the wages of workers in China are 5 times higher than in Bangladesh. This low wage of workers will keep Bangladesh ahead.
On the other hand, Bangladesh’s garment exports are increasing in non-traditional markets. At present, the share in the non-traditional market is 8 percent, but it will increase to 10 percent in 2026. Again, diversity in exports is also increasing. Trousers and T-shirts accounted for 62 percent of the country’s total apparel exports in 2012-13. In the last financial year, it decreased to 57 percent. That means apparel entrepreneurs are focusing on exporting garments that add more value.
According to a CAL Bangladesh report, global GDP growth is likely to slow down this year due to the Russia-Ukraine war. In addition, the increase in the price of fuel, oil, gas, and electricity and high inflation, will also reduce the export of clothing. However, the devaluation of the taka against the dollar and a fall in cotton prices will provide an opportunity to ease that pressure.