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Continuation of subcontracting is call of the day

Currently, Bangladesh is the second-largest garment exporter worldwide after China. Bangladesh’s share in the global apparel market is 6.40%.

Last fiscal year Bangladesh’s garment export was $34.13 billion and contributed more than 84% in the national export.

subcontracting in-BD RMG INDUSTRY
Figure 1:  If we want to make the garment business sustainable we need to make a lot of new entrepreneurs to generate jobs for workers.

The garment sector’s contribution to the national GDP is also more than 15% with employing 4.4 million unskilled, semi-skilled and skilled workers. All those figures are exciting for the nation.

However very people are aware of the country’s such big achievement in the garment sector which mainly has been lifting the economy to a new height.

The garment sector largely contributed to the achievement of GDP growth by 8.13% last year.

It would not be surprising if we say such a lifeline of the economy has been falling into trouble soon as the export earnings have been going down in the last consecutive three months, in the first quarter of the current fiscal year.

Garment export fell 1.6% between July and September compared with the same period of the last fiscal year.

Experts, exporters and manufacturers have been saying that the shipment of apparel items has been declining mainly because of poor compliance, the poor capacity of the factories and shut down of some small and medium factories over the last few months.

Some 59 small and medium garment factories were closed over the seven months and some 25,900 workers lost their jobs. Most of the small and medium factories were closed because they were unable to pay the workers as they were not competitive with selling garment items but following strict compliances.

BD RMG challenges
Figure 2: Recent challenging scenarios of the Bangladesh apparel industry.

But at the same time, new factories did not come to the sector at the expected level. And also could not generate employment for the workers.

There so many reasons for not coming of new ventures in the sector. Primarily low profit is responsible for not coming up with new factories in the sector as the international retailers and brands always downward pressure for a price on the manufacturers and exporters.

Moreover, the cost of production has gone high in the sector for which the newcomers can hardly make any profit. Given the situation, the bigger units are capable to make a profit although the profit margin is lower. If we want to make the garment business sustainable we need to make a lot of new entrepreneurs.

Subcontracting is one of the most important platforms for creating a lot of new entrepreneurs in the sector for making it sustainable.

In the early stage of garment business in Bangladesh, many of today’s big companies were subcontractors of big factories.

Gradually they started also direct exporting to the buyers and finally became a successful entrepreneur and have been expanding their business.

However, after the two industrial disasters – Tazreen Fashions fire and Rana Plaza building collapse the subcontracting was almost banned in the ground of safety.

However, subcontracting was allowed to a limited scale to the own factories of owners. Important thing is that nobody even thought of the creation of new entrepreneurs through subcontracting before banning it.

The banning of subcontracting is not a solution. We need a guideline for running subcontracting factories. The garment manufacturers, leaders of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Bangladesh Textile Manufacturers, different trade bodies, retailers and brands and chambers should formulate the guideline so that subcontracting can be allowed in the sector. Subcontracting will create both entrepreneurs and skilled workers.

The guideline will help to manage the safety standards at the factory level, price negotiation with the main contractors, access to finance and other trade-related issues for the subcontractors. Because those small startups or small factory owners will have a place to do the business if the guideline is given to them with adequate facilities.

 

Guidelines BD apparel subcontracting

Even a special zone in the industrial belts or in the economic zones can be allocated for those small businessmen so that they can contribute in the supply chain and feed the bigger units in the whole business system.

Subcontractors will mainly produce in the basic garment segment. Because, currently, less production of basic garment items is also responsible for the slowdown of export of garment items.

For example, currently of the total export of garment items from Bangladesh, nearly 40% is high-end value-added garment items for upscale customers.

As a result, many factories have been leaving the production of basic garment items. As a result, other countries, especially Myanmar, Cambodia and Vietnam have been gaining the work orders for the basic items.

Those competing countries have been receiving work orders those which are shifted from Bangladesh and China, two major garment producers worldwide.

Had the subcontracting factories in operations in Bangladesh could have catered those work orders of basic items and could have created a lot of new entrepreneurs and skilled workforce and finally a lot of export earnings.

For instance, even a few years ago total garment export from Myanmar was below $500million, but within five years the earning from apparel shipment from Myanmar stood nearly $5billion.

Myanmar has targeted to export garment items worth $10 billion by 2024. And it is possible as Myanmar started a big way of grabbing more garment share in the global fashion markets.

Interestingly enough, Myanmar has been exporting mainly the basic garment items. They are also involved in the subcontracting business in the garment items.

Currently, like China, Vietnam is also a strong supplier of value-added garment items.

Possibly, Vietnam will cross Bangladesh in the global garment business as the export from Vietnam is growing at a faster rate. Interesting enough, even Vietnam has been producing the basic garment for which the export earning is growing in Vietnam.

So, Bangladesh should also continue the production of basic items strongly with the production of value-added garment items. Especially, the micro, small and medium garment factories those which are subcontractors will produce those basic items. Such an initiative will help to grow the garment items.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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