Export is booming, new investment in coming- what more to do achieving $100bn export target

  • Arif Uz Zaman

The purchase orders of Bangladesh made apparel are increasing in the international market. During July to March of 2023-24 financial year, readymade garments were exported worth $37.20 billion. This export is 5.53 percent more than the same period last year.

Of this, exports of RMG in January were $4.97 billion, the highest exports in a single month for the garment sector. Exports reached $4.49 billion in February, the highest for any February in the history. And exports in March were $4.34 billion, which is 11.57 percent more than the previous year.

Export is booming, new investment in coming- What more to do to achieve $100bn export target

Figure: Bangladesh's apparel exports need to continue to grow at more than 10 percent annually to achieve export earnings close to $100 billion in 2030.

Although Bangladesh's main export destinations, US and EU, are experiencing a decline in garment exports due to record inflation, Bangladesh were able to maintain a steady position. At present the two largest markets i.e., the European Union increased and the US market returned to a positive trend as the

New markets are playing a significant role in exports, have increased 10 times in the last 14 years. That is, it has increased from $849 million to $8.37 billion dollars. In the 8th month (July-February) of the current financial year, the export of garments to the new market has increased by 10.83 percent. According to industry insiders, garment exports will cross $50 billion by the end of 2024.

Upward Trend Continues

The upward trend in exports of over 10 percent has largely continued since 2018-19. In the financial year 2018-19, the export value of ready-made garments was $34.13 billion. The growth in that year was 11.49 percent. However, in the financial year 2019-20 due to the impact of Covid-19, garment exports fell to $27.95 billion but increased again by $3.5 billion to $31.45 billion in FY 2020-21.

In FY 2021-22, the apparel exports was boomed with a tremendous growth rate of 35.48 percent and jumped to $42.61 billion. Apparel 2exports increased by 10.27 percent to $46.99 billion in the next financial year 2022-23. If this trend of exports (more than 10 percent growth annually) continues, it is possible to achieve export income close to $100 billion in 2030.

Earlier, the export was $21.5 billion in 2012-13, $24.49 billion in 2013-14, $25.49 billion in 2014-15, $28.09 billion in 2015-16, $28.1 billion in 2016-17 and $30.6 billion in 2017-18.

Investments

Despite various adversities i.e., Covid-19, Russia-Ukraine war, fuel price hike and much interrupted supply and the Red Sea crisis, Bangladesh continued investment in this sector vigorously. According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), in 2023, 264 factories received new investment. In 2022, this number was 330. The data says that in the last two years, new investment has come in 594 factories in the country.

According to BGMEA data, 603 factories in the country have taken temporary membership of the organization in the six years from 2018 to 2023. Of these, 565 factories (an average of 94 per year) received permanent membership. Half of these factories have come up in the last two years, i.e. 2022 and 2023.

Export is booming, new investment in coming- What more to do to achieve $100bn export target

Meanwhile, in the midst of Bangladesh's bright prospects, the lack of skilled workers in China has increased the production cost of apparel made in the country. So Chinese investors are showing interest in Bangladesh and investing in textile and apparel sector.

Despite national and international challenges, progress in green industrialization continues. The number of LEED certified green factories in Bangladesh has increased to 214. 21 out of 23 LEED certified facilities with the highest score in the world are located in Bangladesh.

Investment and exports in the non-cotton sector are also increasing. Cotton made up about 74 percent of total apparel exports in FY 2020-21, which declined to 70 percent in FY 2022-23. New vistas of potential will open up in the non-cotton sector if proper and timely steps are taken.

The value addition capacity of the industry at the local level has increased, thereby increasing our flexibility on the one hand, we are able to offer a full package to the buyers, on the other hand saving foreign exchange and increasing employment.

Challenges

However, after 2026 LDC graduation, local production will have to go through a double transformation. Then both fabrics and stitching must be at local level to get GSP plus benefits. That’s why a lot of investment in the textile sector in the country has to be done now.

Besides, current double-digit interest rates along with gas and fuel price hike and dollar crisis are hindering production. The interest rate on term loans in the industrial sector has increased from 8 percent to 13.11 percent. Interest in trade and import sector was 9 percent till last June which has now increased to 13.11 percent. In the export sector, foreign currency loans were given from EDF at 2 percent interest which is now 4.5 percent. Also there is a shortage of skilled manpower in this sector which we can meet through on-the-job training and comprehensive training related to latest innovation in the sector.

Therefore, Bangladesh's apparel export growth should be maintained at more than 10 percent. Quick resolution of existing challenges can ensure the growth that is needed to meet the $100 billion target.