It is Vietnam, the South Asian nation, which reaped the highest benefits from the US-China trade war, through exports of apparel goods in 2019 that hit the economy of both countries.
Throughout last year, China’s apparel exports to the US registered a 9.10% fall or $2.50 billion to $24.88 billion against $27.37 billion a year ago. Of the $2.5 billion export deficit in the US market, Vietnam’s solely bagged an increase in export orders of $1.34 billion or 54% or to $13.56 billion.
Over the same period, Bangladesh despite being the second-largest export of apparel products in the global market after China managed to grasp only 21.30% or $531 million to $5.9 billion in the US.
In the last year, Bangladesh’s apparel exports to the US market gained by 9.10% to $5.93 billion, which was $5.40 billion a year ago.
The increased earnings from apparel shipments to the US came from previously placed work orders and due to the trade war between China and the US, said MA Jabbar, Managing Director of DBL Group, a leading garment exporter.
Although Bangladesh seemed to benefit from the trade conflict, the garment export may come under pressure in the coming months because of the fast-spreading coronavirus in the world and in particular in the developed economies that are also the country’s major export destinations.
“Our exports may also be in trouble if the coronavirus situation in Europe and the US does not improve soon. The crisis being faced by these two markets [the US and China] has only deepened after the outbreak was declared a pandemic,” he recently said a national newspaper.
Jordan, an emerging competitor of Bangladesh bagged nearly $300 million or 12%, while Cambodia earned $271 million or 10.87% and India $259 million or 10.37% from the Chinese losing market in US.
However, China still remain the number one exporter to US with 29.68% share worth $24.88 billion, while Vietnam holds second position with 16.18% share of $13.56 billion and Bangladesh is the third largest exporter with 7.08% market share of $5.9 billion in the last year.
Push factors for Vietnam gains
Why Vietnam gains the highest is a question and the only answer comes first is a diversified export basket. The second issue what the exporters are blaming the losing competitiveness to its competitors.
The makers also explained it is because of the appreciation of Bangladeshi currency against the US dollar and the rise in production cost caused by new wage structure and surge in utility charge.
“Vietnam is closer from China also it is mostly Chinese investment where product development happened from China and production in Vietnam,” Ziaur Rahman, country manager of Swedish retail giant H&M for Bangladesh, Pakistan and Ethiopia, told Textile Today.
That means, faster lead time and strong product development have helped Vietnam to gain the highest from the US-China trade war, said Rahman.
However, exporters blamed the country’s business environment for the lesser growth in the US markets compared to its close competitor Vietnam.
“Ease of doing business and cost of doing business, Bangladeshi business people are lagged behind comparing to Vietnam in capturing the US exports. As a result, Bangladesh failed to grab more market share than its competitions as they cannot take orders and deliver in time,” former BGMEA Vice President Faruque Hassan told Textile Today.
What the manufacturer needs flexibility in doing business and stopping hassles in delivering imported goods.
On top of that, Vietnam is very strong in innovation and producing fancy items made of manmade stable fiber, which gave them extra mileage in capturing work orders relocating from china, said Hassan also managing director of Giant Group.
How to gain more
“In Products category, Vietnam is much more diversified than Bangladesh. It has done well because of its diversified export basket. Considering the global situation, the most important thing now is diversification,” Zahid Hossain, former lead economist World Bank Dhaka office told Textile Today.
On the other, they are more prices competitive due to devaluation of exchange, while Bangladeshi taka is appreciated, said the economist.
Foreign Direct Investment (FDI) contributed lots to Vietnam’s capacity and its diversification. So, Bangladesh has to concentrate on product diversification and attracting new investment, which will help to transfer technical know-how, said Zahid.
On the other, Bangladesh improves its ease of doing business ranking and ensure quicker delivery of shipments to reduce lead time otherwise, the buyers will prefer to shift business to the shorter lead-time country, he added.