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How to gain back the lost second top apparel exporting country status

The country’s ready-made garment (RMG) sector has lost the long-worn crown of pride – the second top apparel exporting in the world. Vietnam has snatched the second top position in the RMG export from Bangladesh in the world market.

Vietnam-Bangladesh-global-apparel-market-share

However, for several years now, Bangladesh has been lagging in the international market. The decline has accelerated rapidly during the COVID-19 period.

According to World Trade Organization (WTO) figures, in the last two decades, Vietnam has widened its manufacturing capacity. In 2000, the country’s share in global garment exports was 0.9 percent. At that time, Bangladesh had a 2.6 percent market share.

Over the next decade, Vietnam’s market share has tripled, but Bangladesh’s has grown just over one and a half times. Vietnam currently holds 7.4 percent of the global RMG market share. Whereas, Bangladesh has a 6.3 percent share.

Bangladesh-Vietnam-apparel-export-growth-10-years

Last year, Vietnam exported 29 billion, while Bangladesh exported 28 billion worth of apparel. In the past 10 years, Vietnam has grown by an average of 11 percent and Bangladesh by 7 percent.

In Bangladesh’s case, the country is lagging despite government incentives and various facilities and duty-free market access to many other markets, including the European Union (EU).

One of the main reasons for falling behind in the competition is that Bangladeshi entrepreneurs have been exporting cotton-based basic or cheap clothes for decades. T-shirts, trousers, shirts, sweaters and jackets account for the lion’s share of the total garment export earnings. 74 percent of Bangladesh’s garment exports are cotton.

Although there is a huge demand for synthetic fiber clothing all over the world. Around 78% of fashionwear are manmade fiber-based. Bangladesh is lagging in this regard.

Vietnam is far ahead in the manmade fiber segment. They are making a variety of garments – among those products; synthetic fiber clothing is the most common – without being stuck in five basic products like Bangladesh.

How-Bangladesh-gain-back-second-top-apparel-exporting-country-status
Figure 1: Bangladesh needs to grow capability in the manmade fiber segment to fetch better prices.

US-China trade war and other factors

Entrepreneurs in the garment industry say many US buyers are withdrawing orders from China because of the bilateral trade war.

China faces a global political backlash due to forced labor in Xinjiang Uyghur Autonomous Region (XUAR). Biden administration penalized Beijing by banning the import of cotton and other products.

In recent months, the western governments have toughened their attitude toward companies operating in Xinjiang. And retailers and brands are shifting away from China.

Some portions of orders relocated to various apparel-manufacturing countries like Bangladesh, India, Myanmar and other countries. However, the biggest slice of orders went to Vietnam. Because only Vietnam has the most integrated capacity to do the value-added or high-priced, variety of clothing orders from China.

Last year, when the whole RMG manufacturing supply chain was reeling from the COVID-19 pandemic, Vietnam’s apparel exports fell only by 6%. Whereas, Bangladesh’s RMG export has decreased by a staggering 15 percent.

Foreign investment in RMG sector

Meanwhile, garment industry leaders have been discouraging foreign investment in the sector. However, they have been talking about bringing in foreign investment in the textile sector for several years. However, it is not progressing vigorously.

As a result, Bangladesh is not able to produce new products on a large scale outside of cotton-made clothes.

Bangladesh-RMG-investment-machinery-produce-synthetic -fabrics
Figure 2: To go back to second place, Bangladesh’s textile and apparel industry needs to go for more expensive garment production, which some entrepreneurs are already starting.

Vietnam, on the other hand, has created a favorable environment for foreign investors. Most of their investments in the garment and textile sector are foreign.

According to Vietnam magazine Vietnam Briefing, in the first 11 months of 2019, 184 garment factories in the country received 1.5 billion in foreign investment.

One-third of the investment came from Hong Kong. 2.7 million came directly from China. In that year, the country’s total garment and textile exports were 39 billion. Among which 70% earning came from foreign companies invested in the country. In all, Vietnam has more than 6,000 garment and textile factories.

Due to COVID-19, garment factories in Bangladesh were closed for three to four weeks last year. As a result, exports have nosedived. While RMG entrepreneurs in Vietnam did not face such problems.

Bangladesh RMG industry will need huge investment in the manufacturing industry, especially in the production of synthetic fabrics.

However, the Bangladeshi textile and apparel entrepreneurs hope to turn around again this year.

Meanwhile, new dangers of Least Developed Countries (LDCs) graduation awaits. If all goes well, Bangladesh will be removed from the list of LDC in a few years.

Then the existing duty-free facilities will be no longer available. On the other hand, last year Vietnam concluded a duty-free trade agreement (FTA) with the EU. As a result, Bangladesh will face stiff competition in the EU market and other big markets, unless Bangladesh gets the GSP Plus advantage.

Industry leaders opined that it is only natural that Bangladesh will lag behind Vietnam. As the country has no long-term plan.

To go back to second place, Bangladesh’s textile and apparel industry needs to go for more expensive garment production, which some entrepreneurs are already starting.

However, to move fast, the RMG industry will need huge investment in the manufacturing industry, especially in the production of synthetic fabrics. For this, foreign investors including China should be invited.

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

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