Amid the COVID-19 pandemic, readymade garment (RMG) exports from Vietnam – one of the top apparel exporting nations in the world – have taken a dip.
In contrast, the country is doing better in fetching better prices than its competitors – especially Bangladesh. The price gap is more than double.
Although compared to Bangladesh Vietnam is a newcomer in this industry. But has Bangladesh mostly remained in the basic items. Whereas, Vietnam is strong in manufacturing outerwear for people living in cold climates alongside high-quality blazers and woven formal shirts and trousers in the EU and US markets.
Which has given the country an edge over Bangladesh in fetching better prices.
A Centre for Policy Dialogue (CPD) recent research showed the difference. The difference is common in 2 major export destinations – EU, USA – of both Vietnam and Bangladesh.
In the EU, for every 100 kg of t-shirts, Vietnam made apparel fetched US$2,157.90 last year, while Bangladesh fetched US$1,091.50.
While in the US, the scenario is almost similar. CPD says a critical look into the matter reveals a list of factors behind this sorrowful state. Among the most noticeable factors, the quality of Vietnamese fabrics being significantly better and a segment of its public desire for high-end products.
Khondaker Golam Moazzem, the CPD’s research director says, “Other aspects are also at play, stating better prices in the major markets. Like, around 75% of an RMG item’s raw material is fabric and rest accessories.”
“As Vietnamese apparel manufacturers use higher quality fabric, it fetches better prices from buyers,” he explained.
Plus, Vietnam has a higher number of upscale product brands and retailers, he added.
Moazzem continued, “This results from a better country image, a higher ranking in the ease of doing business index of the World Bank, and the inclination towards compliance, human rights, and environmental protection practices.”
“Vietnamese apparel makers focus on the upmarket while manufacturing garments, though on a limited scale. Hence Bangladeshi RMG makers need to mass manufacture upscale garment items to get better prices and for more export,” he stressed.
Vietnam has various prodigious advantages at its disposal than Bangladesh. For example, Vietnam has a lesser lead time, exporting garments to the EU in 30 days, whereas Bangladesh takes 90 days.
“Bangladeshi garment suppliers suffer from the lack of a deep seaport, and having one could have reduced business operation costs and delivery time,” said AK Azad, managing director of Ha-Meem Group.
Not to mention, it makes good use of its highly available, top-quality raw materials, he added.
RMG suppliers from Bangladesh ache from the lack of a deep seaport, which could surely have lowered business operation costs and delivery time, Azad said.
“We need to improve our products because buyers want to do long-term business with local suppliers if they are satisfied with the initial work orders.”
“The apparel buyers do not want to alter their sourcing because of the pandemic,” he said, adding that customers were prepared to pay higher prices for quicker deliveries.
KM Rezaul Hasanat, Chairman and Chief Executive Officer of Viyellatex Group said, “The country image was a very important factor when fixing prices of garment items. And the same could be said for raw materials.” Also a top garment exporter of the country.
Adding that, many high-end Chinese garment manufacturing units have relocated to Vietnam, which acted as a big factor in securing higher prices for Vietnamese apparel.
Bangladesh RMG industry is comfortable in basic items such as t-shirts and trousers, for which it can be very simply understood why prices of complicated garment items are higher than the basic items, he said.
While Vietnam edging past Bangladesh due to its value-added product manufacturing that can be deemed as complex when trying to get them integrated into mass production lines, anonymously said the Country Manager of a European retail giant in Bangladesh. He refers to examples such as jackets and blazers. Where Bangladesh has only 8 blazer-making factories, while, in Vietnam, it is countless.
Not to mention that Vietnam also manufactures a lot of sportswear, and their prices are very high. Thus, the usual prices of Vietnamese apparel items are high.
The Country Manager added further that nearly all globally famous sports brands and retailers source sportswear from Vietnam, while Bangladesh is still measured as an optional supplier.
Kazi Iqbal, a Senior Research Fellow at the Bangladesh Institute of Development Studies (BIDS) said, “Bangladesh does have factories adding value to products and availing higher prices from renowned brands and retailers. But their numbers along with the output volume are low.”
Iqbal said Vietnam exports a high volume of high-end garment items to brands as they have the capacity. Moreover, many foreign companies are operational there manufacturing such products. Moreover, Vietnam has superiority over fabric quality, country image and timely deliveries.
In the aspect of country image, Rubana Huq, President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said, “The country image is of a supplier of products in the lower price range. The country also lags in producing value-added products. We are still concentrated on cotton and not diversifying to manmade fiber-based produce.”
Rubana Huq added that “While our labor is competitive and we have overcapacity, Vietnam gets to pick and choose and have more value addition. While we have the compliance costs, we also have to cope with various demands from time to time.”
With growing production costs (30% up in the last 5 years), Bangladesh can’t contest with Vietnam, which ranked 70th out of 190 countries in the latest Ease of Doing Business Index.
Regardless of moving up 8 notches, Bangladesh ranked 168th.
The BGMEA President sadly added, “We experienced a 5% price dip in the last couple of months alone.”