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Working together to regain exports

Bangladesh’s apparel industry, the lifeline of the economy with an 83% contribution to exports, has passed the gloomy year 2020. In its over 35 years of journey, the apparel sector suffered the worst crisis in 2020 as the COVID-19 pandemic has brought a devastating impact on the sector to drag the export earnings down.

Right after June 2020, RMG export has witnessed a gradual growth for a due resilience of manufacturers and associated people in this country. Export started to bring back a noticeable turnaround from August 2020.

Working-Together-Regain-Exports-TexTIMe
Figure 1: Textile today enquired the top two captains of the industry as to how exports can grow again in the episode titled ‘Working Together to Regain Exports in TexTIMe.

A concern surfaces now that buyers are offering so low prices that the profitability of factories are declining day by day. In these squeezing prices, some are yet being compelled to take orders without prioritizing the profit but simply stay in operation.

In the case of sourcing major raw materials, factories are facing inconvenience due to the price hike and delay of imports. The price of yarn, in particular, has soared in the last couple of months that pushes apparel manufacturers into a more challenging situation.

y-o-y-RMG-export-comparison

Despite negative export growth, we can see ample opportunity for the industry in the days onward. BD’s competing countries are also facing trouble to stay stable. Buyers may not secure better options than that of Bangladesh overnight. China is desirous to offload apparel volume due to the concentration of value-added items for the last few years. Myanmar is also in political turmoil that may refrain them from the positive hope for apparel export. Moreover, financial and other policy supports from the government can also help the sector to grow.

Textile today enquired the top two captains of the industry as to how exports can grow again in the episode titled ‘Working Together to Regain Exports in TexTIMe on 27th June 2021. Faruque Hassan, President, BGMEA and Mohammad Ali Khokon, President, BTMA were present in the webinar as panelists where Tareq Amin, Founder & CEO, Textile Today was the moderator.

Moderator denoted the impacts of the COVID 19 with the facts on the textile and apparel industry of Bangladesh in the inception of the webinar. Tareq asked both panelists why textile factories were required to remain open despite the worsening COVID infection rate. Both BGMEA and BTMA Presidents observed that the age range of the RMG workforce was between 18 to 35 years. They have comparatively more resistance capacity and immunity in the susceptibility of COVID. Factories could manage well of sanitization, wearing masks and necessary arrangements to be protected from COVID.

Faruque-Hassan-BGMEA
Figure 2: Faruque Hassan, President, BGMEA.

Moreover, the workers left Dhaka due to the closure of factories in the last year which rather created more susceptibility to infection. BTMA President observed that the infection rate among garment workers was very low in comparison. Hassan informed that they install three PCR labs in Dhaka and Chittagong where workers can do tests free of cost. They observed that the buyers’ countries eased their social life and reopened markets as the COVID situation improved. The demands of clothes got back – factories responded to orders accordingly.

BGMEA President observed that global consumption and usage have declined as no country in the world stays in a better position due to COVID 19. He recalled that some orders were canceled in the last year; among them, some backed later on. Several factories could not get their payment because some buyers were got bankrupt in the meantime. Factories had to take orders yet with estimated losses to retain the workforces, to repay the banks and to run operations just to survive, Hassan mentioned.

Khokon observed that it was a perception in the past for Bangladeshi factories –“we do stitch only”. This perception is no more relevant now as 70 percent of the demand of RMG gets fulfilled by local textiles for knitting and woven. He expressed that “we, the BGMEA, BTMA, and BKMEA are brothers –not stepbrothers not cousins”. All are complementary to each other.

Mohammad-Ali-Khokon-BTMA
Figure 3: Mohammad Ali Khokon, President, BTMA 

Hassan informed that export size would be USD 31 billion in the fiscal year 2020-2021. He forecasted that RMG export will be getting back to the previous level (USD 34 billion) in the next year. And after October 2021, the industry will see the normal rhythm of exports.

In terms of ethical manufacturing, Bangladesh scored as high as secured second position after Taiwan, BGMEA President mentioned. Factories invested a lot to secure a workplace in the last couple of years that fetched us international recognitions. He also expected that there will be more orders in the future because of the readiness of factories. He showed his concern of poor pricing from buyers despite putting all efforts to make ethical manufacturing conditions.

Replying to the question ‘How the backward linkage or primary textile can support of regaining export of RMG’ asked by the Moderator Khokon shared that they contributed USD 18 billion out of USD 28 billion to this year including 95 percent of knit fabrics. He recalled that in the last year, the contribution of backward linkage (yarn & fabric) was USD 23 billion out of USD 34 billion. He observed that backward linkage now supports 65 percent of the total demand for yarn and fabric.

BTMA President observed that the price of cotton increased due to the interruption of harvesting fiber. COVID hit the farming that eventually pushed the cotton price up.

The gap of demand and supply also leads to an increase in both cotton and organic cotton prices from 100 percent to 200 percent worldwide. He shared that the local market’s demand for clothes also shocked due to COVID. Bangladesh’s market size is USD 8 billion (survey conducted by BTMA, Tariff Commission and Bangladesh Bank).

global-apparel-export-market-share-top-5-countries-2019

BGMEA President observed that primary textiles should be price competitive. They should compete with the international market for yarns and fabrics.

In the query of achieving of 50 billion target – Hassan observed that there were two reasons for lagging behind the reaching to target:

  1. Global fashion market shrunk in 2015, and there was no growth in the later there-four years. Moreover, it slummed 12 percent in 2020.
  2. Global demand for non-cotton items was 70 to 75 percent whereas we export cotton items 75 percent alone out of total export. We require to adopt it to meet the gap. Khokon observed that if we could do well in the woven sub-sector, it will be easier for us to reach the 50 billion milestones.

He observed that the availability of gas and captive power were vital to set up a woven factory. Though, woven factory requires big investment – Chinese and local investors are ready to invest. The new economic zone should arrange a separate zone for textile factories. He added that Bangladeshi Denim factories are already performing well in quality, SCM and other parameters.

Global apparel export market share of top five countries
Country 2015 2016 2017 2018 2019
China 39.30% 36.40% 34.90% 31.30% 30.08%
Bangladesh 5.40% 6.40% 6.50% 6.40% 6.80%
Vietnam 4.80% 5.50% 5.90% 6.20% 6.20%
India 4.10% 4% 4.10% 3.30% 3.50%
Turkey 3.40% 3.40% 3.30% 3.10% 3.20%

The woven sub-sector was growing before COVID. To explain the recent situation of the woven sector Hassan said the global consumption of woven declined due to COVID but it would be increasing in the coming years.

They could do well in woven with the product diversification, particularly in the items made of manmade fiber. There was a ready market for these segments, Hassan added.

In response to a question from the audience regarding China’s current factor and new market explore like the Kingdom of Saudi Arabia (KSA) BGMEA President said that China’s policy of offloading RMG was helping us, we were also doing homework for exploring new markets like KSA. He put his stance on exploring the virtual market as well.

In case of efficiency, Bangladesh installed world-class technologies, BTMA President pointed. He observed that there is a difference in efficiency measurement between primary textiles and garments where the former one was capital and machinery intensive and later one was labor-intensive.

BGMEA is going to set up a center of efficiency and innovation where they would work for increasing efficiency and adopting innovations, Hassan informed. He observed that factories should concentrate on diversification along with specialization of some areas, he replied in the question of growth strategy factories can take.

Amin posted that “the way we negotiate with the government, can’t we negotiate with buyers for getting higher prices”. Hassan replied that we need to work here to negotiate for better prices though he also linked the matter of demand and supply.

In the query of areas of working together- Khokon termed that they were working together for ensuring compliance, workers’ safety, government policies, rules and regulations, several duties (customs, tax, VAT, etc). Hassan expected that both BGMEA, BKMEA and BTMA would work together to market garments, research and explore new markets.

In reaction to a question about difficulties in the entrance of new entrepreneurs, Hassan emphasized on reasons that triggered the difficulties: First, the required investment to set up a garment factory was much higher than that of 20 years back. Secondly, some factories having common items reached overcapacity. However, we always welcome newcomers into the industry.

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

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