RMG sector poised to take a big leap forward

Faruque Hassan | Published: October 26, 2018 20:53:04 | Updated: October 30, 2018 21:15:36


The apparel industry is a solid testimony to the resilience of Bangladesh as a nation. Since the beginning of our journey in apparel manufacturing almost 40 years ago, the industry faced many crossroads and overcame those quite successfully and stood strong with the dynamism of entrepreneurs. The tragic building collapse at Savar in 2013 shook the whole nation and brought the country under the global spotlight. After that unfortunate incident, future of the RMG industry appeared to be in serious challenge. 

But the darkest cloud also has silver linings. The journey of transformation toward sustainability has been phenomenal and the industry has once again proved its resilience thanks to the brands, retailers, ILO and other development partners for the tremendous support. The recent export performance of the industry also reveals the silver lining. If we look at the export data of last 5 fiscal years, we see that in FY 2012-13 RMG export was 21.51 billion USD, while in FY2017-18 export reached 30.61 billion USD. The compound average growth rate during this period was 7.31 per cent. In the FY 2012-13 our export growth was 12.71 per cent but in the next fiscal the growth increased to 13.83 per cent, followed by growth of 4.08 per cent in FY 2014-15 and 10.21 per cent in FY 2015-16. The export growth in FY 2016-17 was the lowest in 15 years which was as low as 0.20 per cent. Fiscal year 2017-18 was a year of come back as the sector registered 8.76 per cent growth. Growth in the first quarter of the current FY 2018-19 is 14.66 per cent. Altogether, it was a challenging time yet a period of huge turning around.

The World Trade Organisation data shows a picture of faltering global apparel trade, especially since 2015. The trend in global apparel trading was steadily growing till the year 2014 but after that a sharp depression was observed in 2015. In 2014, global apparel export was 483.28 billion USD which declined to 445 billion USD in 2015 and a further fall was recorded at 443.71 billion USD in 2016. So, it was not at all a usual time to retain the market share given the uphill struggle our industry was facing. However, global apparel export had a slight recovery in 2017 with 454.47 billion USD, but it still shows a significant downward trend in apparel demand. Being the second largest apparel exporting country, this slowdown has certain impact on our industry and in its competitiveness due to declining demand.

After the Rana Plaza incident, the RMG sector faced numerous challenges in the area of workplace safety. Already a good number of factories has been closed down. Initially, it looked like the global buyers were not confident due to safety concerns and our capacity to deal with the occupational safety and workers' rights issues. However, the progress the industry has made in last few years with positive response from the government is highly loadable. Through the collective efforts of all stakeholders Bangladesh has emerged as home to one of the safest apparel factories in the world. It is the only example in the world where every single factory has been inspected and all the safety reports have been made available in the public domain. Even the global apparel brands and retailers mention Bangladesh as one of the most sustainable place for sourcing apparel at the moment. According the CPO survey of McKinsey & Co, Bangladesh is the most preferred apparel sourcing destination after China.

The rights and dignity of the workers are priorities of the government and for the industry at large, because without the workers the industry cannot be imagined. For their better living the government recently raised the minimum wage to $96-$97, which is more than many other developing countries exporting apparel. Besides, the government, industry and worker's organisations are working hand in hand to ensure a harmonious industrial relation.

In addition to safety, Bangladesh RMG industry is also leading environmental sustainability in the apparel supply chain as we have the most number of LEED certified green factory buildings in the world. We have 73 LEED certified green factories of which 20 are Platinum rated, and another 300 factories are preparing for the same.  Moreover, Bangladesh government has taken an initiative of establish 100 Economic Zones by the year 2030. The next generation factories will be housed there, it shows that a huge capacity is being added to the existing capacity of Bangladesh. No doubt, the industrialisation in Bangladesh is now taking a turn towards a more planned, organised and clear direction.

Looking at what the sector has achieved so far and the prospects we have in the global market, it is clear that the industry is mature enough to take a big leap forward. The RMG industry has a huge opportunity to grow further and contribute to overall economic growth of the country. While our share in the global apparel market was 4.5 per cent in 2012, in 2017 it reached 6.46 per cent. So, not only our export is showing a promising growth trend but also our share in the global market is picking up.

Now is the time to rethink the business model. The fourth industrial revolution is changing the landscape of global economy and Bangladesh cannot be left alone. In this context, use of modern technologies is vital to enhance our competitiveness. Innovation and diversification are crucial priorities if we are to increase our share in the global market. The positive sign is that our factories are preparing for it and increasingly adapting to the trends and demands of global market. With the help of all stakeholders, the sector can continue to play its enormous role to our economy and will hopefully continue to remain the most reliable apparel sourcing destination in the world.

Faruque Hassan is Senior Vice President of BGMEA and Managing Director of Giant Group. faruque@giantbd.com

 

Share if you like