Bangladesh could earn an additional US$20 billion through export of goods to the European Union (EU) and the United Kingdom (UK), as full potentials of the markets still remain untapped, according to the findings of a latest study.
The country fetched about $28 billion from the EU and the UK in last fiscal year, 2021-22, marking a 32 per cent export growth, of which some $26 billion came from ready-made garment (RMG) exports, according to data.
The EU and the UK jointly account for 45 per cent of the global apparel market with more than $200 billion annual import, according to the study - conducted by the Research and Policy Integration for Development (RAPID).
"Bangladesh captures about 20 per cent of the EU's apparel imports from the non-EU countries. The country has potentials to earn an additional $20 billion through exporting various goods in the EU and the UK, which may rise further," RAPID Chairman Dr M A Razzaque said in the research paper.
Of the $20 billion, apparel export potentials worth $18 billion remain unutilised.
Explaining the potentials, he said China is losing its share in the global market due to the rising tension between the West and the country, emerging geo-political scenario, and long Covid restriction there.
Bangladesh is now capturing major share of the export, previously done by China. Bangladesh could further increase its share, as China is moving away from low value-added apparels to more sophisticated ones.
In 2010, Chinese share in the EU market was about 44 per cent, which declined to about 31 per cent in 2021, according to the findings.
On the other hand, Bangladesh's share rose to about 20 per cent from 9.0 per cent during the period - mainly because of the duty benefit.
Talking to the FE, Dr Razzaque said with the existing capacity Bangladesh can also add $20 billion to its foreign currency earnings - only from the EU and the UK - following improved efficiency through skill development, and automated production.
When asked, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said the local RMG sector needs to generate more skilled manpower to grab the export potentials in the EU market.
Local apparel makers are now focusing on efficiency, diversification, and skill development to grab more market share in the EU as well as increase earnings from India, Japan and other non-traditional and potential markets.
The BGMEA has recently set a $100-billion export earning target by 2030, projecting a 10-11 per cent gradual growth each year.
To achieve the target, the apparel makers are now investing in non-cotton and manmade fibre-based production, increasing capacity of backward linkage including woven fabric manufacturing, and focusing on product diversification.
But to achieve the target, the industry needs uninterrupted gas and electricity supply along with other policy supports from the government to reduce cost of production, the BGMEA president noted.
Terming the target achievable, the RAPID study also said some of the challenges, including inefficiency in ports, complex customs procedures, and lack of technological upgradation, should be addressed.
Of the targeted $100 billion, about $90 billion could be earned from the EU, the UK and the US, it showed.
By 2030, the apparel market size of the EU and the UK would be more than $260 billion, and Bangladesh's export there could reach $65 billion.
Responding to a question, Mr Razzaque opined that it would not be difficult to achieve the target in the EU and the UK markets.
Bangladesh would get duty-free market access in the EU until 2029, while the UK has recently announced a new scheme - the Developing Countries Trading Scheme (DCTS) - that would also provide the GSP-like facilities. In the US market, Bangladesh's apparel export is targeted to increase to $25 billion, which was $9.0 billion in 2021-22.
China witnessed RMG export growth in the US market in 2021, but it is yet to reach the pre-pandemic level, while Bangladesh and Vietnam are capturing China's share there.
Mr Razzaque, also research director at Policy Research Institute, said Bangladesh would have to take the post-graduation challenges into consideration to increase its exports beyond the EU and the US.
After the graduation, Bangladeshi apparel products would face up to 18 per cent duty in Canada, while duty regime would also affect exports to India and Japan.
He said with the rise in export earnings, Bangladesh needs to ensure its labour standards as well as take proper environmental, social and governance measures, which would be major issues in the coming years.
The study also recommended attracting more foreign direct investment in backward linkage, investment in non-cotton fabric, and diversification of RMG products to grab more shares of Chinese export.