Low productivity, shortage of mid-level management professionals and limited backward and forward linkages are among major challenges that need to be addressed for further expansion of the country's RMG sector, according to a recent study.
In addition, the study has identified product and market concentration, high tariff and non-tariff barriers to entering the potential non-traditional markets, lower ranking in international indices, less-than-satisfactory performance with regard to standard and compliance issues, lack of branding and coordination among authorities concerned as the challenges.
Bangladesh Foreign Trade Institute (BFTI) carried out the study titled "Expansion and Facilitation of the RMG Sector of Bangladesh" and released the findings Tuesday. It also put forward some recommendations concerning product and market diversification, development of productivity and professional capacity and branding.
The findings of the study were presented in a workshop organised by the commerce ministry in the city.
Commerce Minister Tofail Ahmed attended the concluding session of the workshop as the chief guest.
Commerce secretary Shubhashish Bose, BFTI chief executive officer Ali Ahmed, BGMEA vice president Mohammed Nasir, Centre for Policy Dialogue research director Khondaker Golam Moazzem, Bangladesh Institute of Development Studies senior research fellow Nazneen Ahmed and Bangladesh Institute of Labour Studies executive director Syed Sultan Uddin Ahmed, among others, were present at the workshop.
Terming the political situation stable, the minister said an industry-friendly environment, marked by availability of sufficient manpower, exists across the country.
Stressing the need for diversifying exports, he said that global competition is increasing and it is not wise to depend only on RMG exports.
Responding to a question he said, "We need to be more cautious about the banking sector as it plays an important role in expanding trade and business."
He also expressed the hope that the finance ministry will take necessary measures related to loan scams.
The other challenges identified by the study included dependency on import of raw materials, inadequate supply of utilities, transport services and high costs, limited facilities in ports, lack of interest in financing small and medium producers, administrative and regulatory constraints.
The production cost has increased but the buyers quote unjustified prices, the study said, adding that unhealthy competition and pricing are also other challenges.
Participants at the workshop stressed diversification of both ready-made garment products and their market, saying that only five items account for 74 per cent of total RMG exports.
Bangladesh's RMG is heavily dependent on the markets of the European Union, the USA and Canada which accounts for some 63 per cent, 18 per cent and 3.0 per cent of total RMG exports, they said.
New and potential markets must be explored for diversification and sustainability of the sector, they said, terming South Asian region, Oceania, CIS and Latin American countries as potential destinations.
Bangladesh should concentrate on upgradation and move towards high-end products like suit/blazer, lingerie, jackets, swimwear, sportswear, uniform, raincoat and fishing wear, they suggested.
Mr Moazzem suggested making demand-based targeted exports and tailor-made strategies for each country.
The government may fund these sorts of analyses and also incentivize the targeted diversification, he said.
Lower productivity of workers poses another challenge for the country's RMG sector, Mr Ahmed said, adding that the country is lagging behind its international competitors like India, Vietnam and Sri Lanka in terms of efficient production.
For creation of qualified managers and professionals, the country needs to have quality institutions, experts and participants said, underscoring the need for making investments both in public and private sectors to help establish quality fashion designing and technology institutes with global recognition.
They also stressed coordinated approach by and among commercial missions of the country in different countries in expanding business in non-traditional markets.
Other recommendations included steps to remove tariff and non-tariff barriers, improve marketing strategy, and reduce dependence on external sources of raw materials and development of infrastructures.
Branding plays an important role in expanding and facilitating the sector, they said, and suggested harmonised and targeted approach in this regard.