20 days ago

Rise in RMG exports to US

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In the midst of economic gloom, the fact that readymade garments (RMG) export to the United States (US), which is one of the principal export markets for Bangladesh, is much welcome news. While overall RMG export has been declining due to a myriad of factors related to economic downturn in the various destination markets, export to the US market totaled a little over US$867 million in January, 2023. This represents a 15.44 per cent growth and gives a glimmer of hope to the principal export item from the country. The development comes as somewhat of a surprise because, according to OTEXA data (US department of Commerce), apparel import into the US had posted a decline of 3.44 per cent in January. So, how is it that Bangladesh's exports grew? The fact is that Bangladesh faces strong competition in the US market from China and Vietnam and both these countries' RMG exports declined significantly. China shipped nearly a fourth (24 per cent) less and Vietnam about 0.5 per cent and Bangladesh picked up some of the slack in the sector. It appears that the domestic RMG sector is riding high on the manufacture of value-added garments coupled with product diversification - especially producing non-cotton-based garment.

The shifting away from major garments producers like China should not be taken for granted. The present geopolitical impasse between the West and China could change in the future. Bangladesh needs to take full advantage of the current situation and continue to diversify its product base within the apparel industry. That local manufacturers are delving into non-cotton-based garments is a step in the right direction. Bangladesh, as one of the top readymade apparel producing countries needs to invest in upgrading their production units to bring down costs. With energy subsidies being phased out and energy bills being continually readjusted (upwards), energy-efficiency technology interventions at factory level have become imperative. Cost of production, as it stands now, is already increasing due to rise in cost of raw materials. That cannot be mitigated much as it depends on global prices for inputs like cotton, which Bangladesh imports. Hence, the cost savings must come from elsewhere.

The pickup in January orders may not last because as OXETA data show, orders have decreased in terms of quantity. So, betting on shifting of orders from China, Bangladesh must step up by offering not just more of the same, but doing better than what had been done in the past. Apart from energy efficiency, there is the issue of worker proficiency that leads to greater productivity.

Today labour is no longer cheap and multiple wage boards have been formulated, where some have been implemented. Workers demand more wages, but it must match productivity. These are the less talked-about issues in the economic discourse of this country, but a higher wage must go with a higher return on production. Only when the industry becomes leaner in terms of production costs, more efficient in terms of higher productivity, can the country hope to compete with economic giants in the global apparel sector. Industry can invest only when policy initiatives like tax-breaks at import level are put into effect that makes this transition to a higher technology threshold easier. The bottom line is efficiency and cost effectiveness.


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