Reforms and diversification key to boosting RMG

For decades, policy circles and industry stakeholders have repeatedly stressed the need for reforms and diversification to rejuvenate the country's readymade garment (RMG) exports. Reforms essentially imply structural changes in production and operations, with a strategic shift from low-end, mass-volume products to high-end or semi-high-end categories that effect higher value addition. Diversification, on the other hand, refers not only to broadening the range of apparel products but also to extending export reach beyond the conventional markets of North America and the European Union. Although some progress has been made on both fronts, the pace has been far slower than the required. In today's rapidly changing global trade dynamics -- especially involving apparel exports -- the challenges are more complex than they were a decade ago, forcing Bangladesh at a crossroads.

Despite the difficulties, optimism persists that Bangladesh can still make a transitional leap in apparel exports. A recent diagnostic report prepared jointly by the World Bank, the International Finance Corporation, and the Multilateral Investment Guarantee Agency highlights this potential. According to the report, Bangladesh's RMG sector could generate as much as US$94 billion in annual export earnings by 2029, provided that the industry actively expands into non-traditional markets and embraces manmade fibre (MMF) production in a big way. Achieving this ambitious target would require sustaining an average annual growth rate of 15 per cent -- a formidable challenge that demands wide-ranging, coordinated reforms across trade policy, industrial operations, and financial systems.

The report also identified four sectors in Bangladesh with the highest growth potential where private investment could play a transformative role. These include the RMG, middle-income housing, domestic production of textile dyes and paints, and digital financial services. The findings also shed light on broader concerns such as foreign direct investment (FDI) trends, the overall business climate, and cross-cutting regulatory bottlenecks that hinder private sector growth. The clear message is that while Bangladesh's growth prospects remain bright, achieving them will require regulatory clarity, accelerated digital transformation, and establishment of a more inclusive and investment-friendly climate.

The United States, Bangladesh's single largest apparel export destination, is likely to play a particularly pivotal role in this anticipated prospect. Recent tariff actions by the US, targeting multiple countries including some of Bangladesh's competitors, carry important implications for Bangladesh's RMG exports. The US tariffs are largely aimed at curbing Chinese exports. Consequently, many American apparel brands and retailers are now adopting a strategy of geographical diversification in sourcing to reduce over-dependence on China. Rising tariff rates on Chinese apparel and the intensifying strategic rivalry between Washington and Beijing have prompted several leading US fashion companies to scale down their sourcing from China -- some planning to reduce it to single-digit percentages, and others even considering moving out of China altogether.

This geopolitical and trade reorientation presents Bangladesh with a unique window of opportunity. With China's declining market share in the US and the search for alternative sourcing bases, Bangladesh could secure a larger slice of the American apparel market. The numbers tell the story: China's share of the US apparel import market dropped from 37.7 per cent in 2013 to 21.3 per cent in 2023. During the same period, Bangladesh's share rose from 6.0 per cent to 9.0 per cent. Vietnam has also been a major beneficiary, expanding its share from 10 per cent to 17.8 per cent. India, Cambodia and Pakistan, too, recorded modest gains. Clearly, the global sourcing map is shifting and Bangladesh stands to benefit if it can position itself strategically.

The critical question, however, is whether Bangladesh is ready to seize this opportunity. Industry insiders point out that despite clear signals of shifting demand, fresh investment to expand production capacity -- especially in MMF-based and other high-value apparel items -- has been limited. The country still depends heavily on imported raw materials for producing value-added garments, particularly MMF-based products. Without building domestic capacity in this area, Bangladesh risks missing out on lucrative future orders. Moreover, structural challenges such as energy shortages, rising utility costs, and persistent logistics bottlenecks continue to undermine the country's competitive edge.

Local exporters, however, remain cautiously optimistic. They argue that with its existing scale and experience, Bangladesh already has the capability to absorb some of the work orders likely to be diverted from China. The competitive edge lies in cost efficiency, skilled workforce, and a strong reputation as a reliable supplier. But for this to translate into long-term market resilience, the country must urgently address its internal weaknesses. Expansion of investment in MMF production, reliable energy supply, upgrading of port and transport infrastructure and removal of bureaucratic bottlenecks are the key imperatives.

Another important trend is the pricing strategy of US fashion companies. Even amid rising costs from tariffs and supply chain adjustments, these companies have largely avoided widespread retail price hikes. Instead, they have absorbed some of the cost pressures internally while maintaining their sourcing diversification strategy. This signals that buyers are looking for competitive suppliers who can ensure flexibility, speed and quality without significantly raising end prices. Bangladesh's ability to align with this evolving buyer preference will be decisive in slicing greater market shares.

Industry leaders repeatedly emphasise that a strategic shift from low-end to high-value apparel is no longer optional but essential. Bangladesh must move beyond being predominantly a producer of basic garments to one that specialises in design-driven, technologically advanced, and higher-margin items. At the same time, exploring new and emerging markets outside the US and EU is crucial. Countries in East Asia, Latin America, and Africa represent untapped potential that could further diversify Bangladesh's export portfolio and reduce dependence on a few large markets.

The pathway to revamping Bangladesh's RMG sector lies in a dual strategy of reforms and diversification. Reforms must focus on upgrading the industry to produce more high-value products supported by stronger backward linkages in MMF and other inputs. Diversification must go beyond products to include new markets. The opportunities created by the shifting global trade dynamics are real, but seizing them will require vision, investment and matching strategic policy.

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