Amid the many adversities the country has been facing since the outbreak of the pandemic, the only area that appears to keep hope alive is on the export front. Exports, no doubt, have demonstrated commendable resilience, and the number one export item, readymade garment (RMG), though initially held up by snags, has apparently come out of the difficulties. This is evident from the surge in export to the biggest single market-- USA. In fact, an increase in export of garment to this key market is dubbed a boom.
According to the US Office of Textile and Apparel (OTEXA), US brands and retailers imported $40.93 billion in January-May this year-- up by 40.11 per cent year-on-year. The important thing for Bangladesh is that the country was able to substantially increase its share in the US market in keeping with the soaring US imports. Bangladesh's export of RMG to the US witnessed a 59 per cent rise to $4.11 billion in January-May this year compared to the corresponding period last year. The country earned $7.14 billion from RMG export to the US last year-- 8.76 per cent of the US RMG market. With the surge in export this year, market share has risen to 9.30 per cent till May 2022. Last year, Bangladesh exported $7.15 billion worth of RMG to this market. Compared to 2020, this was about 36 per cent higher.
Garments worth $5.93 billion were exported in 2019 to the US market. The following year also had a great start. However, with the outbreak of COVID-19, exports continued to decline. Finally, garments worth $5.23 billion were exported in 2020.
The country's RMG industry leaders opine that due to the Russia-Ukraine war, some of the European Union's (EU) brands and buyers are currently giving a second thought to buying. However, a lot of orders are coming from US brands and buyers. The US has a large number of orders for June-July season. If there is no new problem, industry leaders expect the country to keep up this high growth in exports.
Two factors are attributed to the increased RMG export to the US market. While on the one hand, both knit and woven garments have been shipped to the US market in large volumes in the past two years, on the other, there has been a commendable growth in knitwear export causing a sizable diversion from the EU market to that of the US.
Sustaining the flow of export to the US might be a challenge in the future as rising inflation in the US affecting the consumers is likely to impact on their purchasing capacity, which may turn worse by the Russia-Ukraine war. However, according to industry insiders, orders as of now are aplenty and this will keep the current momentum for at least a couple of months.
Meanwhile, a FE report quoting a study titled '2022 Fashion Industry Benchmarking Study' says improvement in fulfilling compliance norms by Bangladesh's exporters is an important factor in the increase of its apparel export to the US. The study, jointly conducted by the United States Fashion Industry Association (USFIA) and the University of Delaware, was released recently. It said that although Bangladesh ranked poorly in labour and social compliance years back, lately there has been a noticeable improvement in this regard. US buyers gave the country 1.5 points out of 5.0 in fulfilling compliance norms in 2018, which moved to 2.0 during 2019-2021, and in 2022 there has been a further upward move to 2.5. The study also says that despite current economic conditions and continuing setbacks due to Covid-19 pandemic, Bangladesh still offers the most competitive prices in 2022. The study based on views of selected respondents say that more than 70 per cent of the respondents have stated sourcing from China now involves 'high' or 'very high' labour and social compliance risks. The points for China are 2.0, while for Vietnam 3.0, according to the survey. More than 80 per cent of respondents expected to cut sourcing from China over the next two years as they are adopting a more diverse sourcing base in response to supply chain disruptions and the need to mitigate growing sourcing risks.
Concerned quarters are taking the study report seriously. The study surveyed executives from over 30 leading fashion brands, retailers, importers, and wholesalers, including some of the largest brands and retailers in the US. Increasing sourcing and production costs remain a top concern for the US fashion industry and, for the first time in the nine-year history of the Benchmarking Study, 100 per cent of respondents expect their sourcing costs to increase in 2022, including nearly 40 per cent expecting a substantial cost increase from a year ago. Asia remains the dominant sourcing base for US fashion companies. Notably, eight out of the top ten most-utilised sourcing destinations are Asia-based, led by China (91 per cent utilisation rate), Vietnam (88 per cent), Bangladesh (84 per cent), and India (72 per cent). Regarding Asia-based suppliers, India, Bangladesh, Indonesia, and Vietnam are among the most popular destinations where respondents plan to increase sourcing over the next two years. "In general, these countries have relatively large-scale production capacity and stable economic and political situation," the study report says.
From the above, it appears that although Bangladesh has substantially improved in meeting compliance needs, further improvement is critically important for a larger share of US apparel market.