6 years ago

RMG: Export prospects

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Bangladesh's global market share in RMG rose to 6.4 per cent in 2016, an increase of 0.50 per cent over the previous year according to the World Trade Statistical Review 2017 of the World Trade Organization (WTO). It is a positive sign that Bangladesh's global market share increased, but the big question is --how much our entrepreneur's reaped from RMG export?

The rise in market share shows that there is a huge opportunity for Bangladesh to spearhead RMG export in future. But Bangladesh needs over 13 per cent growth for achieving the $50 billion export target by 2021. In the last fiscal year, Bangladesh earned $28 billion with over 10 per cent growth. On the other hand, China's relocation initiative is a great opportunity for Bangladesh but due to challenges it is remaining untapped.

Lack of marketing strategies, negotiations and bargaining skills for price setting is indeed a barrier to develop the sector. On the other hand, global apparel buyers place orders with competitive pricing along with the shortest possible lead time. Coupled with the deficiencies are difficulties in bank finance and shortage of uninterrupted power and quality utility services. Additionally, there is the fear of gas price hike. If gas price is hiked, it will hurt backward linkage whereas backward linkages are playing the major rule in global RMG market and also expansion of existing business. Industry insiders are also worried about the dearth of skilled workers to produce high value added products of readymade garments. Over and above, some countries in Africa enjoy zero-tariff facility under AGOA which helps them to access the US market.

According to the analysis of the Fire Risk Index (FRI) in Bangladesh, FRI results shows that the mean FRI is 2.8 on a scale of 5.0 for the fire hazard condition of our RMG sector, which signposts an alarming condition.

Furthermore absence of good governance is another barrier to the desired growth of the RMG sector. But most observers think that enforcement of rule of law, justice and good governance at private, public and government organisations is a prerequisite for stopping deaths of people from fire, accidents, and collapse of buildings at workplaces.

Nonetheless, immense opportunities await the country's RMG sector if we can capitalise it in an appropriate manner. The global apparels market is predicted to be $650 billion by 2020. Global market for clothing products came down to $444 billion in 2016 from $450 billion in 2015.

However China still retains its position as the top exporter of apparel products with $161 billion, its market share slid to 36.4 per cent from 39.3 per cent last year. But China's apparel export has declined from $207 billion in 2014, and it is now lower than that in 2012.

Bangladesh's closest competitor, Vietnam experienced a 0.70 per cent year-on-year increase in its market share to 5.5 per cent. India's market share came down to 4 per cent from 4.1 per cent, while Cambodia and Turkey retained their shares at 1.4 per cent and 3.4 per cent respectively.

Given the prevailing situation, Bangladesh's prospect of gaining in RMG export does not at all seem remote. Only a part of China's share can fetch us a big chunk. Besides, there is a likely demand from China's domestic market too. China is going to divert from low-end RMG production which in all fairness is going to benefit Bangladesh.

Moreover, importers from the EU countries are willing to move from China to suitable locations to establish manufacturing hubs, where Bangladesh can fit well.  The geographic location of Bangladesh is ideal in this regard. Needless, however, to mention that tapping these opportunities will require proactive efforts on the part of the government which to start with, should include removal of trade-impeding barriers and putting in facilitations congenial to increased investment. 

The writer is Deputy Secretary, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). [email protected]

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