Focusing more on non-traditional RMG markets
Non-traditional markets have turned out to be increasingly important than before for the RMG industry of Bangladesh. While the industry has traditionally focused on exporting garments to developed countries like the United States and the European Union, it has recently started exploring new markets to diversify its customer base.
Bangladesh's RMG exports to non-traditional markets have shown significant growth in the last four years. Our exports to the new markets registered 21.76 per cent growth in FY 2018-2019 from US$ 4.7 billion to US$ 5.7 billion in FY 2017-1018. However, export witnessed a negative growth of 15.95 per cent in FY 2019-2020 mainly due to the Covid-19 pandemic which had massive impacts on the global trade including the apparel export. But the growth in FY 2020-2021 went up again by 6.36 per cent compared to the previous year. In the FY 2021-2022, exports to the non-traditional markets have grown significantly by 25.40 per cent compared to the previous FY 2020-2021, from around US$ 5 billion to US$ 6.4 billion.
Why Bangladesh should attach more importance and attention to these markets? The reason is obvious as non-traditional markets have emerged as potential growth areas for Bangladesh's RMG industry.
Diversification is the reason why Bangladesh should explore non-traditional market as much as possible. Diversifying for non-traditional markets helps reduce dependence on traditional markets and provides a buffer against market fluctuations and changes in demand. New markets offer opportunities to access new customer segments that may have different tastes, preferences, and requirements from existing markets. By catering to these new customers, the industry can expand its customer base. While we are struggling to expand our base of some traditional products, it is extremely important to expand the product base and the more we expand for new markets, the more our product base will diversify.
Non-traditional markets are emerging economies. Non-traditional markets such as China, India, Brazil, and Russia are rapidly developing and have a growing middle class. Japan and Australia are also promising markets for us. Bangladesh's RMG exports to China and India have grown by 10.76 per cent and 61.57 respectively while the growth was 39.81 per cent in South Korea, 47.65 per cent in Japan, 74.89 per cent in Brazil and by 38.18 per cent Australia in the period of July-February in 2022-2023 compared to the same period in 2021-2022.
Low competition is a key factor in non-traditional or new markets. These markets are relatively untapped, providing new entrants the opportunity to expand their market share. The focus of most of the competitors is mostly on traditional markets like the USA and Europe. Entering new markets often requires the industry to adapt its product quality, pricing, and delivery times.
Another factor is that we can explore favourable trade agreements in non-traditional markets which will provide greater market access including duty free facility.
Rising cost factors are most important issues in today's world for any business which is even more in RMG industry worldwide. So the more we can reduce our production cost, the better it is for us.
RMG industry in Bangladesh needs to do continuous improvement in the overall ESG (Environment, Social & Corporate Governance) concept to keep up the position as a leader in this industry and to compete with other countries. By exploring new markets that demand higher standards of labour and sustainability practices, the industry can be incentivised to improve its practices and become more sustainable in the long run.
Trade balance and over dependency on US dollar could be a vital factor while considering non-traditional market. For example, we import a lot from India but in return export very less. By exporting more RMG to India we may try to balance our trade deficit with them as RMG is the major item in our export basket and their need for RMG products is also more than any other products. There is a growing crisis of USD in our reserve and if we can develop the mode of payment in local currencies with non-traditional markets, it will help us a lot from the over-reliance on USD and also make the USD rate stable.
Transformation of technological knowhow also should be considered while considering new markets. As traditionally we export to the USA and Europe, the transformation of new technology and expertise may be limited.
Bangladesh apparel industry's growth in the non-traditional market is an encouraging development for the sector and the country's economy as a whole. As our exports to non-traditional markets have already shown great promise, more attention should be given and efforts made to continue the growth momentum in market expansion. Increasing the share of RMG export in non-traditional markets will contribute to achieving the Bangladesh RMG industry's goal of 100 billion dollar exports by 2030 while contributing to sustainable growth of the industry.
Mohiuddin Rubel is director, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and additional managing director of Denim Expert Ltd. [email protected]