The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has set the target of raising its apparel export earnings to US$ 50 billion by 2021. It will be the year when the nation celebrates its 50 years of independence. The rapidly growing garment exports have been pushing the country’s economy forward for long. It now enjoys a major place among the economic indicators of the country like gross domestic product (GDP).
The RMG sector constituted only 32 per cent of our total exports in 1989, which has reached 80 per cent in 2014. With a 15 per cent growth in the RMG sector, the Bangladesh economy has progressed impressively in the last few decades.
Moreover, backward and forward integration of RMG-related industries is also providing boost to the economy. Despite many challenges including political turmoil in the country and legal bindings, the sector has been making its dominant presence felt in the country’s economy. The number of apparel factories is also witnessing an increase, which is lowering unemployment. A number of factors have lately emerged to hold prospects for the RMG sector to boost its output faster and take its earnings to US$ 50 billion by the year 2021. The Bangladesh government and the private sector are expected to put in their all-out efforts to this end. Let us have a look at the factors that will be conducive to the RMG sector’s rapid growth. Firstly, cost of production in China is rising due to higher labour cost and upward prices of raw materials, socio-economic and livelihood standard uplift and shift to high-tech industries. This has caused concern among international buyers of late. As a result, a large section of the buyers is shifting their orders to other apparel producing countries. And Bangladesh is fast becoming a beneficiary. As per World Trade Organisation (WTO) statistics, China occupied a 37.35 per cent share in global clothing exports in 2011, whereas Bangladesh had a share of about 4.83 per cent (which increased slightly later). This huge gap points to an enormous opportunity for Bangladesh as it keeps strengthening its position as the second largest apparel exporter. Secondly, for achieving the dream goal for 2021, enhancing the market is fundamental. The existing market will provide only a small digit growth, but in order to strike a revolution in RMG export, Bangladesh needs to explore newer opportunities and grab other destinations of the global apparel export market. Now is the time to expand the sector horizontally to shape the country’s market. It is interesting to note that Bangladesh is also exploring newer markets and diversifying its exports and going beyond the traditional exports to the European Union and the US. The share of apparel exports to markets other than the EU and North America was 6.88 per cent in 2008-09. It increased to 14.71 per cent in 2013-14. The new markets include Japan, China, India, South Korea, South Africa, Russia, Brazil, Mexico and Chile. The duty-free access and preferential market access offered by countries like India, China, Korea and Malaysia have helped in the process. North America can be an important and potential market for Bangladesh. Thirdly, only exploring markets will not be enough, as steady growth is required to achieve the dream within the shortest possible time. Manufacturing new apparel products is also a big factor. New products should be manufactured to attract more foreign buyers. The product-wise RMG exports from Bangladesh indicate that the highest share is occupied by trousers, followed by T-shirts and jackets; sweaters and shirts follow. Over the last 5 years, however, the highest growth has been seen in export of shirts and jackets. In a period of about four years from 2009-10 to 2013-14, jacket exports increased by over 120 per cent, whereas export of shirts increased by about 118 per cent. Trouser exports increased by about 87 per cent.
A few challenges must be faced to realise the goal, the major challenges being a well-structured infrastructure as well as international relations. In achieving the RMG export target of US$ 50 billion, a lot of other challenges might emerge. Bangladesh will have to deal with them. However, the main challenge will be posed by the sector’s infrastructure. Let us see how we stand among other Asian countries in the Global Competitiveness. The Global Competitiveness Report 2014-15 (World Economic Forum) evaluates important apparel exporting countries on their infrastructure quality.
The table [Comparison of Infrastructure Quality: 2014-15] shows the areas where Bangladesh still needs to work in relation to infrastructure improvements, especially roads and electricity. Besides, the availability of skilled workforce would be another important aspect which would be very important for the desired growth. Investment in education and training would be highly important in raising a large and skilled workforce. In terms of challenges, the infrastructural development is a prime concern for the major export business owners. It involves massive projects that include deep-sea port, metro rail in Dhaka, the eight-lane Dhaka-Chittagong Highway etc. These projects need to be completed within specific timeline. All this is part of the prerequisite that ought to be met for Bangladesh to materialise its RMG exports vision by 2021. Another basic need for the apparel industry is sufficient power and energy. Electricity supply has increased lately, but gas supply hasn’t, and its supply pattern is almost unchanged. Besides, costly power and energy add to the expenditure of the RMG factory owners. Less costly power as well as its uninterrupted supply is vital for achieving the RMG sector’s vision. All-round stability is imperative for development and growth. Volatile politics and government mean volatility in policy. Violence and unrest affect production even more. They erode confidence of businesses and hamper reputation. Following bouts of political turbulence in the recent past, Bangladesh is now badly in need of a peaceful political atmosphere. The last two spells of political violence have taken their toll on the country’s export activities, especially those involving the RMG sector. Think-tanks observe that ‘the cost of capital’ is the main challenge to achieving growth target. In line with this, sufficient loans to the RMG sector, export financing and congenial banking services must be ensured to increase productivity and meet market demand. The government should also ensure safety and compliance measures at the factories. The country had to face image crisis due to major incidents like the Rana Plaza collapse and the Tazreen fire. All these measures must guarantee that such incidents will not recur. Digital Bangladesh doesn’t only mean increase in internet use, electronic money transfer and use of video conferences; the real benefits of digitisation should find expression in good governance. Every sector is more or less graft-ridden in Bangladesh. From getting necessary approval for setting up new factories to having gas and electricity connections, every step requires extra money or influence of powerful quarters, or both. Setting up of factories by new entrepreneurs has thus become almost impossible. In this reality, overseas entrepreneurs as well as foreign direct investment should be encouraged to bring in new financing to the RMG industry. The target of $50 billion exports by 2021 is highly ambitious, but not entirely unachievable. Here we should see the growth achieved in the last 5 years as exports doubled from $12 billion to $24 billion. However, Bangladesh’s apparel sector needs to work hard for improving its infrastructure and ensuring a larger supply of skilled workforce to make the grand RMG export dream for 2021 come true.
Source: https://www.thefinancialexpress-bd.com/2015/05/30/94638
