Export of readymade garments from Bangladesh peaked above $25.5 billion in 2015 accounting for nearly 82 per cent of the country’s total exports. At present, there are 4296 factories and about 4 million workers in the readymade garment industry. An estimated 10 million people are employed in the support and services sectors. These numbers are expected to double with the projected doubling of exports to the $50 billion target by 2021. According to a recent World Bank study, in the event the local RMG industry is able to capture the attrition of about 20 per cent of China’s apparel exports, Bangladesh’s export volume will increase by at least $29 billion creating 5.4 million new jobs and 13.5 indirect employments (Kathuria, Sanjay, and Mariem Mezghenni Malouche 2016, Toward New Sources of Competitiveness in Bangladesh – Key Findings of the Diagnostic Trade Integration Study). The Apparel Summit, organised by the Bangladesh Garment Manufacturing and Exporters Association (BGMEA) and various stakeholders last year aimed at achieving a target of $50 billion per annum by the year 2021. Perhaps this could have seemed a realistic goal in December of 2014 but occurrences during the last three quarters of this year suggests the dream may be fraught with serious challenges. Despite serious signals coming from the international quarters, the Government of Bangladesh and the domestic private sector seemed to have failed to grasp the seriousness of the issue and the severity of the impact upon the RMG industry’s growth potential. Competitiveness: Key to apparel exports growth
It is undeniable that the demonstration of strong resilience of the industry to undo many gloomy forecasts of the past has prompted many within and outside the industry to keep hoping that at the end of the day the Bangladesh RMG industry will be able to deliver as projected. However, there are a number of important initiatives to be in place to facilitate the sector to thrive in a desired manner. The government should adopt an effective policy for fulfilling the a) requirements of the international buyers, b) the conditions of the US Trade Representative (USTR), c) the standards of the International Labour Organisation (ILO) and any of its subsidiaries, d) the requirements set by the bilateral and multilateral donors, and e) conditions imposed by importing nations in the alternate markets – such as, the EU, Japan, Australia, and India. Invariably, the competitiveness of the apparel export industry of the nation needs to be enhanced to meet challenges from any quarters. Especially, the withdrawal of the Generalized System of Preferences (GSP) from the US, the likelihood of the EU following the steps of the USTR, the signing of the Trans Pacific Partnership (TPP) by the US government with Vietnam and other East Asian nations, and the absence of alternative markets for Bangladeshi exports due to the intra-bloc trading of the TPP member countries pose as major stumbling blocks for the country seriously lagging in terms of capacity to deal with the complex issues. A recent report published by Sourcing Journal indicates that the US apparel imports from Vietnam grew by at least 15 per cent year on year totalling $5.95 billion occupying the place next to China. China holds about 12.50 per cent of apparel imports into the US (of $15.95 billion) with a modest increase of 2.3 per cent annual growth in dollar volume comprising of 33.5 per cent of the pie. Bangladesh squeezed past Indonesia to take the third place with a dollar value of exports of $3.1 billion accounting for 6.7 per cent of the apparel imported into the US growing annually at 8.5 in value. In the month of July, imports from Sri Lanka increased by 16 per cent and ranked highest in dollar value with an impressive $1.1 billion compared to above $1 billion for Vietnam, and slowing down in the case of Bangladesh to almost half of these performers at $508 million. Exports to the US from Bangladesh fell by at least 37 per cent since the factory disaster in 2013 from $4.94 billion losing about $1.84 billion of business as of July 2015. Growth of annual apparel imports from the ASEAN has been noted as positive second to Vietnam. Forecast for Vietnamese exports to the US are on the up for many reasons. TPP will halve or nullify the 17 per cent duty on imports into the US for Vietnamese apparels and textiles. Industrial policy of the Government of Vietnam has been favourable to the growth and development of the industry and had an extremely positive influence upon the surge in the export volume. A recent example may illustrate the significant contribution of Vietnam to industrial growth by the implementation of a plan for setting up of 4.2GWh of Wind Power along the coastal belt. The Vietnamese government has also introduced programmes to improve the industry by setting up garment villages, investing in infrastructure, and policies for encouraging foreign and domestic private investment. Domestic and external policy of the Vietnam is focused on encouraging Foreign Direct Investment (FDI), improved bilateral economic and political cooperation for trade, commerce, travel and tourism – especially improvements in political-security and economic relations with the United States. A well-coordinated approach of the Bangladesh government for fulfilling the conditions for restoring of the GSP and pursuing a policy for improving political and diplomatic cooperation with the United States may succeed in overcoming an otherwise dismal outlook on apparel exports. What the Bangladesh government can do to ensure compliance is to set up a task force under the Prime Minister’s Office to oversee the activities of the private and public sector and the International NGOs responsible for delivery of the outputs in terms of workers safety, working environment, representation of the workers, and solve pending legal issues. An institutional mechanism may be set up under a public-private partnership for development of the apparel industry since the country lacks a proper body or exclusive governmental machinery for dealing with the various aspects of value chain for promoting and managing apparels exports. At the Apparel Summit held in Dhaka in December of 2014, participants from the various stakeholders sought to develop a consensus for a comprehensive programme of cooperation for achieving the $50 billion export target by 2021. However, the ambitious goal of bringing about the needed changes in the apparel industry failed to identify a body or mechanism or a machinery to deliver on the promises. That is, who will drive the change for attaining a higher growth trajectory? An entity endowed with adequate resources and support from the private sector, the government and the workers in a public-private partnership model may prove to be effective. Setting up of special economic zones (SEZs) for the apparel-textile export industry may be sustainable in achieving the goals of future growth. An SEZ is supposed to focus on eliminating the weaknesses inherent in the domestic economy by creating a desirable environment within the zone for optimising performance, productivity and growth – i.e. enhanced export competitiveness. Survival and sustained growth of the apparel industry depends on export competitiveness and SEZs can play an indispensable role in this regard. Invariably, success of the private sector or of governmental policies and strategies in achieving the $50 billion target will depend on: i) the stability of the domestic political and economic conditions; ii) coordination of the purposes of the public and the private sector that may be best attained within a public-private partnership framework; iii) coordination of domestic policy so as to be competitive with regional exporters (i.e. keeping price and wages in line with export competitiveness).
