Bangladesh’s total ready-made garment (RMG) exports declined to $27.83 billion in the 2019-2020 fiscal year. This is in stark contrast to the projected export of $38 billion by the industry at the beginning of the fiscal year. Bangladesh’s total RMG exports were $34.13 billion in FY2018-19. This means exports plummeted by 18.45 percent in this last fiscal year. Against the backdrop of the Covid-19 pandemic, this decline in RMG exports was not unexpected. Bangladesh’s exports in the months of March, April, May, and June of 2020 were nominal due to the impacts of the pandemic. Unfortunately, the country witnessed unethical purchasing practices by some brands and retailers as soon as the pandemic broke out across the world. The brands and retailers cancelled all the orders that were ready to ship or were at different stages of production in Bangladesh’s garment factories. Uncertainty loomed large about when or whether the cancelled orders would be reinstated by the buyers. One thing is certain – that the concentration of the country’s RMG exports in European and US markets has largely contributed to Bangladesh’s hapless state. Even after four decades of the industry’s establishment, we have been unable to diversify our export destinations. Hence, the news that China granted duty-free access to 97 percent of Bangladeshi products, from July 1, has prompted Bangladesh to rethink its stance on penetrating the large market of this Asian country. China used to provide Bangladesh duty free access for 60 percent of items under the least-developed country (LDC) scheme of the World Trade Organization (WTO). However, now the duty-free coverage has been extended to 97 percent since the discussions and negotiations between the governments of the two countries had been going on for quite some time. This is indeed a success of the current Bangladesh government in economic diplomacy. Under the LDC scheme, apparel was included in chapters 61 and 62 of the HS schedule which covered more than 200 items. That contributed to the growth of Bangladesh’s RMG exports to China from 50 million to 500 million in the last 10 years. Now, with the extension to 97 percent of products, the few apparel and textile items which were left have also been included in the duty-free export basket from Bangladesh to China. With a population of 1.3 billion and rapid economic growth, China has the largest consumer market for clothing. China’s large population, with its increasing per capita clothing consumption, provides a lucrative business opportunity for the rest of the world. Out of a total $450 billion turnover of the RMG sector on the global market, China itself still holds 35 percent of the turnover, whereas Bangladesh’s share is only six percent. Due to higher production costs, Chinese companies are shifting their focus from apparel production to heavy industries. So, Bangladesh should avail this opportunity to grab the Chinese market. Apart from the huge size of the Chinese market, Bangladesh has several other advantages in exporting apparel to China. While it takes 25-35 days to ship RMG containers from Bangladesh to European and US ports, the transit time between the Chittagong port to Chinese ports is only 12-18 days. So, it is possible for Bangladeshi manufacturers to export apparel to China with shorter lead times. As winter is the major season in China, there is huge demand for high value apparel products such as suits, jackets, etc. in the country. It is also high time for Bangladesh to shift from low to high end apparel production as the wages of garment workers and operation cost of the garment factories in Bangladesh have increased manifold in recent years. Moreover, there is a challenge for Bangladesh to remain competitive in the EU after the nation’s graduation to a middle-income country in 2024, losing the country its GSP facility in 2027. However, Bangladesh will have the opportunity to continue to enjoy duty free access to the EU if it achieves GSP Plus. In the case of China, there are two schemes under which Bangladesh enjoys duty-free access. One is the LDC scheme through the WTO and the other is the Asia Pacific Trade Agreement (APTA). So, even if Bangladesh graduates to a middle-income country from an LDC, it will continue to avail the duty-free access in China under APTA. So, Bangladesh’s apparel industry should exploit these potentials to explore China. To grab the Chinese market, the apparel makers of the country need to be well equipped. They will have to invest in setting up modern machinery to produce apparel like suits and jackets, but certainly, these investments will ensure higher return on investment. It should be mentioned here that China is the largest source of raw materials for Bangladesh’s RMG industry. Annual imports from China are worth about $2 billion. So, the increase of Bangladesh’s apparel exports to China will be a win-win for both the countries. Expanding Bangladesh’s RMG exports to the Asian countries such as China, Japan, and South Korea – or even India – will also give the country’s apparel makers the leverage to challenge the unethical practices of western buyers.
