Bangladesh is a popular destination for low-end manufacturing items at the cheapest rate while Vietnam produces high-end apparel
In what can be seen as a boon for Bangladesh’s mostly RMG-dependent export sector, Vietnam’s business hub Ho Chi Minh City has been facing a notable shortage of manpower in textile, clothing leather and footwear factories.
Right after China, the two countries occupy the leading position in terms of global export of apparel products.
Factory owners in the Vietnamese city said they are struggling to recruit new workers while existing staff keep quitting, reports the VnExpress International news portal.
The situation is so worse that factories are competing with each other to recruit younger employees.
For instance, Thanh Cong Textile Garment – Investment – Trading JSC, an apparel factory in Tan Phu District, is in need of more than 1,000 workers.
After the surge of Covid-19 across the globe, Vietnam announced strict lockdown measures which led to a huge chunk of their workforce migrate out of Ho Chi Minh City and return to their hometowns and villages.
Nguyen Thi Thuy, vice president of the Vietnam Textile Apparel Union, said that companies have been losing an average of 10% of their staff each year.
One of the reasons for the shortages is the RMG factories are no longer attractive to laborers due to higher working hours and lower wages. However, other industries (electronics, services and industries) provide higher salaries and better conditions.
Workers do not make enough to match the city’s exorbitant living expenses and prefer to stay back in their villages with the safety cushions of their family members.
The lack of colleges and universities to provide technical training to workers in the field also attributes to the shortages.
According to the World Trade Statistical Review 2021, Bangladesh’s share in the global apparel market dropped to 6.3% in 2020 from 6.8% a year earlier.
The market value for Bangladesh was $28 billion in the year 2020. Meanwhile, the share of Vietnam in global RMG exports stood at 6.4% in 2020, up from 6.2% a year earlier.
Vietnam’s market value stood at $29 billion at the end of 2020.
To put it into perspective, the share of Vietnam in the global export market was 2,9% back in the year 2010 while Bangladesh’s share in the global apparel export market was 4.2%, which was 85.5% more than Vietnam’s.
Apparel manufacturers and economists say Bangladesh lost its position to Vietnam amid the latest trend of decline in apparel export, which was further tapered by the pandemic.
Globally, Bangladesh is a popular destination for low-end manufacturing items at the cheapest rate while Vietnam produces high-end apparel with a strong backward linkage industry and educated workforce.
Although Bangladesh and Vietnam had been holding the second and third positions respectively in apparel export, the business dynamics and environment are quite different in the two competing countries.
Earlier this month, the Bangladesh Garment Manufacturers and Exporters Association set a $100-billion apparel shipment target by 2030.
So, given the ongoing manpower shortage in Vietnam, there is an opportunity for Bangladesh to grab as it did not face such a crisis.
A Dhaka-based garment factory official said they saw fewer returning workers owing to “higher salaries in informal factories.”
Unlike Vietnam’s diverse export portfolio, the majority of Bangladesh’s export earnings (around 83%) come singularly from the RMG sector with the industry experiencing a recent boom. According to the Export Promotion Bureau, Dhaka saw an increase in RMG exports by 36% in the first ten months of FY22.
Some garments owners even had to turn away a full or increased volume of orders because they did not have the capacity. But this also presents Bangladesh with a unique opportunity to expand their production in the industry and reap benefits.
Also, rising costs has reduced Beijing’s popularity as the go-to destination for business. With firms looking to relocate their operations, Dhaka is an attractive destination.
However, the Least Developed Country (LDC) graduation means Bangladesh will lose its duty-free access to Regional Comprehensive Economic Partnership or RCEP countries that include Vietnam as a signatory. Therefore, if Dhaka does not join the bloc or make separate deals with member states, it may lose its competitive edge.
Backward linkage industries are also something Bangladesh needs to focus on. Vietnam’s backward linkage industries provided major fuel for its sustainable growth and Dhaka needs to learn from this. Over-dependence on other countries for this will only lead to more lead times for orders.
Bangladesh’s garment sector has every prospect of remaining a dominant global RMG manufacturer. However, Dhaka must navigate other industries opening up with its progress into developing country status and ensure proper technical skills resources are available for workers in the RMG industry. It must take lessons from its competitors and ensure that this industry does not cripple.
