A resilient industry with challenges ahead, Bangladesh’s RMG sector in 2024 has navigated through a complex set of challenges while demonstrating remarkable resilience.
With export growth showing a positive trend, increased sustainability efforts, and significant improvements in labor practices, Bangladesh is well-positioned to continue its success in the global garment market.
However, challenges remain, including political instability, rising energy costs, and growing competition from neighboring countries. Hence, 2024 has proven to be a year of both challenges and progress, with significant issues impacting the industry while also providing opportunities to evolve in a rapidly changing global market.
Order fluctuations: A mixed outlook
Throughout 2024, Bangladesh’s garment exports saw significant fluctuations. According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), in the first quarter, exports dropped by 3% year-on-year due to global economic uncertainties and inflationary pressures in major markets like the U.S. and Europe.
However, as the year progressed, exports rebounded, with a 5% increase in the third quarter, driven by the ongoing recovery of global supply chains. The year’s overall export growth is projected to be around 4%, with export values reaching nearly $45 billion by December, despite fierce competition from neighboring countries.
Gas, power, and fuel shortages: A lingering crisis
The country’s energy crisis remains one of the major challenges for the RMG sector in 2024. Power outages and fuel shortages have disrupted production, affecting factory schedules and increasing operational costs.
According to industry reports, manufacturers have faced an estimated 15-20% increase in energy costs due to reliance on expensive alternative sources like diesel. This has added strain to profit margins, which have shrunk by approximately 2-3% over the past year.
While some factories have turned to renewable energy solutions such as solar power, the lack of stable energy supply continues to hamper the sector’s potential for growth.
Sustainability progress: A step forward
As of 2024, Bangladesh continues to lead globally in LEED-certified green factories, particularly in the ready-made garment (RMG) sector. The country now hosts 230 LEED-certified factories, including 92 with Platinum ratings and 124 with Gold certifications.
Impressively, 62 of the world’s top 100 LEED-certified factories are located in Bangladesh, including the two highest-rated facilities worldwide.
A notable development in 2024 has been the sector’s commitment to sustainability. According to BGMEA, over 300 factories have now received Global Organic Textile Standard (GOTS) certification, reflecting a broader push towards greener production.
In 2024, nearly 10% of Bangladesh’s total garment production is now made using sustainable practices, up from just 3% in 2020. Additionally, the country has increased its investment in water recycling and energy-efficient machinery, with over $200 million in green investments flowing into the industry in the past year. This move is in response to increasing global demand for eco-friendly products, particularly in markets such as Europe and the U.S.
August uprising and the aftermath
In July-August 2024, Bangladesh experienced a major shift with a large-scale uprising that led to the Hasina regime change. During this period, garment factories were shut down, ports were closed, and exports were halted, causing significant disruptions to the economy and supply chains. This political upheaval, along with the protests demanding better wages and working conditions, exacerbated the challenges faced by the garment industry.
However, despite these setbacks, the resolution of the labor dispute and the eventual reopening of factories and ports allowed the industry to regain its footing, reaffirming Bangladesh’s resilience in the face of political instability.
Again, those protests were sparked by a combination of high inflation, rising costs of living, and demands for a minimum wage increase.
Leadership changes in trade bodies:
2024 has seen significant leadership changes within the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Following a recent election, SM Mannan Kochi was initially appointed as president. However, due to unforeseen circumstances, Kochi resigned from the position.
Afterward, Anwar Hossain, the Vice Chairman of the Export Promotion Bureau (EPB), has been newly appointed as the Administrator of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
“Bangladesh’s RMG sector is poised for a significant export boost. The last quarter typically sees an uptick in orders due to the holiday season. According to EPB, exports have surged by 7% in the final quarter, with a forecasted year-end export value reaching approximately $45 billion, up from $43 billion in 2023.”
After 14 consecutive years, AKM Selim Osman has stepped down as the president of the knitwear industry owners’ association BKMEA. Mohammad Hatem, who had been serving as the executive president for a long time, has become the new president of the organization. Mohammad Hatem has served as the vice president of BKMEA for a long time. He became the executive president in 2021.
After the resignation of Mohammad Ali Khokon as Bangladesh Textile Mills Association (BTMA) president due to family and physical illness in the wake of the mass uprising, Amber Group Chairman Shawkat Aziz Russell was elected as the president of BTMA. He had previously served as BTMA senior vice president.
Order shifts to neighboring countries: A growing competitor
As Bangladesh grapples with internal challenges, neighboring countries like Vietnam and India have become increasingly competitive in securing orders from global buyers. According to the World Trade Organization (WTO), Vietnam’s garment exports grew by 7% in 2024, while India’s garment exports increased by 5%. These nations have capitalized on Bangladesh’s energy and labor cost challenges, drawing some orders away. However, Bangladesh still maintains its edge in terms of established infrastructure, skilled labor, and competitive pricing. The country continues to focus on diversifying its product offerings, from basic garments to high-value items like active-wear and denim, to stay ahead in the competitive landscape.
Labor rights: Progress amidst struggles
Labor rights have remained a central issue in the RMG sector in 2024. July protests eventually led to a deal between labor unions and manufacturers, with an agreement on the 18-point demand list, including wage hikes of up to 25%. The deal, while necessary, came at a cost to production timelines and created some tension within the industry. Nonetheless, Bangladesh’s ability to address labor concerns has strengthened its global image, with international buyers taking note of the industry’s commitment to worker welfare.
According to reports from the International Labour Organization (ILO), worker safety, wages, and treatment continue to be focal points for the industry. In response, the government and BGMEA have made significant strides in improving working conditions. The adoption of new labor policies, which include increased wages and enhanced safety measures, has been welcomed by both workers and international buyers. Bangladesh’s focus on improving labor rights is not only in response to domestic pressure but also to align with international standards set by major buyers in Europe and the U.S.
Export growth at year-end: A positive turn
As 2024 comes to a close, Bangladesh’s RMG sector is poised for a significant export boost. The last quarter typically sees an uptick in orders due to the holiday season, and this year is no exception. According to the Bangladesh Export Promotion Bureau (EPB), exports have surged by 7% in the final quarter, with a forecasted year-end export value reaching approximately $45 billion, up from $43 billion in 2023.
“Despite political instability, rising energy costs, and growing competition, Bangladesh has shown remarkable resilience. The country continues to lead in sustainable garment production and labor rights while adapting to global shifts in demand for ethical and eco-friendly fashion.”
Additionally, the U.S. high-level trade representative visit in November 2024 helped boost confidence in the sector, with assurances from international buyers that product prices will raise by 5-10% in response to inflation. During the July-November period of the current fiscal year was $16.11 billion, compared to $14.34 billion in the same period last year. In this case, exports have increased by 12.34 percent compared to the previous year.
Global shifts: U.S. presidential election and EU due diligence
The global political landscape in 2024 has added an extra layer of complexity to Bangladesh’s RMG sector. The U.S. Presidential election could lead to a shift in trade policies, potentially impacting duty-free access for Bangladeshi goods. Furthermore, new European Union regulations on due diligence for labor practices and sustainability are forcing Bangladesh’s manufacturers to adopt stricter standards.
According to the EU’s new trade agreements, companies that fail to comply with environmental and social standards may face tariffs and restrictions. Bangladesh’s ability to meet these standards is crucial for maintaining its stronghold in European markets, where it exports roughly 40% of its total garment production.
A Resilient Industry with Challenges Ahead, Bangladesh’s RMG sector in 2024 has navigated through a complex set of challenges while demonstrating remarkable resilience. With export growth showing a positive trend, increased sustainability efforts, and significant improvements in labor practices, Bangladesh is well-positioned to continue its success in the global garment market.
However, challenges remain, including political instability, rising energy costs, and growing competition from neighboring countries. By continuing to focus on high-value products, embracing green technologies, and fostering labor rights, Bangladesh can overcome these challenges and secure its place as a global leader in the garment manufacturing industry.
With a projected export value nearing $45 billion by year-end, the industry’s ability to adapt to global shifts and meet increasing demand for ethical and sustainable fashion will determine its long-term success.
