Adequate policy, logistic support to gain $100b RMG exports

Alongside the ongoing war between Russia and Ukraine, the skyrocketing fuel price and electricity crisis severely affected the production and export, says Shahidullah Azim

Nasreen Geeti

Proper policy and logistic support are a must to gain higher export income from the existing level in line with the target of sustainable Development Goals (SDGs).

Recently, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), has set a target to earn $100 billion by 2030 from the clothing products, said Md. Shahidullah Azim, Vice –President of BGMEA to the Daily Tribunal.

Achieving the $100 billion export target, the sector has to earn $7.17 billion each year, he said, adding that the sector also has to post an 11.26% annual growth in export earnings till 2030.

Such an ambitious target was set at a time when the global economies are bleeding due to the Covid-19 pandemic impacts and ongoing Russia-Ukraine war, he mentioned.

Apart from this, the LDC graduation in 2026 will be another challenge for the exporters as there is a possibility of duty free benefits withdrawal by the importing countries in the post-graduation period, mentioned Azim.

Non-cotton products are the future of fashion, and for this, there is no alternative to penetrate this segment gradually. About 75 per cent export earnings are entering from cotton base products, he also pointed out.

“We have a lot of potential to boost the production of the cotton products. The global Non Cotton Fabrics market size was $27.48 billion in 2021 and it is expected to reach $45.85 billion by the end of 2027, with a Compound Annual Growth Rate (CAGR) of 7.1% during 2021-27”, he mentioned.

Country’s export earnings from apparel products rose sharply by 35.47 per cent to $42.61 billion in FY 2022, which was $31.45 billion in the previous year, he informed.

The sector is contributing 81.81 per cent to the national exports. Out of $42.61 billion, knitwear products fetched $23.21 billion, up by 36.88 per cent from last fiscal year’s $19.91 billion, while woven items earned $19.39 billion, registering a 33.82 per cent growth. Knitwear products contributed much better than woven products.

Knitwear products contributed 44.56 per cent, while woven products 37.23 per cent. For sustaining the growth and to earn the $100 billion from the sector, there is a strong need to bring balance between woven and knitwear products. Knitwear products did well as the sector has a strong backward linkage and it can meet 85% to 90% demands of raw materials from domestic sources.

On the other hand, the woven sector can meet around 50% raw materials from domestic sources, which is a barrier to growth. To reduce the gap between the woven and knitwear sector, the industry people have to come up with new investments to improve capacity to supply raw materials from local factories.

He mentioned that BGMEA has already sent a letter to the Commerce Ministry, demanding a 10% cash incentive on the export of non-cotton garment items. Exporters are new in this area and they need policy support including incentives against exports. The government should offer at least 5 percent cash incentives against exports and more duty free benefits for importing raw materials for this sub sector.

Some 71.37 per cent of Bangladesh’s apparel exports earnings come from EU and US markets and the ongoing war between Russia and Ukraine is posing a threat on the exports earnings.

We need to take initiative to boost the export to the non-traditional markets including Japan, Australia, Russia, India, Brazil, and Malaysia. Due to proximity, there is a huge opportunity to grow in the South Asian market as the culture and clothing pattern are the same and Bangladesh enjoys duty free benefits. In addition to these, Bangladesh has to focus on the Middle East market.

Manufacturers should focus on these markets and develop products for these markets. Against a $10 billion exports market in Gulf countries, Bangladesh exports to the region are only about 367.49 million. So, penetration to the export market of United Arab Emirates (UAE), Saudi Arabia, Qatar, Oman, Kuwait and Bahrain will be a great option for Bangladesh to enlarge export value and volume.

The existing capacity and productivity is not enough to earn $100 billion by 2030. Compared to our competitors, the productivity is low and it is hovering around 60%-70%, while Bangladesh’s competitors’ workers’ productivity is between 90% and 100% percent. In remaining competitive in the global exports market, there is no alternative to increase productivity.

Azim has underscored the need to conduct more research to adopt the current fashion trend as consumer taste also changes rapidly. So, the sector people have to have a dedicated team to cope up with the fancy trend and retain the global buyers. Industry and academia can join hands in research and innovation for the clothing sector to take it to a new height.

After the Rana Plaza collapse, Bangladesh’s RMG sector turned into the safest one, he said, adding that global brands, retailers and buyers have also a responsibility to help Bangladesh reach the $100 billion target.

Apart from this, the global brands and retailers have to ensure better prices and follow ethical buying practices while quoting prices for goods which will give an ease to owners to overcome the cost related challenges and offer a better wage for the workers, he mentioned.

He recommended ensuring the timely shipment of goods, he said adding that maintaining product quality is very crucial to retain buyers’ confidence.

According to BGMEA data, there are 165 green factories in the RMG sector certified by US Green Building Council’s (USGBC), so, we are also seeking the co-operation of the buyers to gain $100 billion export income.

To cash the opportunities, we have to attract investors also focusing on manufacturing goods China is leaving. Foreign investment should be allowed in the high end products, which will help to acquire knowledge from their expertise. On the other hand, the government should offer plots in the special economic zones to the foreign investors to produce high valued clothing products. In addition, the political crisis in Sri Lanka, Myanmar is also an opportunity for Bangladesh, which needs to cash through improved communication with buyers.

The ongoing supply chain disruption will remain for some time for ongoing war between Russia-Ukraine. Instability in food products, fuel oil market has not come under control. Europe and America are the main export destinations of Bangladeshi products, but the chaotic situation is hindering the export.

UD (Utilization Declaration) is the permission certificate for duty free import of essential raw materials after receiving the export order. In the last two months, it has decreased by 18 percent compared to the same period of the previous year.

Again the price of cotton and yarn has come down a bit. The price of clothes is also decreasing. There are many reasons for the slowdown in exports in the new financial year.

Bangladesh was in an advantageous position in exports due to several reasons last financial year. Other countries, including major exporter China and competitor Vietnam, are yet to fully recover from the impact of the coronavirus.

The situation in Vietnam is almost the same. As a result, Bangladesh has also benefited from China’s tariff fight with the US for the past four years.

Actually, Bangladesh has shown capacity in supply chain during pandemic time as the entrepreneurs continued the production with the risk and delivered the products to the buyers.

Such approaches of stakeholders helped to gain trust of the buyers, Azim observed. Expressing the current crisis, Azim said that the skyrocketing prices of fuel and electricity problem is severely hindering the production.

The business cost of the apparel sector is increasing gradually, putting negative impact on the entire sector, he observed.

“If the current situation prevails in the long run, it would be tough to sustain business”, Shahidullah Azim added.

Shahidullah Azim has underscored the need for undertaking prompt action to resolve the fuel and electricity crisis and to boost production and export income.

“More tax waiving facility is a must to achieve $ 100 export income from the apparel sector”, added Azim.

Meanwhile, BGMEA Director Harun or Rashid also echoed with Sahidullah Azim for the further boosting of the production and export.

He laid emphasis for ensuring more policy and logistic support to gain $100 billion export income from the apparel sector.

The working atmosphere in the factories has changed now. “We are now ensuring a global standard working environment in our companies, so, it is important to ensure more policy and logistic support to boost the production”, Rashid added.