Snapshot: Sourcing from Bangladesh

Snapshot: Sourcing from Bangladesh

In light of the ongoing US-China trade war and recent coronavirus outbreak, many companies are seeking alternatives to China to meet their sourcing needs. As a result of this and other trends, Bangladesh is fast emerging as one of the world’s key production centres for textiles and readymade garments (RMGs). While many businesses are currently looking for alternative for their sourcing needs, it is important that they exercise caution to ensure the consistency of their quality and the timeliness of their deliveries. For this reason, we always recommend working with a third party inspection company with eyes on the ground to ensure your supplier’s operations and management are up to your exact standards.

A long history of excellence in textile and RMG production

Bangladesh enjoys a rich history of textile production dating back to the 16th century when it was the key cotton and textile production region of the Mughal Empire. The country has seen significant growth since focusing on exports in recent decades: according to Sourcing Journal, annual apparel exports increased by an average of 12% annually between 1995 and 2010, with exports to Western markets more than doubling during this time. According to Trading Economics, these exports accounted for 80% of the country’s total export revenue last year. With over 30 years of experience in modern textile and RMG production, Bangladesh offers foreign buyers expertise that includes sophisticated dying, embroidery, and lavation techniques, and much more.

Challenges and future prospects

In 2019 Bangladesh sold more than US $40 billion worth of garments and textiles and the government aims to reach over $50 billion by 2021. While much smaller in scale, other significant exports include footwear and food products. While these are positive indicators, there are also a number of challenges to sourcing from Bangladesh. A 2011 study by McKinsey & Company identified some of these key challenges as:

– Poor infrastructure

– Compliance issues

– Rising labor costs (though still much lower than other suppliers such as China – see below) and a quality/ capability gap

– Political and economic instability

– Reliance on imported raw materials

Labor costs – Wage Comparison Table

Labor Costs Unit China Cambodia Vietnam India Bangladesh
(Per month) USD $550-600 $180-190 $170-190 $160-180 $100-110

* Source: Wazir Analysis

Positive Signs

It is notable that much progress has been made on these issues since the publication of the McKinsey report. For instance, the country has seen a significant reduction in employee deaths due to non-compliance with safety codes following the horrific Rana Plaza building collapse of 2013. Furthermore, infrastructure spending is on the rise: according to a September, 2019 article in the Times of India, Bangladesh has announced a US $62 billion annual budget with large-scale infrastructure spending being a significant component in helping the country achieve its ongoing goal of double-digit GDP growth into the next decade.

As a key partner in China’s One Belt One Road Initiative and with China as its largest trading partner and an important foreign investor, Bangladesh will be a beneficiary of much infrastructure development to come. As China seeks to reduce its textile and RMG production in favour of more high-tech products, Bangladesh will likely continue to benefit from this important shift in the global supply chain.

In addition to infrastructure spending, the Bangladeshi government has undertaken a number of measures to improve the country’s textile and RMG export. These include the removal of textile quota restrictions, and a duty free exemption for many top trading partners. Bangladesh also enjoys tariff-free mechanisms from the World Trade Organization (WTO).

While Bangladesh’s outlook is strong, it is important that your business interests are protected when sourcing from any new supplier. A local third party inspection company can help you do just that by functioning as your eyes on the ground and ensuring your shipments are both reliable and in-line with your quality expectations.

Why choose HQTS?

With over 25 years of quality assurance experience across Asia, HQTS is ready to help your business build strong and meaningful supplier relationships in Bangladesh. Our office in the country’s capital of Dhaka is ready to be your one-stop shop for your inspection needs in the country, including  factory audits, production monitoring, pre-shipment and sorting inspections, and everything in between. We have extensive expertise in textiles and garments and our leading fabric inspection services ensure a total quality control experience. Finally, our rigid Social Compliance audit ensures that your supplier follows all of the necessary global regulations regarding worker safety and environmental impact. If your business is in need of new sourcing partners in new markets such as Bangladesh, make sure HQTS is your first choice to ensure reliability and excellence in quality every time.