- Posted by: HQTS
- Category: Uncategorized
Bangladesh is the world’s second-largest Ready-made Garment (RMG) exporter. The RMG and textile sector has consistently been the key driver of Bangladesh exports for the last several years, contributing over 80% of total exports from the country. In 2018, exports of RMG generated foreign-exchange earnings of US$32.9Bn. By 2021, the government aims to raise this figure to US$50Bn.
Bangladesh exports a wide range of apparel products to North America, Europe, Asia, and many other regions of the world. Generally, RMG and textile products for export are divided into two major categories – woven and knitwear.
Bangladesh has a global market share of 6.4% of total RMG exports. Due to various factors, China is slowly transitioning away from RMG and textile production. This factor increases the opportunity for Bangladesh to capture additional market share from China and increase its percentage of the global market going forward.
Key Factors Shaping the Market
Several advantages have contributed to the country’s rise in the sector, including:
Located at the crossroads of three major Asian economic entities – ASEAN, China, and India – Bangladesh provides easy access to multiple ports of entry, including sea, land, and air. This unique location allows it to act as a bridge of trade cooperation, facilitating the inflow of significant global investment.
- Public Policy
Quota-free textile regulations – introduced in 2005 – have substantially improved the textile and RMG industry in Bangladesh. Moreover, the country enjoys a duty exemption under the Generalized System of Preference (GSP) from many import countries of the developed world. Bangladesh also enjoys reduced and tariff-free mechanisms from the World Trade Organization (WTO). Taken together, these have powered exceptional growth prospects for the Bangladesh textile and RMG goods export industry.
- Rich Experience
With more than 30 years of experience in the manufacture of RMG and textiles, Bangladesh has developed a good reputation in global markets. It leverages the value of sophisticated techniques in dyeing, embroidery, lavation, and many others. Additionally, most factories can produce multiple types of RMG products, increasing choice and flexibility for buyers.
- Low Labor Costs
Bangladesh has the advantage of having a cheap and readily available workforce, even when compared to India, Vietnam, and China. This abundant and growing labor force is currently underutilized and provides abundant opportunities for the expansion of labor-intensive manufacturing, including RMG and textiles. The labor situation represents a clear competitive advantage.
Wage Comparison Table
Data source: Wazir Analysis
Despite the high growth rate and industry advantages, RMG and textile manufacturing in Bangladesh faces many challenges. For example:
- Raw Materials
Bangladesh imports many of the raw materials required for RMG manufacturing like cotton, fabric, dyes, and others. In fact, most of these materials are sourced from China. This dependence on raw materials hampers the development of the RMG industry.
- Longer Lead Times
The fragmented supply chain and outsourcing of raw materials hurt total lead times, which impacts competitiveness. For example, Bangladesh requires an average of 90-120 days to final delivery, while China requires only 50-60 days.
- Supply Chain Integration
Being highly dependent on the import of raw materials for RMG and textile manufacturing, the supply chain is fragmented. As more upstream suppliers come online, manufacturers will become more competitive through local supply chain integration. A more robust supply chain and advanced technology can be leveraged to reduce non-local sourcing, manufacturers and buyers will benefit from reductions in production costs and lead time while delivering high-quality products.
- Low Productivity
The overall productivity levels in apparel manufacturing are relatively low compared to its competitors. An unskilled workforce and lack of technology, including large-scale industrial machines and equipment, contribute to productivity issues.
With technological advancements, the process of sewing and knitting is increasingly automated. As automation increases, labor costs become a smaller percentage of total delivered costs. Thus, reducing the advantage of lower wages. This may pose a serious threat to long-term RMG and textile manufacturing in Bangladesh.
HQTS in Bangladesh
Bangladesh was the first country to join China’s Belt and Road initiative and thus far has received large amounts of funding from China for infrastructure projects. China is also Bangladesh’s largest trading partner, with two-way trade set to exceed US$30Bn by 2021. This has opened many opportunities for China and Bangladesh based companies to increase cooperation.
China-based HQTS is also benefiting from increased cooperation. The fundamental principles of the Belt and Road initiative, namely, “communicative, constructive, and cooperative”, form the foundation by which HQTS provides quality assurance services for our customers in Bangladesh. HQTS is determined to help strengthen and deepen trade cooperation in the region through improved quality assurance, development of additional partnerships, expanded service categories, and growth of our footprint in the region.
Countries Participating in “One Belt One Road”
HQTS is one of Asia’s oldest and largest quality assurance companies and has operations in more than 20 countries supported by a staff of more than 1500 industry professionals. We provide a broad range of services, including product inspections, consumer goods testing, factory audits, supplier evaluations, production control and management, and quality control consulting and training throughout Asia.