Bangladesh garments gain foothold in new markets

Bangladesh has been trying to diversify the export and market of readymade garments (RMG) for over a decade. Though the country has yet to see success, it has made progress.

Currently, several companies export value-added or premium segment diversified RMG products. Again, the country has started reducing heavy dependence on traditional markets, as well as increased share in new markets, thus, a new wave of transformation has hit the RMG industry.

The European Union, including the UK markets, shared 58.90 per cent of Bangladesh’s total RMG exports in 2009 while the US and Canada shared 28.70 per cent and 4.86 per cent respectively. That means traditional markets were the destination of 92 per cent of the total exports while new makers have it 7 per cent only.

Share of new markets rose to 18.72 per cent over the one-and-half decades, reducing heavy dependency on traditional markets. The US market share decreased to 17.46 per cent from 28.70 per cent and Canada maker share to 3.19 per cent from 4.86 per cent. The EU market shares did not change much, but the share of the UK markets increased during this period.

Fazlul Haque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, “The silent revolution in new markets is the result of everyone’s efforts, yet this happens separately. Our entrepreneurs are trying. There were also initiatives by the government, and buyers are also trying.”

According to Fazlul Haque, it is necessary to increase shares in new markets for two reasons. One is a dependency on only two or three markets may cause concern for massive adversity, and another is Bangladesh must have an active presence at ad everywhere -- small and big markets -- to increase apparel exports.

He said it is possible to bring the share of new markets to 40 per cent of total exports, and there is potential. Everyone knows the name of Bangladesh now. As a result, it will be easier to raise the exports, if the country moves in a planned way.

There is a potential to increase apparel exports to Africa, South America and the Middle East. Two three-year plans should be taken targeting a certain single country of these regions, and then news will arrive in the neighbouring countries, Fazlul Haque said.

The apparel sector flourished at the patronisation of the government as the endeavour of entrepreneurs in the 1980s. Duty drawback and bond facilities were introduced later, followed by the launch of back-to-back LC (letters of credit) later. The apparel and textile sector enjoyed 25 per cent cash assistance in the 1999-2000 fiscal, which was reduced gradually. At present, the RMG industry enjoys incentives to increase exports to new markets.

Exports of RMG nearly quadrupled over the one and half decades despite the Rana Plaza building collapse and the coronavirus pandemic. Earnings from RMG exports rose to USD 47.39 billion in 2023 from USD 11.89 billion in 2009.

In 2023, RMG exports to the EU stood at USD 23.38 billion, US at 8.27 billion, UK at 5.38 billion, Canada at 1.51 billion and new markets at USD 8.87 billion. Once fallen behind, new markets have now surpassed the US markets, and its growth is also relatively better than any other market.

In 2020, RMG exports grew by 20 per cent in new markets, 12.46 per cent in the UK, 1.6 per cent in Canada and 1.5 per cent in the EU while exports fell by 8.68 per cent in the US.

Japan and Australia were the surprise in new markets. Exports of RMG grew by 26.53 per cent year-on-year to USD 1.68 billion in 2023. Exports to Japan rose by 15 times in the past 15 years since 2009, which was USD 1.1 million.

RMG exports to Australia increased by 38 per cent year-on-year to a record USD 1.28 billion in 2023. Exports to this market stood at 70 million in 2009

Exports of RMG to India also grew fast to USD 510 million in 2019 from USD 8 million in 2009. Exports declined amid the coronavirus pandemic, but they rose to 900 million in 2022 and 920 million in 2023 while growth was 2.20 per cent in 2023.

Russia and South Korea are among the top five new markets. Exports of RMG to Russia declined following the Russia-Ukraine war, but it posted a 13.13 per cent growth to USD 480 million in 2023. Exports to South Korea also rose gradually to USD 590 million in 2023 from USD 240 million in 2028.

Besides, apparel exports to China, United Arab Emirates (UAE), Malaysia, Saudi Arabia, Turkey, South Africa and New Zealand also saw an upward trend.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), told Prothom Alo, “The accomplishment of the new markets is a positive side, but this remains limited to two or three markets. We highlighted data and statistics on 15 potential markets in a research in 2010, and we are performing better among those markets where our government and trade organisations have taken various initiatives.”

According to Golam Moazzem, the duty system is a big challenge in new markets. As most of these countries are developing countries, products that come from outside of their regions are exported to these countries with higher duties. For this reason, Bangladesh must negotiate with them on duty cuts. It is also necessary to sign free trade agreements (FTAs) sign preferential trade arrangements (PTAs) with Brazil, Argentina, Peru and Mexico. Besides, there are language barriers in several countries, as well as visa complications, and it will be necessary to resolve these problems, he added.

*This report appeared in the print and online editions of Prothom Alo and has been rewritten in English by Hasanul Banna.