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Bangladesh needs to up its technology quotient to lead the game

"Bangladesh export earnings from the US has been dipping at the rate 4.46 per cent to reach $5.07 billion in 2017 from $5.30bn a year ago, as reported by the data by OTEXA. Owing to this, its share in the US apparel market came down to 6.31 per cent from 6.58 per cent. While Vietnam registered over 7 per cent growth in the US apparel market, followed by Mexico at 5.33 per cent, India at 1.19 per cent, and Pakistan at 1 per cent in the same period. China, the largest exporter of apparel products, also saw a decline in export earnings as well as market share in the US. Rising labour costs in China and the country pushing towards service-based economy are some of the reasons behind its decreasing export share. However, with the ongoing trade war between China and the US, Bangladesh and Vietnam are the strong contenders to fill the gap."

 

Bangladesh needs to up its technology quotient to lead the game 002Bangladesh export earnings from the US has been dipping at the rate 4.46 per cent to reach $5.07 billion in 2017 from $5.30bn a year ago, as reported by the data by OTEXA. Owing to this, its share in the US apparel market came down to 6.31 per cent from 6.58 per cent. While Vietnam registered over 7 per cent growth in the US apparel market, followed by Mexico at 5.33 per cent, India at 1.19 per cent, and Pakistan at 1 per cent in the same period. China, the largest exporter of apparel products, also saw a decline in export earnings as well as market share in the US. Rising labour costs in China and the country pushing towards service-based economy are some of the reasons behind its decreasing export share. However, with the ongoing trade war between China and the US, Bangladesh and Vietnam are the strong contenders to fill the gap.

Who would win ultimately?

Major comparative advantages of Bangladesh apparel industry are lower wages, high capacity suitable for largeBangladesh needs to up its technology quotient to lead the game 001 volume orders, and lean manufacturing. Bangladesh has inherent supply of local cotton, yarns, and fabrics, even though it is not sufficient to cover the entire demand of the apparel export sector. The high dependence on importing most of cotton and fabric to sustain apparel manufacturing contributes to longer lead times. To add to the woes are the poor infrastructure, inefficient logistics, and unstable energy supply.

Vietnam on the other hand has much higher labour cost (twice or thrice of Bangladesh) but this disadvantage is nullified by higher productivity of skilled and better trained workers. Hence, Vietnam can produce intricate styles with agile and flexible manufacturing. Its infrastructure, logistics services and reliable energy supply are state-of-the-art, resulting in shorter lead times. However, Vietnam lacks in domestic raw materials and primarily relies on imported textiles. But Vietnam’s proximity to China makes transporting raw materials easier and convenient. In terms of product portfolio, Bangladesh has much less diversified product portfolio than its Vietnamese counterparts.

Of Bangladesh’s total exports, 79 per cent are concentrated in five basic products: trousers, T-shirts, sweaters, shirts, and jackets. In comparison, Vietnam has a more diversified product portfolio. 63.1 per cent of Vietnam’s apparel exports to the US comprise of these top 10 product categories: women’s knit shirts and blouses (MMF), women’s trousers (cotton), women’s knit shirts and blouses (cotton), women’s trousers (MMF), men’s knit shirts (cotton), dresses (MMF), men’s trousers (MMF), men’s knit shirts (MMF), men’s trousers (cotton), and women’s coats (MMF).

Playing it safe

Rather than banking on just one market, Vietnam has diversified its reach and because of that, despite the abandonment of the Trans-Pacific Partnership (TPP) last year, Vietnam’s textile and garment industry exceeded its 2017 target of $30bn with an export turnover of over $31bn, registering an increase of 10.23 per cent from the prior year. While the US, EU, Japan, and South Korea maintained good growth, China, Russia, and Cambodia registered a strong export lead.

Vietnam has also invested big in the development of shuttle less looms and the biggest investor in ring spindles and open-end rotors, amongst the ASEAN countries. The lesson for Bangladesh is clear that one cannot compete on low-cost advantage alone. The country needs to move away from mass market commodities to higher value-added fashion goods or increase productivity. Its garment factories must re-engineer their operations to increase worker skills.

Embracing technology, up-skilling workforce to meet new technology needs, moving up the value chain in its product-portfolio from basic commodity to high end fashion, diversification of markets, developing a conducive climate for attracting foreign investment, improving ranking in the global competitive index on all pillars, developing our infrastructure, developing our own textile sector to reduce over-dependence on raw-materials and thus reduce lead times would all ensure that Bangladesh can retain its number two spot as the apparel exporter to the world.

 
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