India, Pakistan surpass Bangladesh in RMG export growth in EU, US markets

TBS Infograph

Despite Bangladesh's securing a good number of apparel work orders from the European Union and the United States, it was outnumbered by neighbouring India and Pakistan in terms of export growth in the two major markets in January-July this year. The two countries clearly capitalised on their competitive advantages. 

In the first seven months of this year, Bangladesh's readymade garment exports registered a little over 18% growth in the EU, while the two neighbouring countries saw their exports rise by 22% and 28% respectively, according to Eurostat. 

Likewise, exports from India and Pakistan to the US market during the same period experienced better growth over Bangladesh, according to Otexa data.

Apparel exports say an abnormal rise in yarn prices - a key ingredient that accounts for 50-60% cost of a clothing item - has given the two countries an edge over Bangladesh as they can source yarns domestically at prices 30%-50% lower than in Bangladesh.

"Many work orders slipped out of our hands and shifted to India or Pakistan because of high yarn prices in Bangladesh," Fazlee Shamim Ehsan, chief executive officer at Fatullah Fashion Limited, told The Business Standard.

As the two neighbouring countries produce cotton locally, they can offer clothing items at comparatively low prices, he said.

Md Fazlul Hoque, former president of Bangladesh Knitwear Manufacturer & Exporters Association (BKMEA), told TBS, "The difference between raw material prices might be the reason why India and Pakistan performed better than us in RMG growth. Our exports are increasing and there is room for further development."

"There is no research on why our apparel exports are not growing more. We have to find out the reasons. We need to assess what strategies our competing countries have adopted to accelerate growth," he pointed out.   

However, Shahidullah Azim, vice-president of Bangladesh Garment Manufacturers & Exporters Association (BGMEA), expressing his optimism, said, "We will surpass both the countries in the coming months with a large number of work orders flowing in."

According to Eurostat data, European countries imported around $38 billion worth of apparel items in the January-July period this year, up by 13% over the same period a year ago.

Bangladesh, the second largest RMG exporter after China, exported apparel items amounting to $7.82 billion to 27 European countries in January-July this year. 

Other top garment exporters to the EU market are Turkey, India, Cambodia, Vietnam, Pakistan, Morocco, Sri Lanka and Indonesia.

Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), told TBS that Bangladesh stays behind a bit because it does not have its own cotton, which can be compensated to some extent by enhancing productivity and product diversification.

"There is a competition over getting hold of the buyers moving away from China. Bangladesh should pay attention to it," he added. 

Prices of cotton had been rising worldwide since the beginning of this year, leading to a surge in yarn and fabric prices. 

RMG entrepreneurs have claimed that local spinning mills have been charging much higher than in the global market, while spinners have repeatedly clarified that they hiked prices in line with cotton prices.

Both the parties, however, recently reached an agreement on pricing of yarns.

In FY21, Bangladesh exported $31.45 billion worth of garment products, of which knitwear items accounted for over 50%.

In 2020, Bangladesh exported a little over $14 billion worth of RMG items to the European market, while the volume amounted to $16.45 billion in 2019.

Yarn price differences between local and global markets

According to global market data, the current cotton price is a little less than 95 cents per pound. Cotton imported by Bangladesh is mostly used to produce 30 count yarn meant for manufacturing knitwear items. 

RMG exporters claim that per kg yarn price should not cost more than $3.8, including all expenses, but is being sold at $4.15-$4.2 at the local market. 

Textile millers, however, say it costs about $4.12 to produce 30 count yarn per kg of yarn, which they offer at $4.2 per kg.

Drawing a comparison between 30 cotton carded yarn prices in Bangladesh and India as of last Wednesday, Fazlee Shamim Ehsan said per kg import cost of the same yarn from India is $3.60, which is sold at $4.15 per kg in Bangladesh. But Indian buyers get the same at $3.5 per kg.