Is apparel industry ready to reap benefits from new market opportunities?

Some good news appeared last week on the export fronts. The first month of the fiscal year saw over 15% growth compared to a year back, driven, as usual, by apparels, latest export data shows.

The growth came in the backdrop of a US fashion industry survey revealing that they want to procure more from Bangladesh and buy less from China.

Earlier this week, a World Trade Organisation report said Bangladesh, with $45b exports in 2022, more than tripled its share in the global clothing market, reaching 7.9% last year from just 2.5% in 2005.

Bangladesh retains its position as the second largest apparel exporter after China despite the local apparel industry facing higher production costs due to energy price hikes and slow orders from inflation-hit western destinations.

Exporters believe their efforts to go for more value-added and diversified products started paying dividends, offsetting the effects of the decline in orders that forced many factories to run at less capacity. Buyers are squeezing prices at 12% to 20% compared to the past year, requiring them to sell more products to cover the reduced value, an exporter, Md Khosru Chowdhury of Nipa Group, told TBS.

Despite headwinds, Bangladesh continued to raise its apparel market share by 1.5 percentage points last year amid prospects of more gains in the US market which might buy less apparels from China, the world's biggest exporters.

But Bangladesh is not alone hoping to gain. At least two contenders are there, Vietnam and India, from where a similar proportion (52%) of US buyers intend to procure more clothing. Though lesser in proportion, US fashion executives also want to increase imports from Cambodia, Egypt, Mexico and Indonesia.

All these countries too stand to gain if 78% of US fashion companies, as surveyed, really reduce sourcing from China.

However, Bangladesh's apparel exporters are confident about their capacity to gain in case major American fashion brands reduce their procurement from China for geopolitical reasons.

"Should a 2-3% market share from China be redirected, no other country but Bangladesh possesses the capability to step in and bridge the gap," said a confident Mohammad Hatem, a knit garment exporter and executive president of Bangladesh Knitwear Manufacturers and Exporters Association.

Bangladesh's apparel industry, he believes, has established itself as a dependable and steady supplier to the global market.

 Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Vice President Shahidullah Azim also holds high hopes from growing trend among western buyers to look for "China plus one" sourcing destinations. "Here Bangladesh is in the best position in terms of capacity, ethical manufacturing and green industries," he says, hoping that additional orders will mean more industries and more jobs in Bangladesh.

Can industry leaders expect guaranteed gains only banking on their own inbuilt capacity and confidence?

 They need more.

 Hatem said years' of political stability helped them grow with a big jump in capacity and unlimited opportunities are open to them to further increase apparel market share, if uninterrupted supply of gas and electricity is ensured. "The country has to develop infrastructures to meet future needs of the industry-- especially port capacity and road transportation to achieve the $100 billion apparel export target by 2030."

"A four-lane highway is not enough. Bangladesh now needs an elevated expressway from Gazipur to Chittagong," notes Mohammad Hatem.   

Adding to the wish-list, Shahidullah Azim says now the government needs to provide policy support for the manmade fibre-based industry if Bangladesh hopes to gain from the projected decline in China's market share.  

"If we get policy supports for the next 5 to 10 years, Bangladesh may host the world's best MMF industries," he says as he feels enabling facilities can encourage foreign investment and joint ventures in man-made fibre industries to grasp the future opportunities as the global market now demands more man-made fibre clothing than cotton ones. Bangladesh needs to enhance expertise in this area.

"Industry needs to increase capacity to grab the market share to be lost by China, which produces high-value items mostly from man-made fibre.  We have to invest more in suits, blazers, lingerie, activewear and sportswear," Azim says.

MMF units are more capital intensive than cotton spinning mills and they require a skilled workforce to operate new technologies. "Local manufactures need to improve their efficiency in mid-level management as well," he adds, calling for tax breaks and simplification of customs procedures to import new technologies and raw materials for the MMF industry.

Their hopes are also backed by experts.

Dr Mohammad Abdur Razzaque, chairman of research organisation Research and Policy Integration for Development (RAPID), earlier told TBS that Bangladesh would be able to earn additional $54 billion every year from apparel exports by 2030 if the industry can shift to non-cotton products, bring in foreign investments, ensure environmental and social governance (ESG), and enhance capacity in logistics including port and customs.

"Global political tension and domestic factors will continue to reduce China's share in apparel exports. On the other hand, Bangladesh's strong backward linkage support will play a positive role in achieving this target," he explained.

However, he cautioned, there are some uncertainties and challenges ahead as Bangladesh is going to lose duty-free export facilities after graduation from least developed country status in 2026.

Opening new opportunities alone is not going to help, the industry needs to prepare well to reap the benefit before losing it to other contenders. Vietnam knocked Bangladesh from the second position a couple of years back and it remains as a soft reminder for us.