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25Mar

BANGLADESH, The First Choice of Apparel Import

Bangladesh offers a favorable business climate with a very low labor costs compared to other textile-producing countries. It has a favorable trade status with the European Union (EU) and is supported by numerous government incentives. Actually Bangladesh is a strategic location as it offers unique advantages. The wage cost in Bangladesh is amongst the lowest in the world. Garments manufactured and exported from Bangladesh do not attract any import duty. Bangladesh is manufacturing high-quality denim fabric to cater to requirement of European countries. It has ready market available; hence the proposed plant shall be profitable from day one. Companies worldwide like Germany-based Amann Groupand, have established Amann Bangladesh Ltd., a joint venture, Japan-based zipper manufacturer YKK Corp., India-based Arvind Ltd., are investing in Bangladesh’s textile industry.
The government of Bangladeshi also actively supports textile industries of the country. The government trains garment workers to increase the country’s garment exports, provides small- and medium-sized garment exporters with an additional 5- to 10-percent increase in cash incentives on the total value of exports, supplies bailout package to restore their productivity. All these available benefits collaborately help to increase the potentiality of apparel Import throughout the world.Several textile associations support Bangladesh’s industry. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) helps to strengthen and promote the Readymade garment (RMG) sector by establishing a healthy business environment and cultivating relationships among the manufacturers, exporters and importers, with the goal of increasing Bangladesh’s foreign exchange earnings and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) works to promote sector interests, promoting and developing the sector’s capacity as well as the market. Both organizations work to improve social compliance status, and provide education and spread awareness of basic rights.
Bangladesh share in the global market is about 5 %. This 5% share alone is merely strong enough to specify that there is a great opportunity of expansion. That means more and more fashion retailers and brands will be looking to source from Bangladesh and the trend has already been started. Bangladesh has been effectively supplying apparel products without fail to the premier international fashion brands like H&M, C&A, M&S, Wal-Mart, GAP, Levi’s, s.Oliver, Tesco, Zara, Carrefour, JCPenney and many more. McKinsey & Company, a global management consulting firm forecasted Bangladesh’s apparel exports could grow double by 2015 and triple to $42 billion by 2020 (McKinsey CPO Survey, November 2011). They also mentioned that Bangladesh will be the apparel sourcing hot spot over the next 5 years.

RMG Export during FY Fig:1- RMG Export during FY 2008-09 to FY 2011-12 (Mn. US$) Source: Export Promotion Bureau, Bangladesh (EPB).

Bangladesh is becoming more popular for its strong competitiveness as the other competing countries like China, Vietnam, India and Pakistan are facing higher costs of production and this view is according to most of the international buyers. Managers of Mondial orient Ltd. Said “the export of garments from Bangladesh will remain unhurt for the next 15-20 years as the country has potential.” Mondial is a sister concern of German-based C&A Company, which has more than 1,500 retail outlets across Europe. He said “We are here mainly for the lower prices of garment items as the prices of apparel items in other countries have already gone up following the higher costs of production.”
List of top retailers and fashion brands importing from Bangladesh

top retailers and fashion brands

Bangladesh is supplying cost effective but quality products and this why the top retailer’s interest is on the expanding textile imports from here. A main driver for Bangladesh’s export business is its low costs. Bangladesh as the country has the potential to supply quality apparel items, International buyers look to long-term apparel business ties here. The following lists will clearly view the real reason for which one country can make a preference that Bangladesh should be the most logical choice for Apparel Import.

BKMEA and iART repor

Fig: 2- Price in USD (Value / Quantity) Scenario of Knit wear Item (HS 610910-T-shirts) in EU 27 Market.
Fig: 3- Price in USD (Value/ Quantity) Scenario of Woven Item (HS 620590-Men’s/boys shirts) in EU 27. Source: BKMEA and iART report: Apparel Export Statistics of Bangladesh FY 2010-11.

Table: 1- Comparative picture of Minimum Wages and Profit margin in the Garments Sector of different competing Countries

  Minimum wage in $ per Month Profit margin (%)
Countries    
India 113 11.8
Pakistan 118 N.A
Vietnam 120 6.5
China 204 3.2
Bangladesh 39 43.1
     

Source: Problems of Bangladesh Garments Sector and their Solution- Sarwar Md. Saifullah Khaled, Thoughts on Economics, Vol. 20, No. 03

Minimum wage ($) per month in garments

Fig: 4- Minimum wage ($) per month in garments sector of different competing Countries.

If we analyze the given charts we will simply understand the potentiality of Bangladeshi apparel import. We have found that Bangladesh is more competitive than China due to cheaper labor, utilities and land. The profit margin of the Bangladeshi owners will remain still higher than that of other competing countries.
Other reasons behind the top retailers’ interest are availability of cheap labour, energy at low price, FDI (Foreign Direct Investment) is legally permitted, convenience of duty free custom bonded ware house, improved GSP advantages under regional cumulative, simplification of tariff regime, meeting world standard on social compliance issues, easily accessible infrastructure like sea road, railroad, river and air communication etc.
As there exist a favorable environment in the country to set up RMG factories and increase production, Bangladesh has ample opportunity to grasp a good share of market. The favorable market access opportunity has placed Bangladesh to become major exporting nation in the world. Bangladesh is consistently making available the C&M service at the most competitive price maintaining acceptable quality standards and for this the country is becoming more and more considerable for the apparel retailers and fashion brands in the global apparel market. The manufacturers are receiving expected responses from the foreign buyers. A number of new buyers from Bangladesh’s traditional export destinations, such as America, Canada, and EU, and new markets such as the Middle East, China, Malaysia, Japan, Russia, Hong Kong, Brazil and Argentina have already inquired about factories and the business potential here. This age is a competition in producing improved quality over cost-reduction policy and through diversification; Bangladesh has to move into high value added products. One day Bangladesh will be the world largest RMG exporting country with the rapid growth of export volume and that day is not so far.

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