World’s second largest apparel exporter, Bangladesh risks losing its footing in the global market with the competitive edge it was holding for the past few years, and needs immediate efforts towards product and market diversification.
The warning and suggestion concerning the biggest export sector of the country, which occupies over 82 per cent of the total export basket, were made at a report of the World Bank, titled ‘Bangladesh Development Update: Powering the Economy Efficiently’, released in Dhaka on October 2.
The report said, Bangladesh’s garments industry may suffer external shocks in the form of reduced demand, higher price of cotton imports, or higher tariff in Europe. It also observed, Bangladesh’s current advantages, namely cheap labour cost, which it has been using to come atop competition against India, Vietnam, Pakistan, and Sri Lanka, is ‘thinly based’.
Bangladesh may soon start losing market share as trade alliances and tariff preferences shift. The cost of labour is increasing and will increase further as the living wage movement gains ground. Improved compliance has also raised cost of production, the report said.
The World Bank also observed that initiatives towards export and market diversification have failed to yield visible results for Bangladesh. Also, at the same time, the export of a promising item – leather – is also suffering setbacks due to mass factory relocation and other issues.
It also observed that Bangladesh was weak in taking advantage of China’s displacement and that it benefitted others. As an example, it cited that Bangladesh’s growth in US market was only 2.3 per cent, which was over 7 per cent for Vietnam, 5.3 per cent for Mexico and 1.19 per cent for India.
As per recommendations, the World Bank said product and market diversification are critical for building resilience in the readymade garments industry. Also, going forward, “Sector-specific targeted programmes and more emphasis on research and development (R&D) will be needed.”