Our RMG industry appears to be in a rut, but there are several ways out
Bangladesh’s global market share in RMG rose to 6.4% last year, an increase of 0.5% over the previous year, according to the WTO’s World Trade Statistical Review 2017.
It’s a good thing, of course, but the big question is: How much profit were our entrepreneurs able to reap from RMG export?
Bear in mind that our RMG sector has already set a target of achieving $50 billion by 2021.
This continuous rise in market share shows that there is an immense opportunity for Bangladesh to spearhead global RMG export in the future. But our nation needs over 13% in growth to reach said target.
In the last fiscal year, Bangladesh earned $28bn with over 10% growth. Then there is China, which remains a great opportunity for Bangladesh, but due to some impediments it remains untapped.
Let’s take a look at what some of these impediments are.
Lack of marketing strategies, negotiations, and bargaining skills in term of price-setting for RMG products have proven to be barriers, due, in part, to global apparel buyers placing orders with competitive pricing in the shortest possible lead time.
Banking assistance remains an issue. The interest rate for foreign investors is just 3%, and the interest rate for domestic investors is more than 10%, according to a former VP of BKMEA.
Additionally, a lack of uninterrupted power and quality utility services is a serious problem in enhancing the state of our nation’s industrialisation. If the gas price is hiked, it will hurt backward linkages, which play a significant role in the global RMG market and the expansion of existing businesses.
A matter of skill
Industry insiders also agree that there is a great shortage of skilled workers in producing high-value-added RMG products. Some countries in Africa have had zero-tariff facilities under the AGOA act which helps them to compete with our RMG sector.
Furthermore, a lack of good governance is yet another barrier that the RMG sector has to overcome. Most economists are of the opinion that rule of law, justice, and good governance at private, public, and government organisations are pre-requisites to stopping workplace accidents.
There is a great shortage of skilled workers in producing high-value-added RMG products
Enormous opportunities await our RMG sector — we only need to seize them. The global apparel market is predicted to be worth $650bn by 2020, after all.
China still retains its position as the top exporter of apparel products, its market share slid to 36.4% from 39.3% last year. But China’s apparel export has declined from $207bn in 2014, and it is now lower than that in 2012, as surveys point out.
Just behind Bangladesh is our closest competitor, Vietnam, in third position, which has narrowed the gap with a 0.70% year-on-year increase in its market share to 5.5%. India’s market share came down to 4% from 4.1%, while Cambodia and Turkey retained their shares of 1.4% and 3.4%, respectively.
Ripe for the picking
I believe our country has a great opportunity to capture the market share of the Chinese RMG industry, mostly because China is going to divert from RMG production.
In that regard, the government needs to ensure lobbyists, advocacy, and strong diplomatic relations in order to capture the Chinese market.
Moreover, EU and other importers are willing to move from China to Bangladesh in establishing big enterprises. The geographic location of Bangladesh is ideal for global trade, with regard to convenient access to international seaports, air routes, and other avenues.
There are a good number of green industries and world-class RMG factories which comply with global safety regulations.
I believe that the market share could be about 7% within the next few years as a good number of green factories are in the offing for production, which would add new volumes to the country’s production capacity.
Finally, regarding the “China shifting” opportunity, all the government has to do is come up with necessary policy support for infrastructure development.
At the same time, it has to be ensured that ethical buying practices and fair price strategies are implemented, to make sure that no stake-holder feels shafted.
Only a truly congenial business environment can draw foreign investment from China and other nations. If we can achieve that, our RMG market share will increase almost overnight.
Md Harunur Rashid is Deputy Secretary, BKMEA.