Competitors witness fewer falls in exports and gain more from China’s lost market shares
Apparel goods export to the United States of America, the single largest export destination for Bangladeshi clothing products, declined sharply by nearly 20% to $2.47 billion in the first six months of 2020.
However, the overall exports to the US declined by 19.94% to $2.56 billion in the January-June period of this year.
According to the US Department of Commerce’s Office of Textiles and Apparel (Otexa) data, Bangladesh’s export earnings from apparel products from the US saw a 19.73% fall to $2.47 billion during January-June period of 2020, which was $3.07 billion a year ago.
As per the data, total imports of clothing products to the US also declined by 30.37% to $27.88 billion in the first half of 2020, which was $40 billion in the same period last year.
Vietnam, Bangladesh’s closest competitor and second largest exporter to the US after China, has seen an 11.12$ decline to $5.65 billion.
China, the world’s largest exporter of apparel goods, also registered a 49% fall to $5.76 billion in the first half of the year 2020.
Bangladesh’s others competitors India saw a decline by 32.09% to $1.53 billion, followed by Indonesia with 20.33% to $1.81 billion, Mexico 37.21% to $1 billion, Sri Lanka 23.56% to $693 million and Pakistan 17.27% to $585 million
However, Cambodia exceptionally performed well and posted a 3.44% gain to $1.25 billion, which was $1.20 billion a year ago.
Economists and exporters largely blamed the Covid-19 pandemic for the sharp plunge in US import, which disrupted the supply chain and slashed demands.
“From the beginning of the year, exports were in the downtrend. During April-May period, the fall was expedited by the Covid-19 pandemic as the US witnessed the worst case of infection of coronavirus,” Mohammad Hatem, first vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told Dhaka Tribune.
In addition, the economy of the country is going through crisis, which cut people consumption and expenses for clothing products, he adds.
“Price competitiveness is a big challenge for Bangladesh in the global markets and it is applicable to the US market as well,” Exporters Association of Bangladesh (EAB) president Abdus Salam Murshedy, told Dhaka Tribune.
As a result, export earnings are falling and we are being beaten by our competitors due to policy support and incentives offered by their respective governments,” said Salam.
Bangladesh losing competitiveness
While Bangladesh exports fell by 19.73%, Vietnam saw an 11.12$ decline and reduced the gap with China, the number one exporter to the US market. On the other hand, Cambodia, another competitor posted a 3.44% gain.
“The ongoing pandemic has adversely impacted the demand of goods, while manufacturers, especially woven products, are losing competitiveness to its competitors," Prof Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), told Dhaka Tribune.
"The concern is our competitors, especially Vietnam, who is doing better even amid the pandemic. They are trying to retain the market shares and gaining more from China's losing market share," said Rahman.
He also stressed on product diversification, exchange rate management and focusing on man-made fibre products as the demands are on the rise in the US market.
China’s lost market shares have been picked up mostly by other Asian suppliers, particularly Vietnam (18.9% YTD in 2020 vs. 16.2% in 2019) and Bangladesh (9.4% YTD in 2020 vs.7.1% in 2019).
Turnaround hoped for in January next year
Amid the gloomy situation and ongoing pandemic, there is hope for the Bangladeshi apparel makers, as most of the US buyers want to source more from Bangladesh in the next two years.
According to the “2020 Fashion Industry Benchmarking Study”, 55% of US fashion brands have expressed their interest to expand sourcing from Bangladesh in the next two years.
Meanwhile, the manufacturers also think, this year exports will remain in the negative territory but will turn around by the end of the year.
“Compared to European markets, work order from the US market is better now. We are hoping for a comeback in the US market from the beginning of next year,” said Hatem.
However, the economist opined that success depends on attracting buyers, who are relocating from China and reducing dependency on a single country.
“As buyers keep relocating their businesses from China to more competitive countries, Bangladesh needs to focus more on attracting these buyers and on new foreign investment” CPD research director Khondaker Golam Moazzem said.
In the pandemic world, brands and buyers will focus on reducing dependency of China and Asian nations especially Bangladesh, Vietnam and Cambodia will be in focus, said the economist.
"We have to ensure a congenial business environment and should welcome buyers with a diversified product basket to capture the opportunity," he added.