Apparel exporters of Bangladesh blamed Covid-19 pandemic for falling behind Vietnam
Vietnam surpassed Bangladesh in exporting textile and clothing products in the first six months of 2020.
According to the General Statistics Office of Vietnam data, during the January-June period of 2020, Vietnam, the closest competitor of Bangladesh, earned $13.18 billion from exporting textile and sewing products.
On the other hand, Bangladesh fetched $11.92 billion by exporting readymade garment (RMG) products during the same period, data from Export Promotion Bureau (EPB) showed.
According to the World Trade Organisation (WTO) data, Bangladesh was the second largest apparel exporter in the globe with a 6.8% market share worth $34 billion in 2019.
In 2019, Vietnam's market share was 6.20% to $31 billion.
Also read - Is the RMG industry on its way to recovery?
Why the slip in export position
“First, we need to clarify the export figure of Vietnam. Vietnam exports data include both textile and RMG products, while our products are only apparel and textile products, and that too counted in different categories,” BGMEA Senior Vice President Faisal Samad told Dhaka Tribune.
However, the gap in terms of export earnings is not very big and if the earnings from textile products of Bangladesh are added with that from the garments, it will be very close to Vietnam, claimed Samad.
Bangladesh's total exports earnings from textile and apparel goods stood at $12.32, which is $864 million less compared to Vietnams’ $13.18 billion during January-June of 2020.
Secondly, production in the country’s apparel sector and other manufacturing factories were closed during March-April. In a sense, exports were almost stalled, while Vietnam did not stop operation, Samad explained.
"That is why we lagged behind and exports’ earnings declined sharply during the March-May period," he added.
Vietnam handled the pandemic successfully as it took measures such as shutting its borders, increased testing, and enforced lockdowns to halt the spread of the novel virus, whereas Bangladesh did not react as much as people hoped.
The country with a population of 96 million had only 288 Covid-19 cases and one death.
What experts say
Economists do not want to draw conclusions with the present data, and also want to take the global pandemic situation - which disrupted trade and commerce - into consideration before commenting on the decline.
“It is an unusual situation, when the global trade and supply chain has gone through disruption as well ups and downs in demand, this situation should be treated differently,” Khondaker Golam Moazzem, research director, Centre for Policy Dialogue (CPD) told Dhaka Tribune.
However, there are reasons for Vietnam’s better performance in exports amid pandemic as it had been able to face the Covid-19 pandemic and reopen factories first, said the senior CPD official.
On the other hand, Bangladesh suffered production disruption due to countrywide shutdown and in April the export earnings saw a steep decline, said the economist.
In addition, Vietnam has a diversified product basket, which helped to capture work orders shifting from China during and before the Covid-19 pandemic, said the researcher.
On top of that, the Free Trade Agreement with the European Union could be another reason for the country's better export performance, he added.
Exports performance during pandemic
In April, Bangladesh apparel exports witnessed the sharpest ever decline to $375 million, while in the same period Vietnam earned $1.61 billion.
This was an 85.25% drop, the highest fall in history, from the same month last year.
Bangladesh, the second largest exporter of apparel goods after China, saw a 20.14% decline to $2.25 billion in March.
On the other hand, in May the exports earnings improved and stood at $1.23 billion, still a 62% fall from last year's figure.
Later, in June, exports showed signs of recovery and posted a 6.63% negative growth to $2.24 billion.
Meanwhile, in July Bangladesh apparel exports stood at $3.24 billion with a 1.98% decline compared to the same period last year.
Will Bangladesh rebound?
As per the present export data, Bangladesh lost its second position to Vietnam. But trade leaders as well as the economist opined that with the unusual situation, it is too early to comment on the issue.
“Whether the present difference in export between Bangladesh and Vietnam will sustain or not will depend on the performance of the countries during regular situations, excluding emergencies,” said Moazzem.
With the unusual situation, it is tough to comment on whether Bangladesh would lose its position to Vietnam as the second largest exporter or not. But there will be competition between two countries in the current year, he explained.
If normalcy returns to global trade and the situation in Bangladesh’s trade and manufacturing becomes stable, it might regain the position, he added.
“Until the end of the year, we cannot draw conclusions or cannot assess the performance. However, I am hopeful that by the end of this year, Bangladesh will be able to regain the position,” said Samad.
"For this, we have to be careful and cautious so that Vietnam cannot take away our orders rather we can grab more from the China shifting. In addition, the government offered stimulus packages should be utilized in an effective manner to increase competitiveness in the global markets," he added.
Factors to consider for revival
As said by the sector people, the exchange rate is very crucial for the exporters to remain competitive in the global exports markets.
The exporters are demanding Tk5 against a US dollar on the amount of export retention.
On the other hand, the economists also supported the depreciation of Taka.
“Bangladeshi currency has been overvalued against the USD for a long time, hurting the country’s exporters. But, the policy makers are not paying heed to this,” said the South Asian Network on Economic Modeling (Sanem)'s Executive Director Prof Selim Raihan.
It is true that the market driven exchange rate can increase import value and the regulator is controlling the rate to maintain stability, adds Selim.
But considering the exporters, especially the small sectors' interest, there is a need for a reasonable depreciation of Taka against the USD. This could be very close to the real effective exchange rate so that it would not remain overvalued, the economist says further.
He also urged manufacturers to diversify products and improve efficiency for vying with competitors.
Bangladeshi currency depreciated by only 0.5% in FY20, while other Asian nations including India’s currency depreciated by 8.8% followed by China 2.8%, Indonesia 1.1%, Vietnam 0.7% and Cambodia 0.7%.