Bangladesh’s apparel industry future bright, says WB
Kazi Azizul Islam
After elimination of the quota system in 2005, the recent economic recession is reshaping the global apparel supply chain and importers’ procurement strategies, which has had a considerable impact on Bangladesh, said the World Bank Bangladesh’s garment industry has some strengths and many weaknesses, pointed out the World Bank’s just published study titled, ‘Global Apparel Value Chain, Trade and the Crisis: Challenges and Opportunities for Developing Countries’.
The World Bank’s researchers say that the country’s future is full of potential due to enhanced availability of accessory products such as local yarns and packaging materials, and importers now think Bangladesh to be a package supplier.
One of the strengths of Bangladesh’s apparel industry is low cost, especially the local firms’ willingness to keep margins low. After China and Turkey, Bangladesh is now the world’s third largest apparel exporting country and entrepreneurs here invest in new technology to improve productivity and to reinforce relationships with buyers, they said.
The cost of labour is one of the key factors for Bangladesh’s success — the researchers found that the average wage per hour of garment factory workers in Bangladesh is only 31 US cents. The per hour wage is $1.66 in China, 56 cents in Pakistan, 51 cents in India, 44 cents in Indonesia and 36 cents in Vietnam.
They also pointed out that terminal handling and customs dealings have improved here considerably in recent times.
Apparently pointing to the growing number of spinning and denim fabric manufacturing units, the World Bank pointed out that there has been satisfactory growth in backward linkage textile industries here. It was also noted that some foreign investors were setting up fabric and fibre manufacturing units in Bangladesh.
The World Bank’s researchers pointed out that Bangladesh’s weakness was lack of good designers and related technology. Shortage of skilled workers and mid-level management people, workers’ unrest were pointed out as other drawbacks. Power outages, inefficient infrastructure, lack of industrial expertise and outdated social standards were also pointed out as the major disadvantages of Bangladesh’s garment industry.
In 2005 Bangladesh’s share, of both the EU and US markets, was around 3.5 per cent, but by the end of 2009 the share increased to around 5 per cent, said World Bank researchers.
‘China has been the big winner, although Bangladesh, India, and Vietnam have also continued to expand their roles in the [global apparel] industry,’ said the World Bank’s study. ‘Leading firms [major importers] now desire to work with fewer, larger, and more capable suppliers that are strategically located around the world.’
The researchers said that by the end of 2009 the economic recession that hit the apparel retail markets of all the advanced industrial countries sent ripples throughout the supply chain in developing economies as well.
‘A striking trend is that the largest low-cost apparel producers in the developing world, such as China, India, Bangladesh, and Vietnam, have actually managed to increase their export shares in major global markets,’ said the World Bank. ‘This may reflect a substitution effect of the economic recession, in which the lowest cost suppliers gain market share vis-à-vis more expensive rivals.’
Classifying the capability of Bangladesh’s industry, World Bank researchers said that at least Bangladesh’s knit apparel industry should be categorised now as OEM [Original Equipment Manufacturing]. The industry can now do Free on Board or package contracting business, it said.