It would not be an exaggeration to maintain the rivalry between Bangladesh and Vietnam, is long-standing and rather intense, when it comes to the realm of garment manufacturing and exports.
Though Vietnam is a latecomer in the global garment business, it turned into a major player even if China still holds the number one position in terms of apparel export and manufacturing globally with Bangladesh and Vietnam vying for the number two position even though Bangladesh has so far managed to ward off the challenges from Vietnam to hold to its coveted position of the second-largest apparel producer in the world. The year 2020, which would go down the annals of the history as a rather disastrous one thanks to the COVID-19 pandemic, was not any different.
However, when we talk about the all-important US market, which is a vital export destination from the perspective of both, the market share of both the countries have undergone a change, consequent to the changed equation between USA and China, which witnessed China losing out on its market share in the lucrative US market.
It may be mentioned here that the US-China trade war that raged between the two countries traces its origin when Donald Trump began his presidency by investigating unfair trade practices in China, and then slapped 25 per cent tariffs on the Asian nation. Years later, those tariffs reportedly remain still even after the Phase One trade deal (meant to be the first in a series of deals) was signed in January 2020. US tariffs on Chinese products reportedly remained in place. When the COVID-19 pandemic hit, the trade war albeit faded into the background for some time.
Meanwhile, if reports are to be believed, China would like the United States to lift its tariffs on Chinese goods now that President Biden is in power.
If that would happen is yet to be seen but one has to accept that in the year gone by, Vietnam stole a march over Bangladesh after it captured the opportunities and gained most from China’s losing market share there.
According to reports which cited data from the US Department of Commerce’s Office of Textiles and Apparel (OTEXA), in 2020, China lost its market share by about 3 percentage points to 23.7 per cent — from over US $ 64 billion of apparel imports by the US in 2020, China solely supplied 23.7 per cent (in 2019, it was US $ 13.6 billion) — even as Vietnam has captured the opportunities and gained most from China’s losing market share in the US with its market share rising to 19.2 per cent from 16.2 per cent.
Further, the OTEXA data underlines Bangladesh’s export earnings from the US, the single largest export destination, saw an 11.73 per cent fall to US $ 5.2 billion in 2020 even though Vietnam recorded a 7.2 per cent negative growth to US $ 12.6 billion in the US apparel market.
So, what could be the reason behind Vietnam prevailing over Bangladesh?
After the US-China trade spat, a good number of Chinese investors relocated their factories to Vietnam due to its readiness in entertaining investment and proximity, reportedly stated the Managing Director of Snowtex, SM Khaled, interacting with the media, who further added that Vietnam has the added advantage of buying raw materials from China within a shorter period, while it also takes less time than Bangladesh to ship goods to the US as it has a deep-sea port.
“Besides, Vietnam’s investment capacity is much higher than us and workers’ productivity and efficiency are much higher,” observed Khaled, adding, “If we do not invest, we will not be able to take orders. So, increasing investment from home and abroad is the key to gaining from China’s losing market share.”
It may be mentioned here that even as many foreign companies looked to venture out of China, more and more countries tried to attract those entities to establish production units in their respective countries even as Bangladesh’s National Board of Revenue (NBR) had reportedly also formed a high-powered committee to give recommendations to the Government for attracting foreign direct investment to Bangladesh, especially with a focus on companies moving out of China. Now, how far has that helped to bring in the foreign entities even if is not very clear yet, but many in the industry believe that Bangladesh has definite edge over Vietnam for sure.
Bangladesh has an opportunity to enlarge the sector; Bangladesh’s Government is offering investment opportunities in special economic zones, said Sharif Zahir, the Managing Director of Ananta Denim Technology, adding that since the labour cost is less than its competitors and there are huge opportunities for business expansion, Bangladesh has ample opportunity to grow in the US market.
Sharif further also added that Vietnam has limited capacity to expand business in manufacturing apparel goods unlike Bangladesh, while also underlining that workers’ wages are also comparatively lower in the country (Bangladesh) but stated Bangladesh has to improve relations with the US and negotiate with the United States Trade Representative (USTR) to explore opportunities for duty-free market access.
Meanwhile, speaking to the media, AK Azad, Managing Director of Ha-Meem Group reportedly underlined that Vietnam’s current success can be attributed to the associated investment shift from China, as a result, Vietnam today has a lower lead time. He went on to add that Bangladeshi garment suppliers suffer from the lack of a deep seaport, and having one could have reduced business operation costs and delivery time even as the President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Dr. Rubana Huq on her part reportedly maintained the country (Bangladesh) also lags in producing value-added products.
“We are still concentrated on cotton and not diversifying to manmade fiber-based produce,” stated Rubana, adding, “While our labour is competitive and we have overcapacity, Vietnam gets to pick and choose and have more value addition….”
Bangladeshi manufacturers are not interested in diversifying products; they rather prefer to expand businesses within the same product lines, reportedly underlined the Research Director of the Centre for Policy Dialogue (CPD) Khondaker Golam Moazzem, adding, in the given context, Bangladesh has to attract foreign direct investment in the value-added segment
Agreeing that Bangladesh’s gain was comparatively lower than Vietnam, the CPD Research Director reportedly stated that Vietnam can make all types of goods, while Bangladesh produces basic and mid-range products, and on top of that, Bangladesh’s competitors like India, Myanmar, Cambodia and Turkey have also taken a bigger share of the pie.
So, keeping in consideration the views shared by the stakeholders, Bangladesh would perhaps do good to try and iron out the bottlenecks, if and where they are, not only to increase its market share in the very important US market but also in the other traditional and non-traditional export destinations if it has to maintain its sway over the other manufacturing destinations that are considered its close competitors.