Bangladesh has not only proven itself in the realm of apparel manufacturing and export over the years, it is amongst the top three apparel exporting countries in the world. Having proved itself in RMG, it is perhaps time the country looks to diversify its export basket without losing focus on apparels, and more so when LDC graduation is round the corner, which might put Bangladesh in a more vulnerable position following a loss of duty-free benefits.
It may be mentioned here that exports from Bangladesh have recorded an annual average growth rate of about 11 per cent since 2001 even as Bangladesh’s exported US $ 40.5 billion in 2018-19 but that declined to US $ 33.7 billion in 2019-20, a decline of 16.8 per cent from the previous year due to slowdown in global trade flows caused by the Coronavirus pandemic, while according to the World Trade Organisation (WTO), world merchandise trade was set to plummet between 13 and 32 per cent in 2020; however, exports bounced back in 2020-21 to US $ 38.75 billion even as the Government has set a target for exports amounting to US $ 51 billion in the fiscal year 2021-22.
However, it is to be maintained here that Bangladesh heavily relies on readymade garments for fuelling its exports growth, accounting for about 84 per cent of merchandise exports even as the Bangladesh’s export destinations are also highly concentrated in EU and USA while the export growth over the years has been made possible by ample supply of cheap labour and duty-free access to its major markets as Bangladesh has one of the lowest wage rates in the world which has helped to expand the RMG industry.
But for more than forty years the country has largely remained focused on a narrow range of relatively low-value added RMG products and, the country has failed to use RMG as a springboard to diversify into more complex products as many other East Asian economies did in the past even as research studies suggest that Bangladesh enjoys competitive advantage in RMG, jute, leather goods, tea, sea food, etc.. But the truth is that only apparel has enhanced its competitiveness over time while others failed to do so.
And as a result, Bangladesh continues to rely on RMG to achieve its export success but if experts are to be believed, growth in the longer term will remain constrained, which thus calls for diversification of exports both in terms of the product composition and export destinations even as the LDC graduation might put Bangladesh in a more vulnerable position following a loss of duty-free benefits and at a time when Bangladesh’s single-product export base is struggling to cope with the global market vulnerability amid the Covid-19 pandemic, studies show a ray of hope that the country could earn US $ 22 billion more annually if liberal market access could be utilised with diversified items.
The Economic Relations Division (ERD), in a study, finds that US $ 18.34 billion worth of export potentials remain unexplored in the top ten export destinations, while another study of the Research and Policy Integration for Development (RAPID) says there is a scope of at least US $ 4 billion in export earnings from China alone even as exporters and economists identify non-diversification of the country’s export basket, and secondly, an inability to maintain the quality of products, as reasons for the country’s failure to tap the unexplored potentials in top export destinations. They also add that the readymade garment sector apart, other sectors are not getting the kind of attention they need. As a result, Bangladesh is unable to exploit the potential of exporting other highly potentials product categories like leather, home textiles and jute along with the likes of plastics, agricultural products, frozen fish, etc., all of which have lot of potential, in terms of exports.
Of late though, home textiles, is performing well! If latest reports are something to go by, in the last few months, at least eight buyers from USA and Europe, who used to source for all their home textile requirements from China and Pakistan earlier, have reportedly started sourcing from Bangladesh now, which undoubtedly is a big achievement for Bangladesh and if industry insiders are to be believed, it is the quality of Bangladesh’s home textile offerings coupled with its competitive pricing, which have many big names in global home textile business, now turning towards Bangladesh.
It may be mentioned here that Bangladesh strengthening its foothold in home textiles could not have come at a better time when the demand of home textiles has increased tremendously thanks to the Covid-19 as the pandemic has changed the consumption pattern with greater demand for home textiles now than they were earlier as more people are working from home or staying longer at home due to various restrictions.
“The shipments from Bangladesh increased mainly because its (home textiles) use has increased,” claimed Rashed Mosharraf, General Manager for Marketing and Head of Operations of Zaber & Zubair Fabrics in an earlier interview with the media while adding because of the pandemic, people are staying indoors for longer periods, and this has increased the use of home textiles a lot.
Further, as per industry insiders, even if sales of garment items have taken a hit due to the pandemic, sales in retail stores in the European and America for that of home textiles is increasing — the global market size of home textiles is currently more than US $ 104 billion and by 2025 it expected to touch US $ 133 billion — and, apart from the American, European and Canadian markets, the export of home textile has also reportedly been increasing in the Asian and Australian markets, exporters said.
This, in turn, is countering the decrease in sales of fabrics and sheets used in hotels and airplanes during the pandemic because of the decline of businesses in the aviation, tourism and hospitality sectors.
This trend of an increasing inflow of work orders from international retailers and brands is being propelled by higher demand, especially from hospitals, said Mosharraf even as industry insiders say Bangladesh has become a major source for home textile because of massive investments made by local entrepreneurs, as a result of which, local manufacturers can now supply a vast quantity of buyers’ overall requirements.
More than Taka 25,000 crore has been invested in the homes textile sector over the last couple of decades in Bangladesh, said Monsoor Ahmed, Secretary of the Bangladesh Textile Mills Association (BTMA), which if at all, is indicative of the fact how players in home textiles are preparing themselves to make the most of the prospects in the days to come.
Even if home textiles is slowly but surely moving towards achieving its potential, the same however cannot be said about the leather sector, which was once said to be the second-best sector after RMG, in terms of export potential. To give an example, Vietnam entered the global footwear export market just a decade ago and the Southeast Asian nation’s export reportedly stood at US $ 20 billion a year, while on the other hand, Bangladesh made the foray three decades ago but its overseas shipment in the segment is hovering way below that of Vietnam.
Lack of backward linkage industries, inconsistent policies, lengthy customs procedures and difficulties in getting bonded warehouse facility for imports of raw materials are mostly blamed for the low leather goods exports from Bangladesh, underlined some industry insiders even as many leather sector entrepreneurs say they will not be able to explore the global market without the Leather Working Group (LWG) certification for the Savar leather industrial park.
“Raw materials meant for many products are import-dependent. Raw materials for readymade garments can be imported without paying duty under the bond facility. But other products are deprived of such an advantage,” maintained Chairman of the Policy Exchange Bangladesh and former Senior Economist at World Bank Group, Dr. M Masrur Reaz, adding, “We cannot supply products as per the global market demands. Our earnings from other sectors apart from the RMG sector is very low. We could export footwear items to Japan, but we do not have quality products.”
It may be mentioned here that owing to environmental compliance, it had been difficult for the leather product manufacturers to get Leather Working Group (LWG) certification — the main objective of the LWG is to develop/maintain a protocol that assesses the environmental compliance and performance capabilities of leather manufacturers and promotes sustainable environmental practices. The group seeks to improve the leather manufacturing industry by creating alignment on environmental priorities, bringing visibility to best practices and providing suggested guidelines for continual improvement — which makes it easier to sell goods to the global buyers.
Meanwhile, the Bangladesh Tanners Association has reportedly written to the Industries and Commerce Ministries to extend the project (Savar Tannery Industrial Estate) for another two years, terming the industrial city as ‘incomplete’ and ‘environmentally unfriendly’, even as talking to the media, Project Director of STIE Jitendranath Pal reportedly underlined that from 1st July, a newly formed Government-owned local entity, Dhaka Tannery Industrial Estate Wastage Treatment Plant Company Ltd., has taken charge of the CETP.
We have requested for extension of the project till June 2023 due to incomplete construction of the common chrome recovery unit, CETP commissioning, and a lack of resource generation through solid waste management, maintained Shaheen Ahmed, President of the Bangladesh Tanners Association even as Jitendranath Pal stated that although the CETP has been running for some time now, the online monitoring system has not been installed as per the agreement and its laboratory has inadequate testing facilities even as he added the Government might undertake another project for Balancing, Modernisation, Rehabilitation and Expansion (BMRE), to make the same fully operational.
So, even as tanneries have been relocated from Hazaribagh, which was once home to 95 per cent of Bangladesh’s tanneries, exporters were unable to make the most of export opportunities due to lack of LWG certification for the Savar leather industrial park.
Going by the views as shared by the industry insiders, experts and economists, one is given to understand that Bangladesh stands a good chance to increase its export earnings significantly by diversifying into other product categories while also maintaining its focus on apparels, but to do that certain challenges are to be addressed and at the earliest possible, especially when it comes to the highly prospective leather sector.