{"id":3853,"date":"2016-03-29T14:54:42","date_gmt":"2016-03-29T08:54:42","guid":{"rendered":"https:\/\/bbf.digital\/new\/?p=3853"},"modified":"2017-09-09T22:53:16","modified_gmt":"2017-09-09T16:53:16","slug":"shifting-sands-of-the-apparel-industry","status":"publish","type":"post","link":"https:\/\/bbf.digital\/new\/shifting-sands-of-the-apparel-industry","title":{"rendered":"Shifting Sands of the Apparel Industry"},"content":{"rendered":"

By<\/span> LightCastle Partners\u00a0<\/a><\/span><\/span><\/p>\n

Bangladesh currently sits as the second largest player in the apparel industry behind China. As China moves up towards more value-added products, it leaves behind more opportunities for countries like Bangladesh to strengthen their foothold in low-value apparel markets. However, the competition is also hot on its trail, with emerging players such as Vietnam and Ethiopia vying to make headway as well. Although Bangladesh is undoubtedly doing well in the apparel industry, it can ill afford to rest on its laurels.<\/span><\/p>\n

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RMG is at the Heart of the Bangladesh Growth Story
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When Bangladesh\u2019s export-oriented ready made garments (RMG) sector began its modest journey in the late 1970s, few foresaw its meteoric rise and the substantial role it would play in driving Bangladesh\u2019s economic fortunes. Bangladesh\u2019s substantial cost advantage in labor, augmented by early advantages gained by preferential trade agreements such as the MFA have contributed to the industry\u2019s rise as a global player from the 90s onwards.<\/span>
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Read: The Bangladesh Growth Story<\/a><\/span><\/p>\n

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New Players Emerging in the Global Sourcing Scenario<\/span><\/h1>\n

At the moment, Bangladesh occupies a comfortable position in the global apparel export scenario, contributing 5.1% of the export volume. Although the end of the MFA in 2005 sparked doom and gloom predictions from many analysts, Bangladesh has continued to grow at a robust pace. An important factor for this sustained growth is China\u2019s shift towards higher value production, leaving much room to grow for Bangladesh\u2019s apparel industry\u2014exports grew from 6.9 billion USD in 2005 to 25.5 billion USD in 2015.<\/span><\/p>\n

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Despite international backlash following a series of industrial accidents in 2012 and 2013, Bangladesh still remains the top sourcing destination among CPOs for the next five years. Although countries such as Vietnam are hot on its heels, the true long-threat might arise in the form of new players such as\u00a0Ethiopia. Ethiopia currently enjoys a vast cost advantage over Bangladesh, with rage rates currently almost half of those in Bangladesh.<\/span><\/p>\n

Furthermore, other factors such as preferential trade agreements (GSP to USA and EU) surplus electricity, cheap land price, preferential investment terms and proximity to EU and USA also play an important role in accelerating Ethiopia\u2019s apparel export growth.<\/span><\/p>\n

Changing Fortunes in the Export Destinations<\/span><\/h1>\n

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\nBangladesh is also facing running into problems with the US market, which is currently the single largest importer of Bangladeshi apparels. In 2013, USA cancelled GSP for Bangladesh\u2019s exports citing a variety of reasons. It should be noted that, although apparel did not originally fall under GSP, BGMEA was lobbying hard to get tariff free access for apparel exports. Thus GSP cancellation is a significant roadblock on the way to getting such benefits for the apparel industry.Although Bangladesh\u2019s apparel industry is currently buoyed by robust domestic growth, it faces some external challenges in regards to some of its export destinations. The EU, which is currently the largest market for Bangladeshi apparels (61%), has been experiencing sharp depreciation due to the Eurozone crisis caused by Greece\u2019s debt default. A depreciating Euro means that Bangladeshi apparel exports are becoming more expensive in the Eurozone.<\/span><\/span><\/p>\n

Read Also: Powering Bangladesh\u2019s Future<\/a><\/span><\/p>\n

Bangladesh is also facing running into problems with the US market, which is currently the single largest importer of Bangladeshi apparels. In 2013, USA cancelled GSP for Bangladesh\u2019s exports citing a variety of reasons. It should be noted that, although apparel did not originally fall under GSP, BGMEA was lobbying hard to get tariff free access for apparel exports. Thus GSP cancellation is a significant roadblock on the way to getting such benefits for the apparel industry.<\/span><\/p>\n

The Way Forward<\/span><\/h1>\n