by Apparel Resources
06-October-2018 | 6 mins read
Bangladesh has long been amongst the principal sourcing destinations for economic powerhouses of USA and Europe when it comes to apparels. It all started with the quota and trade benefits doled out to Bangladesh as LDC (least developed country) in the late 70s. However, with the prospect of graduating into a developing nation looming large — which could shorn the country of many such benefits — it is perhaps time the country looked beyond North America and EU and tapped the potentials of the non-traditional markets. It’s not that the entrepreneurs are not keen on doing so, but many still believe that intentions notwithstanding, reality is somewhat different!
“Even though there are a lot of discussions on exploring new markets, but honestly speaking I don’t see that enough focus is being given to it. Many are still expecting the Government to facilitate foraying into new markets. But, at the end of the day, one needs to understand, as an entrepreneur, the onus is on us to explore and develop new export destinations and Government can only help in it; but there is no way it can entirely facilitate the process,” underlines Md. Fazlul Hoque, Managing Director of Plummy Fashions Limited (PFL) speaking to Apparel Resources.
Except for the European Union, the US, and Canada, Bangladesh considers all other countries as non-traditional markets. But now, with Bangladesh Government raising cash incentives for RMG exporters to 4 per cent from 3 per cent, for markets other than the US, Canada, and the European Union for financial year 2018-19, it would perhaps give the exporters the boost that they have been looking for to venture beyond their comfort zones to make inroads into new markets.
Fazlul is of the opinion that by focussing only on USA and Europe, the manufacturers are doing them more harm than good. “In this process, we are only increasing the competition amongst ourselves, a reflection of which is perhaps the diminishing profit margins,” explains the MD of MFL, who counts South America as one of the promising destinations and which he is already catering to, alongside many other countries including Japan, China, and India.
Japan in particular is emerging as a very promising market for Bangladesh. As per data from the Export Promotion Bureau (EPB), in the fiscal year 2017-18, Bangladesh earned US $ 1.13 billion from exports to Japan, which is 11.73 per cent higher compared to earnings of US $ 1.01 billion in FY17. Out of the US $ 1.13 billion, US $ 846.73 million or 74.8 per cent came from the RMG sector alone with apparel export to Japan witnessing a 13.73 per cent rise compared to previous year’s earnings of US $ 744.48 million.
“Even though our exports to Japan are increasing, but value-wise growth is yet not up to the true potentials of the market,” explains Fazlul, who feels the reasons for exports to India and China not achieving the true potential, is due to the buyers there.
“In non-traditional markets, both China and India have huge prospects but I personally feel that domestic brands and importers are yet to source from Bangladesh in bigger volumes. It is only the global brands which have been sourcing from Bangladesh but domestic players are yet to follow suit,” states Fazlul.
It may be mentioned here that despite Bangladesh’s encouraging performance in the non-traditional markets during fiscal July to March ‘18, ‘Made in Bangladesh’ apparels could not see any major turnaround in the Chinese market with value of apparel shipments falling by 5.65 per cent on Y-o-Y basis.
To improve trade facility and export more apparel items, Bangladesh has already sought duty-free market access in China and a Letter of Exchange (LoE) has been forwarded to China. If China approves the LoE, Bangladesh will enjoy exporting the duty-free benefit of 97 per cent of the products under the World Trade Organization (WTO) rules. As per Bangladesh’s Commerce Minsiter, China has also expressed interest in Bangladesh with Free Trade Agreement (FTA). In this regard, the MoU has already been signed between the two countries. Once the FTA comes into effect, RMG export to China is expected to go up significantly.
Coming to India, imports from Bangladesh are also going to go up with the Indian Government making free access of 61 items (48 of them in apparel) from Bangladesh to balance the trade between the two countries. This makes Bangladesh the most suitable low-cost sourcing destination for retailers/importers, more so, at a time when the Indian fashion retail market is on song (currently at US $ 46 billion and expected to reach US $ 115 billion by 2026, growing at a promising CAGR of 9.7 per cent). And the results are already here for everyone to see.
Bangladesh’s apparel exports to India saw a steep climb of 111 per cent (on a point-to-point basis) during the July-March 2018 period – amounting to US $ 218 million, what was US $ 97 million at the same time last year.
It’s perhaps time the garment exporters started looking at the emerging and non-traditional markets with a new perspective and in the light of growth opportunities and prospects that they have to offer.