RMG industry has been a mainstay of Bangladesh’s economic success story. After a short stall in FY ’21, due to the pandemic, Bangladesh didn’t look back in FY ’22 and achieved the highest-ever export turnover of US $ 52 billion in which RMG contributed US $ 42 billion. The start of FY ’23 has been decent too amidst global inflation and political turmoil; however, Bangladesh continues to outperform its own figures even in the toughest of times and that’s what makes it a superior destination for global apparel buyers. Credit also goes to the prudent Government led by the Hon’ble Prime Minister H.E. Sheikh Hasina and relevant stakeholders that are working relentlessly on industry-friendly policies and ensuring a seamless business environment for the country’s apparel factories.
Team Apparel Resources (AR) recently met Tipu Munshi, Commerce Minister, Bangladesh in his Dhaka office and had a freewheeling discussion on Government support to boost the RMG exports. Here are the excerpts.
AR: Bangladesh has crossed US $ 42 billion apparel export turnover in FY ’22 which is the highest ever for the country. Many congratulations!
Tipu Munshi: It’s a matter of pride for us as the industry’s collective efforts have shown the results. The Government will keep supporting the RMG industry so that businesses continue to do wonders. Bangladesh doesn’t want to stop at just US $ 42 billion as we have already set an ambitious target for the RMG industry to achieve.
Nowadays, it is observed that USA wants to move its sourcing from China, and Bangladesh could be the preferred place. It is endorsed by our export figures to USA in FY ’22 when we noted growth of over 51 per cent Y-o-Y in the US market and clocked over US $ 9 billion turnover. We have also got an advantage of Vietnam’s situation. They aren’t investing as huge as us in their garment industry, their workers are moving to other industries such as electronics, and this is why Bangladesh is having an edge over Vietnam.
However, much of our efforts depend on the global retail market scenario too which is not quite stable at the moment and even if we make plans to achieve more RMG export turnover in future, the pertaining market instability may hamper our growth trajectory and this is a problem. But, we are determined that we don’t settle for any less in FY ’23 and onwards in our RMG revenues than in FY ’22.
AR: LDC graduation is round the corner which economists say will come with its own set of challenges. How is the Government gearing up to face the challenges?
Tipu Munshi: We shall have to engage in negotiation with the EU as they have certain rules in the new regime that may increase duty on imported ‘Made in Bangladesh’ from current 0 per cent to 12 per cent. Given the fact that LDC graduation will take place in 2026, EU has extended its GSP scheme under Everything But Arms for three more years till 2029. In these seven years, we have to bring all industry collaborators, stakeholders and authorities together to find ways for long-term sustainable growth without losing preferences from Western countries which, in turn, is beneficial for them as they know the importance of Bangladesh in garment manufacturing.
We’ll utilise the extension to work on strengthening our compliances, sustainability measurements, working conditions for our workers, reducing lead times, catering to smaller order quantities and integrating more automated systems to upgrade factories. However, I maintain our country’s stand that we have the highest number of LEED factories in the world and hundreds of such sustainable factories are coming up in the next 3-4 years quite strongly. Considering all these developments, I don’t think that LDC graduation will be a big challenge for us.
Adding to this, we are trying to do some Preferential Trade Agreements (PTAs) and Free Trade Agreements (FTAs) with countries that can be great export destinations for us but have largely remained untapped as of now.
AR: Bangladesh is doing a phenomenal job in exporting garments to traditional countries, but when it comes to places like China, South America and others, how do you see the potential of FTA and PTA to boost your exports in these areas?
Tipu Munshi: There are two huge markets that we haven’t explored yet. One is Brazil, which has a population of more than 215 million people. However, the problem that we have been facing in this country is the high export duty of 40 per cent! If it cuts down to less than 15 per cent, it becomes a very competitive market for us. In 2019, I visited Brazil and had a meeting in Sao Paulo, trying to increase bilateral trade relations with Brazil. We requested to Secretary General and respective Ministers of the member countries of MERCOSUR to take the initiative for moving forward with PTA/FTA negotiation.
Bangladesh is also trying to negotiate FTA with Eurasians.
And another market that is still undervalued by us is Russia. The major problem here is the payment system but we are trying to sort it out. Russia has got the buying capacity and, in some ways, it is much better than the US market. For example, Russian people like stylish and fashionable items that can fetch higher unit prices. If a product is selling at US $ 25 in the US market, the same product might be selling in the range of US $ 35-40 in Russia. So, we have to explore this market aggressively and some of our factories have already started working with Russian buyers.
Brazil and Russia can together help our RMG exports to go up by around 10 per cent of the current value.
China is another market that we haven’t been able to tap despite the duty holiday! It imports around US $ 10 billion worth of garments in a year; however, our share in 2021 to the Chinese market was just US $ 222 million! For the last three quarters, our entire capacity was booked and this was the reason that we couldn’t cater to the Chinese market despite getting some big queries from there. Definitely, we need to perform better here and we would figure out how duty holidays can become more beneficial to our apparel factories.
AR: In the Indian market, you had said in 2019 that Bangladesh has the potential to export US $ 2 billion worth of apparels within two years. Why have we not been able to meet that potential? Wherein lie the bottlenecks and how to address those?
Tipu Munshi: I think we should take better care of the Indian market and our RMG export can be increased in the neighbouring country hugely. Currently it stands at US $ 556 million which is over 41 per cent of the total values Indian buyers are importing in apparel segment. We couldn’t increase our share in the Indian market as we expected and there are reasons. I hope we will be able to increase RMG products to India and India is going to be a much better market for us in future than what it is today.
AR: Padma Bridge is making huge headlines all over the world and many congrats for that. How do you think it can help the apparel/textile fraternity in Bangladesh?
Tipu Munshi: Padma Bridge has now connected 21 districts of Bangladesh and that includes my hometown as well. To reach my home from Dhaka, it used to earlier take 15-16 hours but I can now reach there in just two-and-a-half hours! This bridge has not just opened the connectivity, but also the mentality of the people living in south-western region. They now feel closer to the capital city Dhaka.
Padma Bridge will help the country’s apparel industry to reduce lead time as it will directly connect the Mongla and Benapole Ports to Dhaka and Chittagong, respectively. This will help apparel factories, which are manufacturing in Mongla EPZ, to transport goods to Chittagong easily within a shorter period of time, who otherwise with the existing systems, have to transport goods via river and sometimes through roads, that are time consuming on account of various reasons.
We are now hoping more workers to join the factories as a result of this improved connectivity. Not just apparels, five other sectors have the possibility to grow tremendously now including leather and pharmaceuticals.
