Bangladesh

After its liberation in 1971 Bangladesh inherited a shattered economy. Initially, foreign support and jute exports helped the economy, but it could not keep up after the mid-1980s. Since then the economy received much needed support from the readymade garment (RMG) sector.

Insights

  • Exports of RMGs have grown from US$116 million in 1984/85 to more than US$19 billion in 2011/12. The RMG sector contributes nearly 10% to GDP and 78% to export earnings.
  • The garment industry is the backbone of manufacturing. There are roughly 3.6 million workers in the garment industry (80% of them women) and another 15 million depend indirectly on the industry.
  • Bangladesh became the second largest apparel-exporting country in the world in 2011. Exports of RMGs reached a new high of US$17.91 billion in 2010/11 registering a 43% increase over the previous year.
  • According to the WTO, Bangladesh, a “reputed low–cost” garment producer, has enjoyed robust growth on the back of its inherent strengths – “especially a vibrant private sector and a large pool of inexpensive labour. Unit labour costs in the garment industry are well below those of the nearest competitors”.
  • Low wages for labour (minimum monthly wage is US$36.50) resulting in competitive pricing has helped Bangladesh maintain a lead in the lower end niche of the apparel sourcing market.
  • As Bangladesh is classified as a least developed country (LDC), it enjoys zero duty access in the European Union, Canada, Australia, Japan, Norway and Switzerland under the GSP (Generalized System of Preferences) scheme. In early 2012, India allowed duty-free access to an additional 48 items of apparel, which gave Bangladesh industry a path to a large and growing market.
  • Many USA and European brands such as Walmart, PVH, VF Corp, Gap, Nike, Levis, Zara, C&A, H&M, M&S, Tesco and Esprit source from more than 5400 enterprises in the country. As China became less competitive for volume retailers and brands, Bangladesh presented a clear alternative. There is an increasing trend of direct sourcing through local offices in Dhaka.
  • The areas of concern for brands and retailers are the frequent strikes and unrest in factories because of low wages and workers health and safety issues.
  • Apart from ethical, sustainability and environmental issues, it is the emergence of other low-cost competitors such as Vietnam, Cambodia and Burma in Asia that offer alternatives to Bangladesh. It is important that manufacturers in Bangladesh move to value-added products.

Opportunity for Wool

  • Climate in Bangladesh is tropical and does not offer opportunity for consumption of wool in the domestic market. As Bangladesh is the second largest sourcing hub next to China, it can be developed as a link in the wool manufacturing supply chain.
  • Bangladesh’s export for 2012 was evenly split by value between woven and knitted goods. Of the knits nearly 25% were sweaters made on medium and fine-gauge machines. The flat–bed knitwear manufacturers can easily take up manufacturing of woollen products as switching from cheaper fibres to wool does not involve any capital expenditure. It needs only training on the production and finishing of woollen products.
  • The Woolmark Company has conducted two supply chain developing projects through which we have trained flatbed knitting companies on the production of knitwear conforming to Woolmark standards. These companies export woollen products to brands and retailers.
  • With the increased demands for wage revisions from both labour unions and brands (H&M) and for better working conditions from retailers such as Zara and Walmart, the factory owners expect their costs to increase. Exporting higher value-added products such as wool offers a better alternative to the cheap products being exported as long as costs can be contained.
  • Wool offers an opportunity for the Bangladeshi industry to break the image of a 'reputed low-cost' garment producer and to reinvent itself.