RMG value addition shows the way

A jump of 11.59 per cent in value addition to 65.97 per cent for the country's main export earner ready-made garment (RMG) in the last fiscal year (FY) is sure to make all concerned ecstatic. Value addition to RMG hovering between 60.51 and 64.32 in the seven years preceding the pandemic recorded an erratic fall and recovery in the pandemic and post-pandemic years until it slid to the lowest slot at 54.38 per cent in FY 22. Viewed from such a point the recovery is quite encouraging but for the discrepancy between the figures of export volumes of apparels as furnished by the Export Promotion Bureau (EPB) and the National Board of Revenue (NBR). According to the EPB, Bangladesh's RMG export was worth Tk46.99 billion while the NBR claims it was Tk38.30 billion. This means the rise in value addition in the last fiscal was 10.69 per cent accounting for a total of 65.07 per cent. Notably, the central bank prepares its report on the basis of EPB figures.

Even the rise in value addition the NBR shows is still higher than the average rate before the pandemic years. Economists and RMG insiders attribute the sudden spurt in value addition to the growing muscle of backward linkage sectors. This is corroborated by the fact that the knitwear apparels have done better than the woven segment with denim sub-sector standing out. The addition of value to a product of the service sector certainly goes up if the raw materials and the main ingredient ---in this case fabric, knit and woven clothes ---can be sourced domestically. But then rise in productivity of workers or factories also add value. Again, a shift to the high-end RMG products also contributes significantly to value addition. Finally, what is less mentioned is the larger volume of export to the extent that Bangladesh has now relegated China to the second position in terms of its export volume to the EU and US markets. Well, China still earns more than Bangladesh does because of the former's quality and high-end exportable apparels.

Indeed, the China-plus policy has been behind this shift in global preference for garments from Bangladesh. Thankfully, the RMG factories here have responded well but not up to the mark. Had it been able to seize the opportunity coming their way, the top foreign export earner would have now discovered itself in a far stronger position. The foreign brands reluctant to pay higher prices on account of price rise of raw materials and rising cost of factories for remediation and elevation to eco-friendly green types are also to blame for not the desired take-off by the RMG here.

Clearly, value addition to RMG products can turn business of this sector robust if the procuring foreign brands fully comply with trade rules and regulations. The positive impact that has spurred the knitwear sub-sector can be equally effective for the textile industry. Investment in the factories making woven garments and more particularly in textile industries for sourcing clothes locally can bring about a paradigm shift in the RMG business. A great deal of time has been lost but still there is an opportunity to advance the country's RMG interests riding on the West's China-plus policy. Last but not least, 65-plus per cent value addition means quite a handsome profit. Let the workers have a share of this they genuinely deserve.