China is at present the largest readymade garment (RMG) exporter and its share in the global market is 40 per cent while that of Bangladesh is only 6.4 per cent. Chinese apparel prices will rise significantly in the near future as the country is heading fast to be one of the world's richest countries. So, China is gradually heaving the clothing market as costs of manufacturing textile and RMG products are increasing day by day in the country due to high labour costs.
In China an RMG worker's wage now stands at least at US$3.5 per hour while in Bangladesh it is only half a dollar. Given the rising costs and prices in China, experts see a big opportunity for Bangladesh to export an increased volume of apparel products and creating more jobs in the sector. Increased apparel exports could create more jobs in Bangladesh, if the country makes improvement in productivity and product quality by enforcing a better safety standard and adopting other compliance policies, says a World Bank (WB) report.
The report, entitled "Stitches to Riches: Apparel Employment, Trade and Economic Development", was jointly launched by the World Bank and the Bangladesh Institute of Development Studies (BIDS) at an event at the BIDS conference room. The report said Bangladesh steadily increased its share of the global apparel trade above the world average and greater than China but lower than that of the Southeast Asian countries. The report, released on May 2, 2016, said successful implementation of reforms would help Bangladesh increase exports and capture more jobs with China's gradual exit from the global clothing market and compete with Vietnam, Cambodia and Indonesia.
Bangladesh has the largest apparel export industry in South Asia and its share is 6.4 per cent of the global apparel exports. Bangladesh needs to improve performance on the non-cost front which is important to global buyers. The report said, for the US market, a 10 per cent increase in the Chinese apparel prices would increase apparel sector employments in Bangladesh by 4.22 per cent. Addressing the event, Bangladesh Prime Minister's Economic Affairs Adviser said synchronisation was needed in the speed of developing technical skills, expanding the industry, diversifying products and ensuring qualitative improvement of the industry. The government should ensure this match.
Admitting that there is infrastructure inadequacy, the Adviser said the infrastructure should increase doubtlessly for increasing productivity. WB Country Director Qimiao Fan has said the apparel industry is extremely important to Bangladesh's economy, accounting for 83 per cent of the total export. He added: "The rising costs and prices in China really cooked an opportunity for countries in South Asia particularly Bangladesh. The potential decrease in Chinese exports presents a huge opportunity for Bangladesh, if it can meet global buyers' requirements for cost, quality, lead time, reliability and compliance with safety standards and other policies".
Similarly, the Centre for Policy Dialogue (CPD) maintains there is a large gap between shares of the largest exporter China and the second largest exporter Bangladesh in the global apparel market. The share of China is 40 per cent, while that of Bangladesh is only 6.4 per cent. It stressed the need for skills and productivity enhancement as well as market and product diversification for improvement of the readymade garment sector. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA), however, disagreed with the report findings partially that says the quality of Bangladesh apparel production is now low. It said: "We don't agree that quality of our apparel is low".
Terming the RMG the lifeline of the country's economy, the BGMEA said: "Massive safety measures have been taken and got success in improving the safety after the Rana Plaza tragedy. Bangladesh is now a trusted source of the global apparel markets". Meanwhile the Business Initiative Leading Development (BUILD) also said the skill development is an area that Bangladesh needs to address to boost the RMG export. Placing the report, the WB lead economist Gladys Lopez-Acevedo said Bangladesh should capitalise on its position as regional leader and implement policies to improve the quality of its product. Bangladesh should focus on sustaining the creation and expansion of good jobs, bringing more women into the workforce and diversifying its products and markets to increase skills and value.
The energy ministry is moving fast to increase gas prices for the captive power plants by 130 per cent. The current gas price for the captive power plants is Tk 8.36 per cubic metres, which would be Tk 19.22 per cubic metres if the proposed gas pricing structure is approved by the cabinet. Business leaders did not find any logic behind the energy ministry's move for increasing gas prices for the captive power plants which are the principal source of meeting the power demand of the country's textile and RMG sector.
The government thinks these power plants misuse gas, which is repeatedly denied by the textile sector business leaders. Around 400 spinning mills and weaving mills are now running with electricity from captive power plants, and that ensures uninterrupted power supply. The captive power users are textile, garments and knitwear manufacturing units. These units too depend on captive power plants to meet their electricity requirement. If the proposed gas price structure is put into effect the whole textile sector would lose its competitive edge.
Under the circumstances, the BGMEA opposed the fresh gas price hike. It argued, due to the increase of cost of production in China, an opportunity was created for Bangladesh's garment sector to flourish. It could be hampered if the gas prices are increased further. The WB in its recent report, as mentioned above, said that South Asia could create millions of new jobs in the apparel industry by taking the advantage of rising manufacturing costs in China. According to the report, wage a key component in the apparel industry, is half a dollar per hour for a worker in Bangladesh, which is over a dollar in India and $3.5 in China.
On the other hand, Bangladesh Textile Manufacturers Association (BTMA) sources said that after increasing gas price in September 2015, the profit margin from the sale of yarn declined to below $1.0 per kilogram. The source also said that last gas price restructuring resulted in a decrease of production in the spinning mills. The 400 spinning mills have a spinning capacity of 10 million bales per year but a considerable portion of spinning capacity remained unutilised because of higher energy prices and inadequate power and gas supply to the production units.
The BTMA has further said that the textile sector as a whole and the spinning sector would be hit hard if the gas price is increased further. Bangladeshi spinners will face pressures as international yarn producers will then supply their products to the local industry at a lower price. The BTMA source said that Bangladesh yarn market again would be flooded with the Indian yarn, if the proposed primary energy price is put into effect.
The writer is a retired Professor of Economics, BCS General Education Cadre. Email: [email protected]
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