IMF sees Bangladesh garment exports keep strong position

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Mushir Ahmed
Bangladesh will maintain its strong position in global garment trade despite some risks and intense competition from South East Asian countries, a study of International Monetary Fund study said Sunday.
The IMF said Bangladesh has lost some grounds in garment trade to Vietnam and Cambodia in its key markets in North America and Europe in 2007 and early 2008, but in the short term it sees no major change in its export outlook.
"Although competition is becoming more intense, Bangladesh's strong market position does not look likely to diminish in the short term," the IMF said in a research paper on Bangladesh's export diversification and external competitiveness.
"Despite the recent mixed performance, Bangladesh retained second position after China in global garment trade," the paper co-authored by IMF's Bangladesh chief Jonathan Dunn said.
Bangladesh exports grew more than 16 per cent to US$14.11 billion in the 2007-8 fiscal year on the back of impressive performance by the ready-made garments, particularly knitwear.
The shipment, however, was negative in the first quarter, but it came back strongly in the remaining three quarters when garment exports grew more than 20 percent to finish the year with a record $10.7 billion income.
The IMF says cheap labour remains the key driver of Bangladesh's garment trade, as a worker in Bangladesh earns only $56 dollar, which is nearly half of what his colleague earns in Vietnam and Cambodia and a third than China.
"There are a number of factors that suggest that Bangladesh is well-placed to expand its manufacturing exports," it said, adding these factors have been "well recognised" by global organisations like the Goldman Sachs.
"A key factor is the abundant and relatively low-cost labour force, which makes it an attractive destination for investors looking to locate assembly operations," the paper said.
But the Fund has tabled some risks, including changing global trade rules that govern access to the main markets for garments such as "expiry of the US and EU safeguard measures on China at the end of 2008."
A long and painful recession in the North America as a result of the global financial meltdown also is a potential risk factor although it was too early to make a prediction, Dunn said.
The Fund called the government to diversify exports, increase competitiveness and maintain macro-economic stability, specially containing inflation and ensuring a flexible exchange rate regime in an effort to face the upcoming challenges.
It said "clear political environment" after the elections would also send a positive signal to the investors.
The global monetary authority said Bangladesh has diversified its export base in the recent years but still it needed a lot of catch-up work to compete with Vietnam or Cambodia.
The country expanded its number of export products well by South Asian standards, but less than East Asian competitors, it said, adding since 1990 the country increased its number of products from 366 to 673.
"This was a faster rate of increase than Pakistan and Sri Lanka, but slower than Nepal and considerably slower than Cambodia, which quadrupled its number of products."
The fund, however, sees Bangladesh's potentials in small oceangoing ship manufacturing industry, which is no longer competitive in China, Korea and Japan.
Shipbuilding has boomed in Bangladesh since the country won its first export order in early 2007. The country's three main shipbuilders now have orders worth $650 million.
The Fund said footwear manufacturing, which is dominated by China and Vietnam, is also expected to boom in Bangladesh.
"Investors have been looking at locating footwear and textile factories and some electronics and agricultural machinery assembly operations in Bangladesh," it said.
"The relocation of footwear production to Bangladesh may be spurred by the recent removal of the US GSP for Vietnam's footwear manufacturers," it added.