Top garment buyers bullish about Bangladesh despite fears of recession in major markets

FE Team | Published: October 19, 2008 00:00:00 | Updated: February 01, 2018 00:00:00

Mushir Ahmed
Top global garment buyers are bullish about Bangladesh as they see the country's shipments gain on cheap labour and declining Chinese competitiveness despite its major markets are on the brink of recession.
While apparel groups have painted a grim picture of falling orders as a direct fallout of the worst global financial meltdown, buyers said Bangladesh would escape the pain thanks to its ability to produce cheapest clothing in the world.
Talking to the FE over the last one and half weeks, at least five top buyers-- together who import nearly $1.00 billion a year --- from Bangladesh said their orders for the coming months would increase despite a drop in retail sales in their home countries.
"All I can is that we're going to increase our garment sourcing from Bangladesh in the coming months," said Manish Chawla, the country head of H&M, Europe's second largest apparel seller.
"We have good cooperation with our suppliers and H&M seeks long-term relationships with its suppliers (in Bangladesh). We look with confidence to the future," company spokeswoman Camilla-Emilsson Falk said.
The Swedish fashion giant reported a two per cent year-on-year fall in sales at established stores last month, as the growing crisis in the financial sector weighed on consumer spending.
But its Dhaka sourcing chief said they see no change in orders for Bangladesh factories. "Local factories here have become very much competitive," Mr. Chawla said.
He comments came as top economies in North America and European Union are struggling to contain the worst financial meltdown since the Great Depression of the 1930s.
Retail sales in the United States and European Union have plunged, sparking fears that Asian countries would face a sharp slowdown in their exports.
The US and the EU are the major destinations of Bangladeshi exports, accounting for some 90 per cent of the country's US$10.7 billion garment shipments last year.
Fazlul Haque, the leader of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said the recession fears have already hit Bangladesh shores, with orders declining around ten per cent in September.
"A massive black cloud has gathered over our heads. The manufacturers and the government should take urgent precautionary measures to face the looming threat," he said.
To Haque, the record 75 per cent year-on-year growth in garment exports in July was an 'exception', not a rule. "It was a one-off figure. It cannot be counted as a major trend," he said.
Buyers and industry insiders, however, rejected the bleak scenario, saying the local garment sector with its abundant cheap labour, increased capacity and backward linkages would most likely gain even if top economies slip into recession.
They said Bangladesh is slowly nudging China as the preferred choice for medium-to-low category ready-made garments.
And recession in the wealthiest countries would quicken that process, as the top retailers would desperately hunt for factories which can offer bargain prices.
"Bangladesh is the cheapest garment manufacturers in the world. There is no way China, Vietnam or Indonesia can compete with its garment industry," said a top official of Metro, Germany's largest retailer.
"Following the cut in consumer spending in Europe, buyers are now cutting orders in China. Some of these are finding their ways to Bangladesh," he said.
Metro, which this year opened stores in India and other countries in Asia, has increased sourcing from the country, like many of its competitors such as Aldi, he said.
"All our orders till February have already been placed," he said.
Buyers said a sharp wage hikes in China coupled with appreciation of its currency --- Yuan gained 17 per cent against dollar since 2007--- has made low-to-medium category Chinese apparel no longer competitive.
"Thousands of their factories are operating with no margins at all. And buyers are now targetting Bangladesh as the main growth area," said Ashok Kumar Baidya, an official of Scandinavia-based retailer, KappAhl.
KappAhl has almost doubled its import from Bangladesh this year and see no change its current policies in the near future.
The country head of one of the biggest retailers in the world, which is based in Britain, said the coming recession might offer new opportunities for Bangladesh, provided it lives up to the challenges.
"No doubt, we'll see some winners and losers in this financial turmoil. Bangladesh has a lot to win because it is competitive. But it has to adapt to customers requirements," the country chief told the FE.
Ziaul Islam Chowdhury, a top management expert on apparel, visited the United Kingdom last week to see how economic slowdown impacted clothing sales in Bangladesh's third largest market.
"Apparel sales in top retailing houses like Tesco, Asda, Target which operate in mass market segments, have been growing even in this turmoil," said Chowhdury, a director of Knit Asia Limited.
"Since we mainly produce mass market garments, I don't see any changes in our shipment orders in the next few months," he said, adding top-end garment retailers like American Eagle, GAP have been the main victims of the economic slowdown.
Chowdhury said the garment shipments growth could in the short term moderate to a 10-15 per cent a month if the recession started to bit the western countries.
"The general feeling is that the existing buyers would observe the situation before placing increased orders to Bangladesh. But we would still gain due to switching of order from China," he said.
"The China factor has emerged as the biggest blessing for Bangladesh. Their loss would automatically mean a gain for us," he added.