Bangladesh is now facing stiff competition from emerging RMG powerhouses like Vietnam. Diversification of the apparel product line is no longer an option, but mandatory. One area where Bangladeshi readymade garments (RMG) products are yet to make a serious dent is the non-cotton sub-sector of the apparel industry. Recently, the Bangladesh Garment Manufacturers and Export Association (BGMEA) president has requested the Ministry of Commerce to make provisions for providing a 10 per cent "special incentive" on export of non-cotton clothes.
The facts speak for themselves. According World Trade Organisation (WTO) data (as of 2020), Bangladesh occupies the 3rd position in global market for apparels with 6.26 per cent share. If one looks at the RMG export basket of US$43 billion (2021 data), cotton-based apparels are dominant to have a share equivalent to an approximate $29 billion. Non-cotton clothes lag behind at $13 billion. Bangladesh holds 2nd position in cotton and 8th position in non-cotton in the global market. According to a BGMEA presentation back in October, 2022, it was found that while Bangladesh held a significant13 per cent share in cotton apparel export to the United States (US), in the non-cotton apparel export market to the US, Bangladesh occupied a meager 8.0 per cent.
Two things are evident. First, the global apparel market is making a shift from cotton to non-cotton apparels, and second, in the two major destinations for Bangladeshi RMG exports, i.e., in the US and the European Union (EU), Bangladesh holds a minority stake in the non-cotton apparel segment. So, while Bangladesh is one of the top-5 RMG manufacturing countries, it also holds the smallest share in non-cotton apparel export. This means Bangladeshi RMG sector is in trouble because the world is moving away from cotton to non-cotton and something must change to take cognizance of this fact and prepare the highest foreign exchange earning segment of the economy to make the desirable transition.
A lot depends on such a transition. After all, there is more to just foreign exchange earnings by the RMG industry. It is the single largest employer of people with an estimated 4.0 million people. There are around 3,500 factories in operation where an approximate amount of $20 billion in investments has been made. Financial institutions of the country have a huge stake in it as they have heavily invested in this sector. The RMG sector is now nearly self-sufficient in backward linkages with practically all accessories being produced in the country. When one puts all that into perspective, the upcoming budget needs to have provisions that will help companies begin transitioning from one source material to another.
The country's overwhelming dependence on cotton-made apparels is also its Achilles heel. With little in way of material diversification, Bangladesh is not being able to take advantage of the rise in demand for clothes made out of synthetic materials. This demand growth has come out of consumers wanting their wearables to be made of material made in a sustainable and environmentally-friendly manner. Cotton production unfortunately is very taxing on water resources, which could be put to better uses in an increasingly chaotic age of climate change. International trade data point to this change where today, reportedly, "non-cotton items' share is around 52 per cent in the total global apparel trade, whereas only 26 per cent of Bangladesh's RMG export is non-cotton items."
It would be prudent to recognise that consumer preferences dictate the market and Western consumers today are far more aware and increasingly make informed decisions when they invest in clothes. One of the things that has changed over the decades is where consumers are increasingly concerned about how their clothes are made, not just about the working conditions in factories abroad but the materials used in them. Whether these materials are environmentally sustainable or not. That puts the ball back in the court of RMG producers and those countries will flourish that are making investments in producing the building blocks of clothes, i.e., man-made fibre (MMF). Furthermore, MMF is the preferred material of choice because it is far more versatile than cotton in making apparels.
The RMG sector will need to train skilled workers to make the jump. The industry as a whole will have to invest in product development and learn to innovate. All this costs money and finance will have to become cost-effective to begin with, otherwise the economies of scale will not be achieved. Since the process of turning MMF into finished goods is an energy-incentive process, cost of energy will have to be buffered somehow. These are just some of the challenges that lie ahead and here policy intervention is required, without which none of the above will come to materialise. These are issues that must be addressed by policymakers because the opportunity to earn billions of dollars more is within reach from a sector which has proven its worth by successfully competing with the rest of the world and earning its laurels.