The Readymade Garment (RMG) industry of Bangladesh has not only been a miracle to its countrymen, it has also been taking the world by storm for the past four decades.
Bangladesh has been called one of the fastest growing GDPs by eminent economists of the world, increasing 2700 per cent in just four decades. The most developed economies of the world have been struggling between 10-30 per cent.
According to a recent estimate, the RMG sector comprises of 82 per cent of Bangladesh's exports. This sector has been vivid and also managed to duck the recession of 2009 successfully. Today, Bangladesh stands to be the 2nd largest exporter of apparel all over the world, next only to China.
From the view point of labour cost, China is paying high price compared to that of Bangladesh. The monthly salary of a Bangladeshi worker would be Rmb 500 to Rmb 600 ($80 to $95), while one Chinese worker now is being paid at least Rmb 2,000 per month .China is now using Bangladesh to outsource its RMG products. China has already placed some orders for manufacturing apparel items in Bangladesh. If the Chinese companies engaged themselves here, it will be a great opportunity for the RMG sector of Bangladesh . Surveys found that European and US companies are planning to expand the share of their sourcing from Bangladesh from 25 to 32 per cent by 2020, from an average of 20 per cent. From the above perspectives we can say that Bangladesh has a great opportunity to become the hotspot of apparel sourcing.
Bangladesh apparel sector has some shortcomings. To become the hotspot and sustainable, this sector needs to be developed in different areas.
1. Infrastructure: The recent factory fire incidents were catastrophic occurrences that damaged the reputation that Bangladesh had earned in the global RMG sector. The factory safety concern is the reason why foreign buyers, especially Western brands, are cancelling their orders from Bangladesh. So, RMG sector needs to improve on infrastructure.
2. Productivity:
Comparing the wages versus productivity of competing nations, analysts say that without improving productivity and technological upgradation Bangladesh will not be able to reach the target of earning USD 50billion by 2021
"RMG industry of Bangladesh needs to shorten the lead time, otherwise, international buyers may divert their attention towards other suppliers for import of garment products in the current quota-free business environment. Technology and automation will be the key." Says Manasij Ganguli, Founder CEO, ThreadSol, a leading technology provider for garment manufacturers.
3. Unskilled Labour: Bangladesh has a population of more than 156 million and a labour force of 79 million (World Bank, 2014). Only 5 per cent of the labour force has received any form of training, with just 1per cent having undertaken technical/vocational training. For employers, the most pressing of these challenges is a shortage of skilled workers (particularly at operator, quality checker and supervisory level). Lack of training capacity and co-ordination challenges limit the effective development of sufficient number of skilled workers to meet the growing demand.
4. Product and Market Diversification: Bangladesh needs to develop the products in the competitive world and make a competitive manufacturing location and should diversify its export basket.
Strengthening the capacity for upscale products is very important for the Bangladesh RMG industry if it is to enhance its competitiveness. As with China and other prominent garment suppliers, Bangladesh needs to address both qualitative and quantitative expansion of its RMG industry simultaneously in order to sustain the business in the long run. The country needs to be capable of adjusting its manufacturing capacity to frequent changes in customer choices and preferences.
Bangladesh needs to expand its capacity for manufacturing high quality, high-priced garment products. Manufacturing basic shirts or t-shirts will not enable the country to remain internationally competitive in the long run.
Thus, product diversification and upgrading processes need to be accelerated. Bangladesh also needs to diversify its markets to include Japan, Australia and other important international markets.
These observations suggest that Bangladesh concentrates on a low-value product mix in its export basket, and even within that low-value product mix, its competitiveness is reliant on low wages that compensate for its low productivity. This situation is precarious not only because there are other low wage countries trying to enter the global RMG market, but also because the low wages of Bangladeshi workers cannot be taken as a permanent phenomenon, given the mobilisation of garment workers over the last few years demanding higher wages and better workplace conditions.
I like to conclude quoting Manasij Ganguli, Founder CEO, ThreadSol who said, "RMG sector needs to improve overall operational efficiency and technological upgradation, reducing lead time, market diversification, appropriate strategy formulation and new policy implementation. The government and the private sector need to work hand in hand for Bangladesh to attain the top spot in garment export."
The writer is Head of Marketing, ThreadSol.
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