Global RMG market: A comparative study

| Updated: October 22, 2017 05:57:14

Global RMG market: A comparative study

In September, 2015, apparel imports into the US continued on their upward trajectory, with seven of the top ten supplier countries booking year-on-year growth. Bangladesh led the pack, posting a solid double-digit gain, with strong increases also recorded by Indonesia, Vietnam and Pakistan. As per the latest figures from the Department of Commerce's Office of Textiles and Apparel (OTEXA), the volume of US apparel imports from all sources grew 4.8 per cent year-on-year in September 2015, down from the 13.5 per cent increase in August 2015. Imports reached 2.69 billion square metre equivalents (SME), up from 2.56 billion SME in September last year, 2014.
Quoting  official data, a news agency reported  on November 05 that Bangladesh's exports rose 21.15 per cent to US$ 2.37 billion in October, 2015, from a year earlier, driven by stronger overseas sales of garments. The Export Promotion Bureau (EPB) said that exports from July to October, the first four months of the financial year 2015-2016, rose nearly 5 per cent to US$ 10.13 billion from the same period a year earlier, 3 per cent short of the target. Sales of garments, comprising woven items and knitwear, totalled US$ 8.24 billion in the July-October (2015) period, compared with nearly US$ 7.75 billion a year earlier.  
Breaking it down into individual supplier countries, seven of the top ten recorded growth shipments from China - the largest supplier of apparel to the US - were up 1.48 per cent to 1.32 billion SME. Nearest rival Vietnam grew 10.6 per cent to 281 million SME, compared to the same month September a year back in 2014. Bangladesh, ranked number three in the top-ten table, saw apparel shipments rise 41.6 per cent to 157 million SME. Of the remaining supplier countries, Indonesia recorded the strongest growth at 16 per cent to reach 99 million SME, followed by El Salvador up 13.8 per cent to 76 million SME and Pakistan up 13 per cent to 51 million SME. Year-on-year import gains were also reported by India up 10.5 per cent to 74 million SME.
However, three countries saw apparel shipments decline during September, 2015. Cambodia recorded the largest drop at 3.52 per cent to 109 million SME, followed by Honduras down 3.5 per cent to 101 million SME, and Mexico down 1.74 per cent to 72 million SME. While there are concerns that increasing wages are undermining the competitiveness of China's garment production on the world stage, the country continues to lead the way when it comes to efficiency and infrastructure. As rising prices are largely being offset by productivity gains, China remains a compelling source for apparel buyers. With its 10,916 garment manufacturers with annual sales above CNY20 million churning out 29.6 billion pieces in 2014, up 1.6 per cent year-on-year, no country can match China in terms of the size of its supply base. Its range of skills, its quality levels, its product variety and the completeness of its supply chain outweigh others.
However, the falling value of the Chinese Yuan is being seen as a lever for US brands and retailers to drive down product costs, with one analyst describing it as a "tailwind for those sourcing apparel from China". The flipside for retailers and brands shipping in goods to sell in China is to take a hit on margin or increase the price of their products. Data released this week also shows the overall weakening of China's manufacturing industry has slowed down, prompting hopes the government's stimulation efforts are starting to take effect.
Meanwhile, Vietnam has benefited as producers and buyers diversify their supply chains, helped by its low labour costs and its industry focus on specialisation, modernisation, and increasing value-added. Foreign direct investment continues to flow into the country, and the conclusion of 7 (seven) years of negotiations on the Trans-Pacific Partnership (TPP) trade agreement last month (05 October, 2015) means Vietnam may benefit significantly. Luen Thai Holdings is the latest company to boost its business in Vietnam, announcing in August, 2015, it will continue to devote resources and efforts in its Vietnam projects.
Despite factory safety issues, the Bangladesh's clothing industry continues to build on its momentum as a low-cost sourcing destination. Since the collapse of the Rana Plaza building in April, 2013, two major industry-backed remedial plans, together with one supported by the government, have worked to resolve issues over safety and worker rights, including the closure of some garment factories. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has said that the country is now working to achieve its goal of doubling exports to US$ 50 billion by 2021, but will need to address a number of existing challenges first.
Despite being blighted by strikes, wage disputes, and factory fainting, Cambodia's apparel industry is the country's largest manufacturing sector. Garment manufacturers have called for a renewed focus on productivity in the sector ahead of a 9.4 per cent rise in the minimum wage for clothing workers to US$ 140 per month agreed for the beginning of the next year, 2016. They are also urging buyers to increase their prices for Cambodian goods. In September, 2015, construction of a specialised training institute for the country's garment workers got underway in Phnom Penh. It will train local workers to fill middle management positions in factories across the country, and offer vocational training programmes such as specialised design and pattern making courses, with the costs paid by employers.
Movement within the top three - China, Vietnam and Bangladesh - during the seven months of the year 2015 shows China rose 7.2 per cent to 8.69 billion SME, Vietnam grew 15.2 per cent to 2.38 billion SME, and Bangladesh increased 13.8 per cent to 1.43 billion SME. The other winners included India up 7.2 per cent to 799 million SME; Cambodia up 4.2 per cent to 816 million SME; Honduras up 3.8 per cent to 837 million SME; El Salvador up 2.2 per cent to 609 million SME; and Pakistan up 0.4 per cent to 448 million SME. However, Mexico saw apparel shipments drop 0.6 per cent to 692 million SME, while Indonesia's shipments were down 0.5 per cent to 960 million SME.
While monthly trade data is often volatile, with big swings from one month to the next, a broader view of the year 2015 has so far shown total US apparel and textile imports increased 8.92 per cent between January and September to reach 48.43 billion SME from 44.46 billion SME last year, 2014. Within this, textiles grew 10.6 per cent to 27.69 billion SME, while apparel shipments were up 6.76 per cent to 20.74 billion SME. All but two - Mexico and Indonesia - of the top-ten apparel supplier countries booked growth.
(The writer is a retired Professor of Economics, BCS General Education Cadre.
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