Bangladesh’s ready-made garment (RMG) industry experiencing exports a notable decline to the United States. According to recent trade data, Bangladesh’s RMG exports to the US fell by 14% during the January to April 2024 period. The export was also declined 19.24 % to $1.18 bn in January and February of the same year. This decline raises concerns about the sector’s stability and the broader implications for the country’s economy.
According to the Office of Textiles and Apparel (OTEXA) under the US Department of Commerce, US businesses imported $77.84 bn worth of clothing in 2023, down from $99.86 bn in the same period in 2022. This marks a 22.05 % decrease in US apparel imports compared to the previous year.
The main products that Bangladesh exports to the United States are Non-Knit Men’s Suits ($2.63B), Non-Knit Women’s Suits ($1.6B), and Knit Sweaters ($882M). During the last 27 years, the exports of Bangladesh to the United States have increased at an annualized rate of 7.71%, from $1.58B in 1995 to $11.7B in 2022.
Export Figures and Economic Impact
The drop in exports is substantial, considering the pivotal role of the RMG sector in Bangladesh’s economy. The United States is one of the largest markets for Bangladeshi garments but in the first four months January-April period of 2024 declined by 14.44% year-on-year to $2.3 bn. According to data from the Office of Textiles and Apparel (OTEXA), a body under the US Department of Commerce, the combined export of textile and garment to the USA also declined by 14.15 % year-on-year to $2.38 bn in the same period.
Several factors have contributed to this downturn:
Global Economic Uncertainty: The lingering effects of the global economic slowdown that compounded by inflationary pressures in key markets and so consumers are spending less on non-essential items including apparel.
Alamgir Kabir, Chief Executive Officer, Kaiser Bekleidungs GmbH, Bangladesh, said “Last year, it was a tough year for overall business due to the slower world economy and the impact of Ukraine Russia war. All the brands took a conservative buying strategy that led to less garment order placed to garment factories which eventually led to negative impact on export earnings of Bangladesh. We sincerely hope that more orders will come our way from 3rd quarter of this year and 2025 could be again a great year for RMG sector.”
Supply Chain Disruptions: The ongoing supply chain challenges including shipping delays and increased raw materials costs have hampered the ability of Bangladeshi manufacturers to fulfill orders on time and at competitive prices.
Moyeen Hyder Chowdhury, Country Manager, Puma Bangladesh, said “Due to the present worldwide crisis, retailers, suppliers, and end users are also in the big suffering to maintain overall costs. Bangladesh needs to focus on cost reduction by better waste management for men, machine, and materials, develop efficiency, and go for diversification.”
Increased Competition: The competing garment-producing countries such as Vietnam, India, and Cambodia, have intensified their efforts to capture a larger share of the US market. They tried to enhanced trade agreements and took competitive pricing strategies that made these countries formidable competitors for Bangladesh.
Moyeen Ahmed (right), Regional General Manager for Bangladesh and India at Gloria Jeans, opined “Bangladesh fails to get volumes of order due to not having competitive price in the international market where competitors are offering price less than Bangladeshi manufacturers. Bangladesh product has duty while Vietnam is duty free in USA. I sincerely seek attention of Bangladesh Govt. stakeholders/minister to look into this to grow business in Russia market.”
US Trade Policies: Changes in US trade policies and tariff structures have also influenced the export dynamics. While Bangladesh gets benefits from the Generalized System of Preferences (GSP) but shifts in trade policy by USA can create an unpredictable business environment.
Industry Response and Adaptation
Bangladeshi RMG manufacturers and exporters are actively seeking strategies to mitigate the impact of the decline. Key measures include:
Diversification of Markets: Efforts are being made by Bangladesh to explore and expand into new markets including Europe, Canada, and Asia, to reduce dependency on the US market.
Innovation and Value Addition: The industry is focusing on enhancing the quality and design of garments to offer more value-added products. Investing in technology and adopting sustainable practices are also part of this strategy.
Faruque Hassan, former BGMEA President said “We should more focus on high-end products with man-made fiber rather than run after low-value cotton base items as the country’s apparel export goes 75% on cotton and five basic items of products out of 200 items of export code.”
“Bangladesh needs to make adjustments to the global apparel demands: focus on Value co-creation, Innovation, Customer centricity, Digitalization, Service Orientation” said Alamgir Kabir, Chief Executive Officer, Kaiser Bekleidungs GmbH, Bangladesh,
Strengthening Local Supply Chains: Reducing reliance on imported raw materials by developing local supply chains can help mitigate supply chain disruptions and reduce costs.
Government Support and Policy Measures
The Bangladeshi government is also playing a crucial role in supporting the RMG sector. Initiatives include:
Incentives and Subsidies: Offering financial incentives and subsidies to RMG exporters to help them remain competitive. BGMEA President S. M. Mannan (Kochi) asked to keep source tax for the garment industry at 0.5% in the budget FY25 for 5 Years.
Infrastructure Development: Investing in infrastructure to improve logistics and reduce bottlenecks in the supply chain.
Trade Negotiations: Engaging in proactive trade negotiations to secure better terms and reduce tariff barriers in key markets.
Outlook for the Future
The 14% decline in RMG exports to the US from January to April 2024 serves as a critical reminder of the volatility in international trade and the need for continuous adaptation and resilience in the face of global economic shifts. So the long-term outlook for Bangladesh’s RMG sector has to be taken and strategic adaptations and government support require to help the sector and navigate through the current downturn. Continued efforts to innovate, diversify, and enhance competitiveness will be crucial in sustaining growth and securing a stronger position in the global market.
