Since establishing diplomatic ties between the Republic of Korea and Bangladesh in 1973, the Republic of Korea has been enhancing cooperation in various fields, such as politics, economy, culture, development cooperation, and human exchange. Additionally, more than 200 Korean companies are present in Bangladesh, making the Republic of Korea the largest investor in Bangladesh’s garment sector. Their investments in recent years have been diversified into infrastructure, energy, and consumer goods, which would lead to further development of our bilateral cooperation. Bangladesh’s RMG export to Korea which was $125 million in 2012 jumped to $564 million in 2022, more than 400% increase in ten years. In 2021 Bangladesh’s RMG export to Korea recorded $448 million with a 38% year-to-year increase and $564 million in 2022 with 25. 8% year-to-year increase. Korea is the first and the biggest foreign investor in the RMG and textile sector. Among the 200 Korean investment companies in Bangladesh, over 70 percent are in the RMG and textile sector employing over 150,000 Bangladesh workers. Recently team Textile Focus had an exclusive conversation with Mr. LEE Jang Keun, Ambassador of the Republic of Korea. Ambassador Lee gave his opinion on the bilateral cooperation in the textile sector and the past, present, and future of the relations in his interview.
Textile Focus: How do you see the economic growth of Korea and what is your observation regarding the contribution of the textile and apparel industry to the Korean economy?
LEE Jang Keun: Textile and garment industries played a central role during Korea’s economic rise. The textile industry was the engine of Korea’s economic growth and export in the early days of Korea’s economic development. Like in Bangladesh, Korea’s industrialization started with the textile and garment sector in the early 1960s with the government’s support. By the early 1980s, Korea had risen among the big three textile exporters worldwide together with Taiwan and Hong Kong. Many Korean global companies started their business with textile factories in the early days which include Samsung and Daewoo. By the 1980s textile industry accounted for 24 percent of the Korean manufacturing sector which has now decreased to below 10 percent. Korea was the world’s 3rd biggest textile exporter in the 1990s. The share of textiles in Korea’s export grew from less than 10 percent in the early 1960s to almost 50 percent by the early 1970s. Now it is less than 5 percent of Korea’s overall export. And Korea moved from the text-led so-called light industry strategy until the early 1970s to the heavy industry development strategy in the late 1970s.
Textile Focus: Bangladesh’s apparel industry is the second largest in the world. What are the opportunities you see for Korea in bilateral trade with Bangladesh regarding raw material (fiber, machines, chemical) export?
LEE Jang Keun: Bangladesh’s RMG industry is the second largest in the world, but its share in global RMG remains very low. According to the WTO Bangladesh RMG’s global share is 6.5% while China’s is 32.21%. Bangladesh’s share in Korea’s RMG import market was 4.23% in 2021 with 445 million dollars. This means ample room for Bangladesh’s RMG to increase its share in Korea’s RMG import market.
In terms of Korea’s export to Bangladesh, already petrochemicals, machinery, and textiles are Korea’s major export items to Bangladesh.
Considering the close partnership and collaboration between Korea and Bangladesh in the textile and RMG sector, both countries would better explore new ways and areas of cooperation such as in the R&D and technological development in the RMG sector.
Now is the time for the two countries to move beyond the traditional types of cooperation, more technology oriented.
Textile Focus: Many Korean companies are investing in Bangladesh especially in the Korean EPZ to support the Bangladesh RMG sector. How many Korean companies are investing in Bangladesh, especially in the textile sector?
LEE Jang Keun: Korea is the first and the biggest foreign investor in the RMG and textile sector. Korea is the 5th largest foreign investor in Bangladesh after the US, UK, the Netherlands, and Singapore with an accumulated stock investment volume of 1.4 billion US dollars in 2022. Among the 200 Korean investment companies, over 70 percent are in the RMG and textile sector which means it could be over 150 employing over 150,000 Bangladesh workers. According to BEPZA, there are 75 Korean companies in the EPZs which makes Korea the second largest investor in the EPZ after Bangladesh. Youngone Corporation is the first Korean RMG investor which established its factory in Bangladesh in 1980. It is also the biggest RMG investor operating Korean EPZ in Chattogram.
Textile Focus: The Bangladesh apparel sector expects to hit the $1 billion mark in export to Korea in the current fiscal year with a diverse basket of items like lingerie, denim, shirt, jacket, and pullover. How can Bangladesh boost exports to Korea?
LEE Jang Keun: According to the International Trade Centre (ITC) data, South Korea’s apparel imports stood at $10.53 billion in 2021. China is the largest export source, $3.54 billion with a share of 33.62% followed by Vietnam, Italy, and Indonesia. Bangladesh exported $530 million in FY2022 to Korea, of which apparel shipments amounted to $440 million with a share of 4.23%[1].
Bangladesh’s RMG export to Korea has continuously increased during the past decades. According to Korean statistics, the export volume of $125 million in 2012 jumped to $564 million in 2022, more than 400% increase in ten years. In 2021 Bangladesh’s RMG export to Korea recorded $448 million with 38% year-to-year increase and $564 million in 2022 with 25.8% year-to-year increase.
Considering this trend, the share of Bangladesh’s RMG in the Korean apparel market can soon reach 10% in which case the total RMG export volume will be over $1 billion.
More and more Bangladesh RMG exporters are turning their eyes to the Korean market from the EU, US, Canada, and Japan realizing that the Korean market is duty and quota-free for around 95% of Bangladesh products. In addition, as Korea is regarded as a non-traditional market, exporters could get at least 4% of cash incentives from the government for their export to Korea. It was one of the reasons why BGMEA together with BIDA dispatched a delegation to Korea in October last year to explore the untapped potential of the Korean market for Bangladesh RMG exporters.
Making the best use of and encouraging the Korean investors in Bangladesh most of whom are in the RMG sector to export to Korea is necessary and important. At present, their buyers are mostly from Europe and the US. In this regard, abolishing discrimination against foreign investors, especially those in the EPZ, is an essential incentive for them to turn their eyes to their own homeland.
The trend of Bangladesh’s RMG export to Korea
Textile Focus: What are the challenges of bilateral trade between two countries?
LEE Jang Keun: The biggest challenge is the global economic crisis caused by the Ukraine-Russian war. Both Korea and Bangladesh have overcome the challenges of the COVID-19 pandemic. However, the prolonged war on the other part of the globe is heavily inflicting pain and challenging too many world economies including Korea and Bangladesh.
In Bangladesh, the difficulties in opening LCs for import and restriction on non-essential imports for a prolonged period are crippling many businesses and affecting bilateral trade, particularly Bangladesh’s import from Korea.
In 2022, the bilateral trade between Korean-Bangladesh crossed $3 billion with Korea’s export to Korea recording $2.35 billion, 44% year-to-year increase. However, the big increase in Korea’s export to Bangladesh in 2022 was mainly due to the diesel export which skyrocketed more than 700% to $972 million. It accounted for almost 40% of Korea’s export to Bangladesh. In most of the other areas, Korea’s export to Bangladesh shrunk in 2022. If this situation continues this year in 2023, the bilateral trade volume will significantly decrease.
The other challenge in bilateral trade is diversification. Garments and textiles account for 84% of Bangladesh’s exports to Korea. There are many potential items and products that can be introduced to Korea such as agricultural and fisheries products. Many believe that pharmaceuticals are also a promising export item for Bangladesh.
In this regard, the lack of direct cargo lines between the two countries, both air and maritime, is another challenge that hampers the full uncapping of trade potential between the two countries. Since Korea is the 7th biggest trading country in the world, connecting the two countries through direct cargo lines will be a big booster of bilateral trade.
Another major challenge in bilateral trade is the complicated and challenging customs-related environment in Bangladesh which increases the cost of business and adversely affects business confidence. Consistent, predictable, less complicated, and business-friendly customs service will significantly increase the trade and other business interactions between our two countries.
