A declining trend of China's garment exports on top of the establishment of a strong local backward linkage industry makes the Bangladesh apparel sector nicely poised to increase its annual exports to two key markets – Europe and the US – by $54 billion by 2030, predicts Research and Policy Integration for Development (RAPID).
Bangladesh has the potential to boost its apparel exports to the US market to $24 billion and to the European market to $65 billion by next eight years, says the research organisation.
It has calculated the potential of garment exports in view of the current trend and statistics of the global apparel market, and the potential capacity of the Bangladesh RMG industry.
According to Export Promotion Bureau (EPB) estimates, Bangladesh exported garments worth about $43 billion in the fiscal 2021-22, of which exports to Europe accounted for $26 billion. Bangladesh's RMG exports to the US market stood at $9 billion last fiscal year.
In other words, Bangladesh's garment exports to these two markets may increase two and a half times in eight years, with an average annual export growth of 12% to Europe and 15% to the US, according to RAPID.
The research organisation says that even in the current situation, Bangladesh has the potential to rake in an additional $18 billion annually by exporting readymade garments to Europe, but the country is not being able to tap it. RAPID, however, did not provide detailed information as to why the country is failing to capitalise on its full export potential.
Nonetheless, there are also some uncertainties and challenges ahead as Bangladesh is going to lose duty-free export facilities after its graduation from the status of a least developed country (LDC) and other geo-political issues.
Dr Mohammad Abdur Razzaque, chairman of RAPID, told The Business Standard that Bangladesh will be able to earn additional $54 billion by exporting apparel every year by 2030 if it can increase focus on non-cotton products, bring in foreign investments, ensure environmental and social governance (ESG), and enhance capacity in logistics including port and customs.
"Global political tension and domestic factors will continue to reduce China's share in apparel exports. On the other hand, Bangladesh's strong backward linkage support will play a positive role in achieving this target," he explained.
Readymade garments account for over 80% of Bangladesh's total exports and more than 80% of the country's RMG exports are done to the European and US markets.
Based on this, the RAPID study showed that the US and European markets remain the main places of hope for Bangladesh in attaining its export growth target. Exports to non-traditional markets are unlikely to grow much, the study said, adding that the country's apparel exports to 16 regions in non-traditional markets totalled a little over $6 billion in the last financial year.
The RAPID chairman observed that Bangladesh's RMG exports to the US and Europe may grow to the tune as predicted by his organisation even if the country can retain the last 10 years' average annual growth rate of its garment exports to these markets.
According to International Trade Centre (ITC) data, in 10 years before Covid-19, apparel exports to the EU (including the UK) grew at an average annual rate of 15% and it grew at 9% to the USA.
The size of US apparel imports currently stands at $87 billion and it has grown at an average rate of 2.8% over the past 10 years. If it grows at a rate of 3% over the next eight years, the size of this market will be $115 billion.
On the other hand, Europe's current annual apparel imports (including intra-European countries) are worth $200 billion. The market has grown at an average rate of 2.82% over the past 10 years. If it grows at a rate of 3% over the next eight years, the market size will be $260 billion, where Bangladesh's share could be $65 billion.
Recently, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has set a target of raising the country's annual apparel exports to $100 billion by 2030.
According to sources, the organisation is working on a roadmap to achieve this target. The trade body may publish this roadmap by the end of this year, they said.
Shahidullah Azim, vice president of the BGMEA, told TBS that the BGMEA has set the $100 billion export target considering the overall situation.
To attain the target, he emphasised the importance of government policy support, ease of doing business, and infrastructure development in order to increase the export of man-made fibre.
But, not all entrepreneurs are confident that Bangladesh can export $100 billion worth of clothing every year by 2030.
Fazlul Hoque, managing director of Plummy Fashion, one of the leading knitwear factories in the country, told TBS, "The kind of master plan and activities needed to raise the annual exports to $100 billion in eight years is not there. On the other hand, the global demand will be on the decline because of the Russia-Ukraine war."
Another entrepreneur in the garment sector on condition of anonymity said RMG factories in the country do not have the capacity to increase production by two and a half times within the next eight years.
There were huge orders last year, he mentioned, adding that the industry could export $42 billion worth of products in the year even after forcing workers to work overtime.
"Will it be possible to increase the number of workers at this rate?" he said.
But, RAPID Chairman Razzaque said, "Even though there is a need for increasing the production capacity by two and a half times, the demand for workers will not increase at that rate as the use of high-tech machines in factories is on the rise."
Bangladesh, Vietnam to benefit most from decline in Chinese exports
A review of statistics on apparel imports and exports over the past decade shows that China's share in the big two global apparel markets is on a falling trend, with Bangladesh and Vietnam taking the lion's share of the lost market of China.
In 2010, 45% of apparel imports to Europe was from China, which fell to 30% in 2021. At the same time, Bangladesh's share in the market doubled from 10%, while that of Vietnam also grew slightly.
China's share in the US apparel import market, on the other hand, has fallen to 20% from 40% over a 10-year period, and most of this lost market of China has been grabbed by Vietnam while Bangladesh's share grew at a slower rate than Vietnam's.