Vietnam, Cambodia, Myanmar and Indonesia are getting a huge number of orders for woven items that shifted from China
Bangladeshi apparel manufacturers have not been able to derive any benefit from the ongoing US-China trade war. Rather, the country is losing competitiveness in the readymade garment industry for various reasons, said experts and entrepreneurs.
The reasons for losing competitiveness include bulk investments concentrated on only five items, taka being strong against US dollar, and a lack of efficiency in product development and marketing.
As a result, apparel makers are getting fewer orders and are pressured to lower product prices. Small and medium enterprises that are producing basic items are facing a tough time under the new wage structure while big companies are fighting for survival.
On the other hand, Vietnam, Cambodia, Myanmar and Indonesia are getting a huge number of orders for woven items that shifted from China. These countries have huge Chinese investments.
Some orders for cotton-based products have relocated to Pakistan and India because they have strong backward linkage industries for these items, compared to Bangladesh.
Pakistan is getting a good number of orders for denim and home textile products as they have a strong capacity to manufacture those items.
Experts said currency devaluation would be an immediate solution to making the apparel industry more competitive.
According to the Export Promotion Bureau of Bangladesh, apparel exports saw 1.64 percent negative growth year-on-year, reaching $8.05 billion in the first quarter of the current fiscal year.
On the other hand, Vietnam's apparel export increased by 10.54 percent between July and September this year. It was 2.2 percent for India and 4.74 percent for Pakistan.
"Trade war failed to leave any major impact on the growth of Chinese apparel industries as its annual growth still shows an upward trend with a 2 percent growth," said Siddiqur Rahman, former president of Bangladesh Garment Manufacturers and Exporters Association.
"Top apparel exporter China still has control over 36 percent of the global market. But some orders have shifted away from them as they are not willing to continue in that segment because of a hike in production costs," he told The Business Standard.
Sharif Zahir, managing director of Ananta Apparels Ltd, said, "Bangladesh is not getting orders moving out of China because we only produce a small number of the items China used to produce for the US market. Also, we lack the capacity to produce diversified products.
"We have a common tendency to invest by imitating someone else, without analysing the market. It is a big reason why our investments are stuck on a few items."
Mostafiz Uddin, managing director of Bangladesh Denim Expert Limited, a denim producer in Chattogram Export Processing Zone, also echoed the same view.
"Bangladesh needs more innovation in production, marketing, designs and trends to export more to not only the US market but to other countries as well," said Mostafiz.
"Entrepreneurs should diversify their products by producing high-value items like sports apparel, lingerie and other fashionable apparels to get more orders form American buyers," said DBL Group's Managing Director MA Jabbar.
"Our company has a pilot project on lingerie items. There is a plan to produce more such items by next year," he added.
Giant Group Managing Director Faruque Hassan said, "Bangladesh is not getting orders that shifted from China because we mainly produce cotton-based items. China has domination on manmade fibre items.
"Bangladesh's line of products is still dominated by cotton-based items – about 74 percent – whereas the global fashion trend has changed to manmade fibre items in the last 10 years."
Faruque thinks if the government provides a 5 percent cash incentive on manmade fibre export items, it will be a good initiative for product diversification and for getting benefits from the trade war.
"We saw a good growth in export destinations in the last 10 years which can be attributed to the government's decision to pay a 4 percent cash incentive for exporting to a new market," said Faruque, also the former senior vice-president of Bangladesh Garment Manufacturers and Exporters Association.
"In 2010, Bangladesh apparel export earnings from new markets were $700 million out of the total $12 billion. In the last fiscal year, it has increased to 17 percent and reached $6 billion out of the total earnings of $34 billion," he added.
MB Knit Fashion Limited, a knitting garment producer in Narayanganj, has received an order from a Chinese buyer to produce 3 lakh pieces of knitted T-shirt every month last year, said its Managing Director Mohammad Hatem.
"The buyer has recently informed me that a Pakistani apparel maker has offered to produce the same T-shirt at $1.28 instead of $1.40.
"Even though we both produce knitted T-shirts using local raw materials, Pakistani entrepreneurs can still offer lower prices because their profit margin will not be affected. This is something we cannot do," said Hatem, also the first vice-president of Bangladesh Knitwear Manufacturers and Exporters Association.
"Now, apparel makers have no option but to produce high-value products to survive. But shortage of raw materials and skilled manpower are another challenge for them," he added.
On the US-China trade war, Bangladesh Garment Manufacturers and Exporters Association's President Rubana Huq said the country is yet to benefit from the trade dispute because of product mismatch while others are using it to their advantage because of their ability to produce diversified products.
"We do mostly cotton-based items and the US is buying products made from manmade fibres."
Rubana, also the managing director of Mohammadi Group, said, "Other competing countries are giving their garment industry full support but we lack adequate policy support in this regard.
"Currency re-evaluation is needed as competing countries have devalued theirs," she added.
The Centre for Policy Dialogue's Additional Research Director Dr Khondaker Golam Moazzem said, "We have limitations when it comes to producing high-value apparel items. That is why Bangladesh cannot benefit from the trade war."
He also said the country is enjoying a positive growth in the US market but that may not continue for long due to the lack of product diversification.
"This the reason why Bangladesh is not getting any orders that are being shifted from China," said Moazzem.