The New Competitive Bangladesh Garment Industry

In 1995, the major garment importing countries agreed to dissolve the MultiFibre Arrangement and thus phase out global garment export quotas.  They recognized that the move to unrestricted garment imports would cause serious disruption to local garment producing industries in industrialized countries that had been protected for generations.  They also recognized that the quota regime had created national garment exporting industries, which had no competitive advantages other than the fact that they were quota free.  As a result, it was decided to phase-out quotas over a ten-year period, to allow both sides to adjust to the new open markets.  In the event, while some on each side made efforts to reinvent themselves most did nothing, and paid the price.

Bangladesh is about to undergo the same wrenching experience.  As of 2024, they will lose duty-free access to the EU, which they currently enjoy as a least developed country.  At that point, they will be forced to compete on an equal basis with better developed, more efficient factories able to provide their customers with something more than no-longer-cheap commodity garments.

Bangladesh is currently the world’s 2nd largest garment exporter after China.  However, unless the industry takes action, Bangladesh might well become the world’s #1 most replaceable garment supplier.   

In 2024, Bangladesh’s garment industry will be squeezed on three sides.

1.  Within Bangladesh, the foreign-owned factories have all the advantages over the locals. They can survive and prosper in the new more competitive industry.

• They have global reputations for corporate social responsibility;
• They are willing and able to pay higher wages; which allows them to train workers;
• They are able to provide their customers with all required services from their home factories, leaving their Bangladesh branch operations as simply low-cost subcontractors.    

2.   Outside Bangladesh, new industries are in the early stage of development, with the potential to provide the same basic commodities at FOB prices lower than Bangladesh and duty free to both the EU and the U.S. Currently, Sub-Saharan African factories collectively have a world market-share of 0.08%, but major importers and their Asian factory suppliers are making major investments in those nascent industries. Five years from now, Bangladesh will not be able to compete with these newcomers. 

3.   Reshoring is the future.  Five years from now technology will have moved import customers back to their home countries or regional blocs.

Bangladesh’s garment industry leaders must act now to develop a new industry able to compete in the normal export industry where importers pay duty.  

Industry leaders and the BGMEA must put aside their differences to first define and then create the new Bangladesh industry.

At a minimum, it must have three facets.

1. New systems to increase productivity.
2. Trained multitasked workers capable of fast turn and quick response.
3. Educated managers and technicians capable of providing the complex and sophisticated services that customer demand.

Five years is a very short period of time to achieve any realistic goal.

The first step is for industry leaders to wake up and recognize they have no choice but to put aside their differences and collaborate.  To quote an American WE MUST INDEED ALL HANG TOGETHER OR ASSUREDLY WE WILL ALL HANG SEPARATELY.