The Business Standard talked to an economist and industry leaders to know if Bangladesh can regain its second position
Vietnam surpassed Bangladesh as the second-largest apparel exporter in 2019-20 fiscal year. During this period, between July 2019 and June 2020, Vietnamese apparels earned $30.94 billion, whereas Bangladesh raked in $28.82 billion, according to the General Statistics Office of Vietnam and the Export Promotion Bureau (EPB) of Bangladesh.
Now, the question is whether Bangladesh can regain its second position. The Business Standard talked to an economist and industry leaders to know if this is going to happen anytime soon.
"We need to encourage more foreign investors to invest in RMG sector"
Professor Mustafizur Rahman, Distinguished Fellow, CPD
Vietnam has outdone Bangladesh after fetching $2.12 billion more, thus becoming the second-largest apparel exporter in the fiscal year 2019-2020.
Though Bangladesh's apparel industry earned more than Vietnam during December and January, the negative growth due to Covid-19 outbreak since March has accentuated the difference between the two countries.
Vietnam is exploring new markets in the US, and has also signed the free trade agreement (FTA) with the EU, which is going to be implemented this year. Though Bangladesh will get duty benefits till 2027, after we entirely graduate from the LDC bracket that year, these benefits will be withdrawn. When our duty benefits would be withdrawn, Vietnam will continue to export at zero duty. This is a major concern for Bangladesh as the EU is the largest apparel market for us.
Vietnam is also ahead of Bangladesh in terms of exchange rate, business environment, lead time, export facilities, foreign investment and technology. This has played a significant role for them in overtaking Bangladesh.
Another aspect is that Vietnam is amongst the top five countries that have dealt with the Covid-19 situation efficiently. For this reason, the demand and supply sides in Vietnam were not heavily disrupted as they were in Bangladesh. Though we have opened up, it has obviously constrained our business.
Apart from cotton-made products, Bangladesh is doing good in knitwear and denim clothing, but it is not enough. We need to explore more. Man-made fibre (MMF) products are gaining momentum now. If we can concentrate more on the MMF products, we will be able to offer these at a competitive price as well. This will certainly add benefit to the industry. Also, as we will have to import the fibres, it is possible to provide import subsidies as well.
To regain Bangladesh's spot as the second-largest apparel exporter, we need to give importance to a few aspects – business package, exchange rate policy, early release of stimulus packages, ease of doing business, bringing down the lead time and making the market more competitive. We also need to encourage more foreign investors to invest in the RMG sector of Bangladesh, which played a significant role in Vietnam's rise.
However, I am hopeful that with our strength in the RMG sector, we will regain our position in 2020-21 fiscal year.
"Vietnam might have outdone us, but has not completely defeated us"
Shafiul Islam Mohiuddin, former FBCCI president
Vietnam might have outdone Bangladesh in apparel export now, but they have not entirely defeated us. They have not actually outdone us; they are on the verge of overtaking us.
This is because they are geographically closer to China. They do not need transhipment of raw materials like us. They directly receive those.
Vietnam also takes the minimum lead time and that is why they were able to outdo us. When it comes to bureaucratic red tape, they are in a better position than us. They receive other facilities, which we are not getting now due to the pandemic.
But we are not lagging far behind. The government is now very much supportive of the industries. For example, the government provided loans to pay RMG workers' salaries for four months.
Now we have to focus on the small existing irritations in this sector. It has become a great challenge for us as we first have to import the raw materials and then think of exporting them. We need to develop our customs to make up for the time lost during the shipments. If these can be done, I believe we can regain our position.
Bangladesh also has an advantage. We have Accord Alliance, RMG Sustainability Council (RSC) and Remediation Coordination Cell (RCC) working for the safety of the workers, which has put Bangladesh in number 1 position in terms of employee safety.
The tables will turn to our favour if we can overcome the Covid-19 situation as soon as possible and take care of the minor irritations. Then, we can take back what belongs to us.
"Vietnam has won now, but we can get back in the game again"
Faisal Samad, Senior Vice President, BGMEA, and Managing Director, Surma Garments Ltd
Firstly, I would like to mention that the year is yet to end if we consider January to be the starting month.
We have collected data from the BGMEA, Vietnam Customs, and the Export Promotion Bureau (EPB) of Bangladesh that Vietnam has made almost $2 billion more than Bangladesh during the last fiscal year. But this figure is based only on the export of garments. So, I think this is not the actual figure of the country and should be reduced.
Secondly, Vietnam is in this position because their factories were not closed for an extended period due to the pandemic in the last quarter, whereas our factories were shut down for whole two months.
I feel these are the factors that contributed to such advancement of Vietnam's RMG export. It is hard to say how long it will take us to prepare for a recovery from our losses due to the current situation.
I think Bangladesh is a competitive country. We have a lot of potentials and skillset. The government has also adopted a lot of good policies last year.
In fact, during the Covid-19 shutdown, the prime minister has provided us with a lot of benefits, and adopted relevant and positive decision-oriented policies. I would also like to thank the Bangladesh Bank governor, who implemented these policies very quickly.
I think that given all these sorts of support, Bangladesh will become the dominant player in the global RMG sector. But it will take a little time to reposition ourselves and recover from the pandemic. I think we can get back in the game again.