Supporting smaller factories during steep decline in apparel export

The apparel industry of Bangladesh has been going through challenging times after the Covid-19 pandemic. The country's apparel export to the USA, our single largest export destination as a country, declined by as high as 21.77 percent in January to August of the FY 2023-24.

The US imported $5.18 billion worth of apparel from Bangladesh during these first eight months of 2023, compared to $6.62 billion during the same period in 2022, according to the data published by the Office of Textiles and Apparel (Otexa) under the US Department of Commerce.

It should be mentioned here that Bangladesh is the third-largest apparel exporting country to the US after China and Vietnam. All the top apparel import sources of the US, including China, Vietnam, India and Indonesia have also shown significant negative growth in the January-August 2023 period.

According to Otexa data, the overall apparel import of the US from the world has declined by 22.77 percent in this period of the year, compared to the same period of 2022. 

The reason for this steep slide in the US apparel import is obvious – the inflation that hit ordinary US citizens hard, who have been focusing on purchasing essentials by cutting down on their budget for new clothes.

We also have no good news on the European Union front as well, which as a region is our largest apparel export destination. Bangladesh's apparel export to the EU declined by 12.69 percent in the first half of 2023, totaling Euro 9.06 billion compared to Euro 10.37 billion in the same period of 2022. 

This decline can be attributed also to a reduction in clothing demand due to high inflation and silent recession affecting the EU's 27 countries. 

Though Bangladesh's apparel export to the EU in July-September period of the fiscal 2023-24 registered an 11.47 percent growth compared to the same period of the previous fiscal year, according to the Export Promotion Bureau (EPB), we cannot count on it to be a promising sign. 

In the last fiscal we celebrated Eid-ul-Azha in July, and during the long holidays for Eid our apparel export always stays low. So, the comparison between the exports of July-September 2022 and July-September 2023 is not a real reflection of the state of affairs.

There is little hope that the situation will change in the near future, because of the world's current economic instability. The Russia-Ukraine War does not seem to be ending soon. Moreover, the recent Israel-Palestine situation will only add salt to this economic wound from which the entire world has been suffering.

The small and medium size apparel factories of Bangladesh have been facing the most difficulty sailing through this hard time. We should not forget that these SMEs are the foundation upon which the citadel of our industry was built. So, it's of utmost importance that we provide these small and medium size garment factories with support right at this moment.

The world will come to normalcy sooner or later. The apparel orders will also rebound. But if we cannot support these SMEs to exist in this tumultuous time now, our vision of achieving the $100 billion apparel export by 2030 will be a pipe dream.

The time is tough for all factories, irrespective of whether they are big, medium-sized or small. But big players sometimes can face the storm, which destroys the medium and blows away the smaller factories; as apparel is a capital-intensive business.

We have seen how the government stimulus package during the pandemic helped the factories to stand and stay in business. The present situation is no less grievous than the pandemic.

Therefore, only a stimulus package or something similar from the government can help the SMEs survive and sustain their business. And if the SMEs survive, the apparel industry of Bangladesh will surely thrive in the coming years.

Abdullah Hil Rakib. Illustration: TBS

Abdullah Hil Rakib is the managing director of Team Group. He is a director of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).