Bangladesh has immense potential of exploring new & emerging markets
Established in 1983 with only 12 members, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) today has around 4,500 member factories. The association takes care of an industry that is at the backbone of Bangladesh’s economy. In a conversation with Fibre2Fashion, president Faruque Hassan speaks at length on all aspects of the apparel industry in Bangladesh.
Which are the biggest import/export markets for Bangladesh apparel? Where else is the demand growing?
In FY 2020-21, with 18.90 per cent share of total export, the US was the largest export destination as a single market, while EU is the largest market as a region having 61.77 per cent share. Nevertheless, the rise of the non-traditional market is significant in last 12 years. In FY 2008-09 our export share to non-traditional markets was only 6.8 per cent, which has increased to 16.16 per cent now.
Please give us a brief introduction of BGMEA, including your current members, your key mission and main functions.
The BGMEA is one of the largest trade associations in the country representing the readymade garment industry, particularly the woven garments, knitwear and sweater sub-sectors with equal importance. Since the inception, BGMEA is dedicated to promote and facilitate the apparel industry through policy advocacy to the government, services to members, ensuring workers’ rights and social compliance at factories. BGMEA collaborates with local and international stakeholders, including brands and development partners to pave the way for development of Bangladesh apparel industry.
BGMEA works with the vision to develop the RMG industry of Bangladesh and the economy of the country. Having such vision BGMEA chalked out the following missions and its strategic direction is paved accordingly.
Firstly, to protect and promote the interests of the industry; thus ensuring a sustained growth in the foreign exchange earnings of the country.
Secondly, BGMEA is committed to ensure all legitimate rights and privileges of the garment workers. The association also strives towards the betterment of the society and environment.
What are the latest summits/conferences BGMEA participated in this year and what were the major highlights in them?
Some of the events where BGMEA participated this year are:
a) Seminar on ‘Wellbeing of RMG Workers through Inclusive Business Initiative’ organised by Dutch-Bangla Chamber of Commerce and Industries (DBCCI) on July 17, 2021.
b) International Webinar/Conference titled ‘Bangladesh at 50: From the test case to a development role model’. Six renowned Australian universities – University of Queensland, RMIT University, Queensland University of Technology, Griffith University, University of Southern Queensland, and Macquarie University – organised the two-day conference on October 7-8.
c) The 26th UN Climate Change Conference of the Parties (COP26) held in Glasgow, Scotland on October 31.
d) The 36th IAF World Fashion Convention held in Antwerp, Belgium on November 7-8, 2021.
e) World Congress on Information Technology (WCIT) webinar titled ‘AI & Robotics: Global Implication of Artificial Intelligence’ on November 14, 2021.
f) ‘Sourcing Bangladesh-2021, Virtual Edition’ on November 17, 2021, organised by The Export Promotion Bureau (EPB).
Which garment categories have seen the highest growth in terms of their revenue from foreign markets in the past year?
Bangladesh mostly exports basic garment items to the different countries in the world. Though we cater to all the segments in the global market, we have the expertise in producing five basic garments items such as trousers, t-shirts and knitted shirts, shirts, sweaters, undergarments. Since people had to stay at home for a long time due to lockdown measures to reduce the infection from COVID, the demand for casual clothing or knitwear increased significantly in the last fiscal year.
According to data from the Export Promotion Bureau (EPB), in FY 2020-21, Bangladesh exported $31.45 billion worth of apparel to the world of which the share of these five items was 82.04 per cent. The export value of trousers and t-shirts and knitted shirts was $10.68 billion and $7.24 billion respectively. Bangladesh also exported $4.05 billion worth of sweater items to the world, and $2.05 billion and $1.79 billion worth of shirts and underwear items respectively.
The Rana Plaza incident is etched in history of the textiles industry of Bangladesh. Have such incidences come down in recent years? If yes, what were the safety measures taken on ground by the manufacturers?
The tragic building collapse in 2013 was an unfortunate incident in our history, but we took it as our turning point.
We, the entrepreneurs, have committed ourselves to turn around and rebuild the industry to make it safer, risk free and sustainable for our workers and employees. We have engaged ourselves with the Government, ILO, local and international labour federations and brands under which, safety inspection in all the export oriented RMG factories in Bangladesh in the area of fire, electrical and structural safety have been carried out. Since the tragic building collapse incident in 2013 a paradigm shift has happened. All the factories have gone through robust remediation programme and installed all the required safety equipment as per the standards. To complete the safety remediation plan, a factory on an average spent around $500,000. And in the case of relocation or rectification, the cost was even 4-6 times higher.
The factory inspections reports were also disclosed online which has set a unique example in the world on the issue of workplace safety and as a result, Bangladesh has emerged probably as the safest and most transparent readymade garment producing country.
To carry forward the progresses made by the unilateral safety regimes and to establish national monitoring, the RMG Sustainability Council (RSC) is established which has taken over the monitoring regime as of June 1, 2020, bringing the Bangladesh RMG safety monitoring regimes under one umbrella. RSC is governed by an equal number of representatives from brands, manufacturers and trade unions. All policies and procedures developed by the Accord, including consensus-based decision-making, and standards for all health-safety protocols have carried over to the RSC.
And, as a result of the initiatives, we can proudly say that such incidences have come down in recent years.
Please brief us about some of the promising news for the Bangladesh garment industry in recent times and how it will leverage the industry.
a) The BGMEA has been awarded the ‘WITSA Global ICT Excellence Awards’ in Sustainable Growth/Circular Economy Award category by WITSA for using ‘Biometric Identity and Worker Information Management System’ in 25th WCIT (World Congress on Information Technology).
b) BGMEA has been honoured with the ‘2021 USGBC Leadership Award’ for its exemplary leadership in developing Bangladesh as the home of the highest number of green garment factories in the world.
c) Bangladesh is the home to the world’s highest green garment factories with 150 USGBC LEED certified factories. Among those, 44 are platinum rated and 93 are gold.
d) A recent survey report unveiled by Hong Kong-based supply chain compliance solutions provider, QIMA, ranked Bangladesh second in ‘Ethical Manufacturing’ with a score of 7.7 only behind Taiwan which scored 8.0.
e) BGMEA joined the UN Fashion Industry Charter for Climate Action (an initiative by the UNFCCC) with an ambition to reduce GHG emission by 30 per cent till 2030.
f) Besides, we are working to create higher education opportunity for girls working in garment factories. Currently 60 young female workers have enrolled in the Asian University for Women to pursue higher studies.
g) BGMEA also pledged to the Green Button, which is a global seal of excellence in sustainability by the Government of Germany.
h) We are partnering with Global Fashion Agenda, Reverse Resources and p4g and developed ‘Circular Fashion Partnership’. 19 brands, 17 recyclers and 85 manufacturers have joined this initiative.
What is the size of the Bangladesh apparel industry? What is the workforce that it employs—both men and women?
Staring with only $12,000 of export in 1978, we reached $34.13 billion in FY2018-19. We have around 3,500 active RMG factories in the country, which has created employment for around 4 million workers directly, and indirectly around 10 million people are working in various backward and forward linkage industries. It is important to note that around 2.5 million of our total workforce is female, who have mostly come from less privileged part of the society. Thus the industry is helping them to be empowered socially and economically.
The tag ‘Made in Bangladesh’ is being retailed in 167 countries across the globe. In terms of investment, from direct and indirect link, this sector has generated almost $20 billion in investment.
How does the Bangladesh apparel industry stand to score with respect to sustainability? What are the initiatives being taken in this direction?
The apparel industry is proving its competence as a strategic industry of Bangladesh through its continuous stride towards social and environmental sustainability. We have our solid commitments to implement Zero Discharge in the industry. We have already started a project with GFA (Global Fashion Agenda) funded by P4G named CFP (Circular Fashion partnership). The PaCT project is being implemented in more than 250 factories partnering IFC looking into cleaner production and renewable energy. We have initiated two projects with GIZ named STILE and Fabric. While STILE is looking into creating a conducive policy environment with capacity development of the manufacturers, the FABRIC project looks more into a regional approach to standardise sustainability standard in the Asian apparel manufacturing countries. To digitalise the industry and make the industry smart, we are collaborating with UNCDF which will look into digitalisation of payment system along with sustainability and productivity activities integrated through a smart management system.
Our commitment is to take the RMG industry to the next level of sustainability and we are looking comprehensively to all the possible areas of concerns.
What role is women in Bangladesh playing in the development of the apparel/textiles industry? How does the government plan to support the women workforce?
For a developing country like Bangladesh, where women’s decision-making power in the family is often dependent on the financial contribution made through her work, I think the readymade garment industry has brought a revolution here in terms of women empowerment. Out of the 40 million workers employed in the RMG industry of Bangladesh, the number of female workforce is around 60 per cent, who are working as the fuel of our industry.
Throughout the last 40 years, this sector has benefitted millions of women, who, if not, would be considered as a burden to the family. The job gives them ample opportunity to enjoy the taste of economic freedom and liberty. Apart from being able to financially contribute to the family, garment sector significantly contributes in enhancing their ability to take part in decision making, coping capacity to sudden shocks and access to resources as they want. Women, especially those who belong to the rural poor income group, frequently go through social oppression and economic inequality because of the patriarchal mind-set of our society. Better than any other sector, the RMG industry has created a platform for women from this cohort to engage in productive role which contributes directly in elevating poverty and uplifting their livelihood status. The opportunity to be gainfully employed also serves as a repellent against early marriage.
How did the Bangladesh apparel industry fare during the pandemic and even now as it continues to linger?
The COVID-19 has hit this industry very hard. It has been difficult for us for the past one and a half years. The worst impacts were cancellation of orders, non-payment by buyers, discounts, deferred payments, deferred shipments, forced loans to pay B/B LC (Back-to-Back Letter of Credit), buyers’ bankruptcy, and uncertainty over payment receivables. The free-fall in export in 2020 caused many factories to close since they did not have enough orders to run on optimum capacity. However, thanks to our Prime Minister Sheikh Hasina for her prudent leadership and fiscal and policy incentives, which helped the industry to sustain during the peak period of COVID-19.
With the fast recovery from the pandemic in the West, the retail sales is rebounding significantly; as a result orders are coming. Though in recent months export has seen significant growth, there are few challenges which still makes the survival of this industry difficult.
What role did BGMEA play in the wake of the pandemic to support the Bangladesh garment industry and in negotiating terms with the various stakeholders?
a) Getting the Stakeholders together:
Since the outbreak, brands had been consulted by BGMEA, having the industry experts onboard, to get over the massive order losses. The respective governments and the concerned parties were consulted too for mitigating the losses. We are very much grateful as the Prime Minister saved the industry at that time by supporting us in the form of wage loan support to pay the wages of the workers and also by providing working capital loan support.
b) Reinstating of cancelled orders:
A virtual forum was created by BGMEA to share information and build cases against buyers’ irresponsible behaviour comprising of WRC, HRW, ILO and Prof. Mark Anner. Due to the continuous constant communication and petitioning of BGMEA with international brands and retailers along with local and international media, and trade unions, now almost 85-90 per cent of the reported $3.18 billion cancellation has been reinstated. Still, we are working to mitigate the losses caused by payment discounts, stocked inventory, deferred payments, payment risk minimisation, etc.
c) Health and Safety Protocol Guideline:
After being closed for nearly one month in order to curb the spread of COVID-19, prior to reopening factories, BGMEA developed a health guideline / protocol for its member factories in consultation with the Ministry of Health of the Bangladesh Government, ILO, WHO and combining with proper homegrown solutions keeping in mind both necessity and practicality of the measures taken.
d) PCR Lab:
The efforts from BGMEA and collaborative guideline with stakeholders paved the way for reopening factories and restarting businesses. A state-of-the-art PCR laboratory to test garment workers for coronavirus had been established and launched by BGMEA. Later, with the infection rate coming down, the lab was transferred to BADAS (the diabetic association) so that it can be used for mass population.
e) Audits and Supervision:
BGMEA also took the initiative to make random unannounced audits of factories, to keep an eye on whether the protocols are being followed properly.
f) Joint Initiatives:
BGMEA also partnered with Inspectorio to help member factories mitigate COVID-19 resurgence. BGMEA and Maya have signed an agreement to provide free services to help prevent and limit the spread of COVID-19, while also addressing general medical and mental health related issues amongst readymade garment (RMG) workers.
g) Identifying the Gaps and Connecting the Dots:
Besides interacting with international community, BGMEA also identified the possible gaps and the bottlenecks of the business during and post the pandemic for which the Government has also been consulted.
h) Vaccination of the RMG workers:
Thanks to Bangladesh government for the prompt response to the letter sent by BGMEA, as Prime Minister Hasina instructed to consider RMG workers as frontliners and ensured COVID-19 vaccination for them on emergency basis. They are getting their vaccine dose at their respective factories without any prior registration.
BGMEA has also contacted several brands and foreign ministry of several countries for collaborating in terms of the vaccination. As a result, German brand KiK has already donated a handsome amount, which has been given to Bangladesh government as the vaccination process is being taking care of centrally. Other brands have also expressed their willingness to collaborate and BGMEA is working in that direction.
As a result of these initiatives, we have been able to contain the rate of infection in our industry within 0.03 per cent.
How does Bangladesh plan to reduce its dependency on China for raw materials and machinery?
The disruptive impact of overdependence on a particular country for either raw material or other accessories has been exposed during the peak hour of COVID-19.
As we have bigger growth vision ahead, technology will be a crucial part for the next stage of our industrialisation with regards to sustainability, competitiveness and creating decent employment opportunities. We have to make our supply chain lean and green, and we have to ensure technological upgradation across the production chain, otherwise it will be difficult for us to optimise cost and be competitive in the global market.
In order to be prepared for the challenging future and improving our own product development capacity, we have taken an initiative to establish a centre for innovation, efficiency and OSH. The main objective of the initiative is to enhance efficiency of the readymade garments industry to make it more resilient and sustainable to ensure lives and livelihoods and complementing the national growth and development. Through this centre, mid-level management of the RMG industry will be trained for virtual modelling, 3D sampling, product design and development, etc which will undoubtedly help us to enhance our competitiveness.
Foreign direct investment in the backward and forward linkage is absolutely necessary and another immediate area where we should work on. On one hand, it will surge the capital movement, and on the other hand, it will enhance our capacity in terms of knowledge spillover and technological know-how.
What makes Bangladesh the topmost contender for the China+1 model as compared to other competing nations, specifically Vietnam, now that it has an FTA with European Union?
Before I answer this question, I want to mention that it is not the competition with Vietnam that we are concerned about, rather we are working to develop and upgrade our excellence in the required area. It is true, that we are lagging behind in terms of FTA/ PTA with our potential countries. However, under the prudent and visionary leadership of our Prime Minister, Bangladesh is getting ready and currently being considered as one of the most favoured nations in South Asia for investment.
One of the major sources of our competitiveness is the young and vibrant workforce. We have around 6 million economically active population in Bangladesh, and every year around 2 million people are joining our labour force, which gives us an advantage when compared to our competitors.
Another strength of the RMG industry is its scale economy. Being the second largest garments exporting country in the world, we have huge capacity in our industry which puts us in a unique position to be cost competitive while providing quality at global standard.
Though Bangladesh has graduated from LDC, we will enjoy the market access benefit up to 2026, and in the EU up to 2029 which also creates a competitive advantage for us. And the recent changes in the EU GSP regulation has made the path easier for us to access the GSP+ in EU after the transition time is over.
The mega projects like the Padma bridge, power plants, metro rail, and bringing the whole country under railway network are making solid progress. Electricity generation capacity reached to more than 25,227 megawatt. 100 new Economic Zones (EZ) are being developed to create structured and balanced investment. Bangladesh has made outstanding achievements in MDGs and is committedly pursuing the Sustainable Development Goals (SDGs), which further endorses Bangladesh’s story of resilience. So, by all means Bangladesh is the best kept secret in Asia.
Apart from the pandemic, what are the biggest challenges and opportunities facing the Bangladesh apparel industry?
Challenges:
a) The price and cost dynamics which has been distorted by the impact of COVID-19. Even though the price received from our buyers are stable now, that is not proportionally increased as per our cost to manufacture.
Production cost—in terms of yarn price, dyes and chemicals price, wages, cargo and freight cost, utility cost—has gone up which is posing a challenge for us. The recent increase in fuel cost, which is also pushing our transportation cost will be another fuel in the fire.
b) Price of yarn increased by 60 per cent in last one year, which is from $2.81 per kg in October 2020 to $4 per kg in November 2021.
c) Freight cost increased by 350-450 per cent.
d) Dyes & chemicals cost increased by almost 40 per cent.
e) Minimum wages increased by 7 per cent in the beginning of the year.
f) Electricity power and gas cost has also increased.
g) Price of fuel cost has reached highest of the last 3 years in the world market, which will affect freight cost further, and will increase price of petrochemical based raw materials.
h) The immediate impact of LDC graduation on Bangladesh’s industry, particularly the export-oriented industries, is also going to be a big challenge for us in the upcoming days.
i) Besides, we have whole range of issues in the area of efficiency enhancement, industrial relations, financial management, supply chain management, environmental sustainability, and the newly emerging priorities on ESG (Environmental, Social, and Governance). All these requires continuous exchange of knowledge nurturing.
Opportunities:
a) With only 6.26 per cent market share, Bangladesh has immense potential ahead in terms of exploring new and emerging markets. Major markets such as Australia, Japan, South Korea, Russia, India, China and even the middle eastern countries like United Arab Emirates (UAE), Qatar, Kuwait, Saudi Arabia and Bahrain are the highly potential markets for Bangladesh that remain largely untapped.
b) Virtual marketplace can also be a big source of our growth, as well as to move from OEM to design and brand manufacturers. And thus make our mark in the global stage with our own brands.
c) If we particularly look at our product basket, we see that 74 per cent of our products are cotton based, whereas the current share of global non-cotton apparel and textile consumption is about 75 per cent. Prioritising our focus to non-cotton-based textile and apparel to realign our product mix with global sourcing trend can be a potential opportunity for us.
d) In FY 2020-21, the share of the top 5 items in Bangladesh’s total RMG export earnings was 82.04 per cent. These items are trousers, t-shirts, blouses, sweaters and underwear. This means that investment in the value-added high-end export item is a big opportunity for us.
e) We do also have capacity shortage in the area of high-end garments like sportswear, lingerie, outerwear, etc where we have a huge market, but insignificant presence.
How is the increased shipping prices and limited availability of containers affecting the industry?
The cargo and freight cost have increased unprecedentedly during the last few months, as global economy is turning around from the devastating impact of COVID-19. The increased cost has increased our production cost significantly.
Along with that, since now it is a much longer time to ship product from Chittagong port to the destination countries, it is increasing the lead time. As a result, buyers are opting for ‘near-shoring’ policy which is further amplifying our crisis and challenges.
How to do you think the power shortages happening across Europe, China, and other nations, are going to impact the apparel supply chains of Bangladesh?
China is one of the prominent sources for importing apparel raw materials used for manufacturing finished goods. In FY 2018-19 Bangladesh imported $4882.65 million worth of raw materials from China. Since the supply chain has already been heavily impacted by COVID, if the power shortage in China further distorts their output and supply chain, increased cost and raw material shortage will pose another challenge for our manufacturers.
