Bangladesh year-end review 2023: Taking the policy route

Bangladesh continued building on its success story in the global textiles and apparel exports. Amidst mixed trade results, the Asian nation formulated some key policies to take its textiles and apparel sector forward.

January to May performance

Between January to May, Bangladesh’s readymade garments exports to the US – its single largest export destination, reached $3.30 billion. The exports value was a notable 19.16 per cent decrease compared to previous year. The decrease was also there in volume terms, almost 31 per cent. Despite decline in exports, Bangladesh still fared better than China and Vietnam which experienced contraction rates of 30.44 per cent and 28.07 per cent, respectively. The contraction in China business was mainly due to shifting of US buyers from China and the China plus One policy being pursued by companies.

During the January-May period, the garment imports by the US and European Union from around the world declined by 22.92 percent and 8.84 percent respectively. Seeing the sourcing by these major markets going down drastically, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) expected global trade of apparel to fall drastically in 2023. BGMEA’s expectation was based on the depressive global economic growth, and retail and trade outlook, which meant a slowdown in demand and order to continue during rest of the year.

July export performance

Bangladesh’s apparel exports in July 2023 jumped 17.43 per cent y-o-y to $3.953 billion, despite global economic recession. This value was 4.65 per cent higher than the targeted value of $3.78 billion. In category terms, knit garments valued at $2.26 billion increased by 22.24 per cent over July 2022, woven garments increased 11.54 per cent to $1.68 billion, while home textiles fell 40.77 per cent. Overall, these exports accounted for 87.3 per cent of country’s total exports of $4.592 billion. Despite increase, the exports fell short by around $400 million from the June’s figures. Seventeen out of 26 types of products that Bangladesh generally exports to the world increased and, as usual, the largest export among them was from the apparel sector. For the FY23-24 beginning July 1, the government has set apparel exports target of $52.27 billion or a growth of 11.24 per cent.

January to July performance

Over the seven-month period (January-July), readymade garment exports of Bangladesh to EU increased 5.88 per cent, compared to the same period last year, reaching $13.97 billion ($13.19 billion in 2022). Six out of 27 EU countries, namely Germany, Lithuania, Malta, Poland, Slovakia and Slovenia, showed negative growth over comparable period. Among these, Germany reached $3.74 billion against $4.35 billion of last year, decreasing significantly by 14.01 per cent. In contrast, Bangladesh’s garment exports to Denmark, France, Italy and Spain increased by 11.9 per cent, 16.05 per cent, 29.64 per cent and 21.82 per cent, respectively. During the period, exports to US declined 9.14 per cent to $4.97 billion, while exports to UK ($3.10 billion) and Canada ($900.57 million) registered respective increase of 14.11 per cent and 7.74 per cent.

The period saw Bangladesh’s exports to non-traditional markets increasing remarkably by 29.66 per cent to $5 billion against previous year’s $3.87 billion. The exports share to these markets stood at ~18 per cent, in which Japan topped the list at $984.19 million, growing almost 49 per cent over the same period of 2022. Other nations of Australia, India, South Korea, China, Brazil and Turkiye constituting the non-traditional markets of Bangladesh also reported a rise, while exports to the UAE and Chile declined.

January to August performance

During eight-month period up to August, the garment exports to the US decreased 21.77 per cent, owing to global recession which diluted the demand for Bangladesh’s garments. Although the exports declined, the price of Bangladesh clothing increased by 10.35 per cent. As per OTEXA (Office of Textile and Apparel), Bangladesh’s apparel exports to US in the first eight months of 2022 was $6.62 billion, which dropped to $5.18 billion in 2023. The US is the destination where about one-fifth of the garments are exported from Bangladesh.

Imports

From the beginning of the last financial year (FY23), the Bangladesh government adopted the policy of austerity amidst the dollar crisis, undertaking all kinds of initiatives to control imports. In addition to tightening LC openings, scrutiny was also increased. As a consequence, the imports fell by more than $14 billion in FY23.

Table 1: Bangladesh cotton and textile imports

Source: F2F TexPro

As seen in Table 1, the cost of cotton imports decreased by about 3.71 per cent to $4.27 billion, which was $4.43 billion in the previous fiscal – a decrease of $164.80 million. During the same period, import costs of textiles and related products fell more than cotton, from $9.94 billion in FY22 to $7.94 billion – a decline of almost $2 billion or 20.12 per cent.

Reaching out to India

Bangladesh has set a target of $100 billion annual exports in the coming years and is looking for suppliers of yarn and fabric from India. In the same regard, Bangladesh, which imports yarn and fabric from China, India, and Vietnam, wants to increase its sourcing from Tamil Nadu and six delegates from BGMEA visited the state in April and had an interactive meeting with Indian Texpreneurs Federation. Bangladesh showed interest to increase its apparel exports and source more woven fabric, and processed, ready-to-cut fabric of different fibres from India. About 40 spinning mills and 60 fabric companies in the state are already supplying to Bangladesh. The Bangladesh delegation also visited clusters such as Surat and Delhi.

New CIP Policy

Bangladesh revised its Commercially Important Person (CIP) policy of 2013 in April-end by adding a new clause of withdrawing CIP status of anyone found guilty of environment pollution. The CIP (export) and CIP (trade) categories of the new policy now have separate status levels that are determined by the revenue received from exports of goods and services. The policy offers CIPs a number of benefits, including a reserved seat in official vehicles, unique travel recommendations from the foreign ministry to foreign embassies, access cards to the secretariat, and the use of VIP waiting rooms and lounges at public hospitals. The number of export sectors have increased from 22 to 35 under the new CIP (export and trade) policy-2023, including new industries such as computer hardware, denim clothing, and synthetic fibres.

National Tariff policy

In July, Bangladesh introduced the National Tariff Policy 2023 aimed at setting up a consistent tariff framework that encourages more domestic and foreign investments and enhancing the competitiveness of manufactured goods in the global market. The National Board of Revenue, with support from the Bangladesh Trade and Tariff Commission, is to formulate a time-bound action plan by year-end or early 2024 to harmonise the tariff regime in accordance with the policy. The policy is expected to drive sustainable economic growth by enhancing the competitive edge of domestic industries, broadening and diversifying exports, incentivising investments and generating employment opportunities through trade liberalisation and the rationalisation of tariff structures. The existing bond facilities will be made more transparent and simpler for export-oriented industries.

Wage rise

In November, Bangladesh’s Minimum Wages Board officially set Tk 12,500 as the minimum monthly wage for entry-level (grade 4) workers in the readymade garment (RMG) sector—a 56.25 per cent increase from the Tk 8,000 set in the 2018 structure.

Not all was well

Unexpectedly, Bangladesh apparel industry faced order crisis in first few months of 2023. Lots of factories were desperately searching for orders from global buyers as well as subcontracts to sustain. In the crucial three weeks running into mid-November, over $100 million worth of garment work orders were postponed because of the labour unrest and vandalism in the country's highest export earning sector.

Fibre2Fashion News Desk (WE SB)