Bangladesh's clothing and ready-made garment sector is undergoing unprecedented expansion, registering an average growth of 20% year-on-year, and has plans to be one of the top three exporters globally by 2013. Paul Cochrane reports from Dhaka.

In the first four months of Bangladesh's fiscal year, from July to September 2008, the sector reported 45% growth in exports of woven and knitwear to US$3.35bn, according to the Bangladesh Garment Manufacturers and Exports Association (BGMEA).

Last year, growth averaged 20% compared to 2006. Woven wear grew 36.67% in the first four months of this fiscal year to a value of US$1.525bn, and knitwear by 52% to US$1.831bn, while total woven and knitwear exports for July 2007 to June 2008 are valued at US$10.69bn.

Major international buyers of Bangladeshi clothing include H&M, Tesco, Zara, Marks & Spencer, Carrefour, Gap, Wal-Mart and JC Penney.

The country's ready-made garment export target for June 2008 to July 2009 is projected at growing 15.5% to US$16.298bn, according to forecasts by Bangladesh's Export Promotion Bureau, with a target of US$6.5bn for knitwear and US$5.68bn in woven goods.

"Over the last three years we've had massive growth, at 100%, after the [World Trade Organization's] Multi Fibre Agreement (MFA) ended," said M Fasihur Rahman, secretary general of the BGMEA.

In addition to increased exports, the number of Bangladeshi garment factories has surged, from 4,107 in 2004-2005, to 4,700 in 2007-2008, while employment in garment factories has increased in the same period from 2m to 2.5m.

The domestic market is also witnessing growth as living standards improve, with local brands springing up, such as Artisti, Seal, Westex and Cat's Eye.

"We are building our capacities and hope we can have our own brands," said Rahman. "But we are lacking in design, soft skills, and technology."

Problem areas
Such strong growth has also presented problems, with the ready-made garment sector running at a 25% shortage of skilled workers and middle management.

The industry has also experienced problems with worker unrest and strikes over poor pay and conditions.

Energy is also an issue, with stand-alone generators providing an estimated 20% of the country's energy.

Additionally, its infrastructure needs to be overhauled, with an expressway between Dhaka and the coastal city of Chittagong planned, along with the development of a deep sea port.

The roll out of such projects is hoped to accelerate following the election of a civilian government at the end of December, which ended a two-year emergency government rule.

Existing improvements in terminal handling and customs have had a positive impact however, going from 12-13 days as recently as last year to clear goods to within three days. In November, a computerised customs automation system was introduced in Bangladesh.

Export goals
The ready-to-wear clothing sector is banking on such developments to meet a 2013 export value projection of US$25bn a year.

The BGMEA said Bangladesh will also try to move into new export markets, such as Australia, Japan, South Africa, Russia and former USSR countries.

Bangladesh has a strong advantage over other global players on the cost front, with its prices having reduced whilst India and China have readjusted their prices in line with rising costs of raw materials.

A dozen Bangladeshi-made men's cotton polo shirts made for the US market cost US$46.10 in 2000, whereas in 2007 it was US$37.95.

By comparison, in Cambodia the same would cost US$48.69, or in India US$53.96, according to the United States International Trade Commission (USITC).

Likewise, a dozen cotton T-shirts exported to the EU27 market cost US$19.56 in 2006 but US$15.60 in 2007, significantly less than nearest rival Cambodia at US$29.04, according to Eurostat.

Continued orders
The country's low-to-medium end production is likely to ensure continued orders as the ongoing financial crisis in the West means a decline in demand for higher end garments, said Ramsingh Raguwanshi, general manager of the country's East West Industrial Park.

The export oriented complex produces formal trousers, blazers and suits, with 70% of exports to the UK for Tesco, Littlewoods, Marks & Spencer, Asda and Matalan, and 30% of exports to the US's Perry Ellis, PVH, and Haggar.

The current global downturn has not overly affected the sector added Raguwanshi, but he said that if manufacturers did not meet deadlines, buyers are typically asking for discounts and charge backs, "which didn't happen before." 

Other manufacturers, particularly to the US market, have however been feeling the pinch, said Shahid Reza, director of Step Two Apparels Ltd, which exports T-shirts, shirts and trousers to France, Italy and the UK.

"Six months ago a buyer would place an order for 150,000 pieces, but now only offer 50,000," he said.

Reza added the sector had also been hit by a weakened Bangladesh Taka (the local currency), causing losses in previously arranged letters of credit (LOCs).

Additionally, garment orders have altered in line with climatic conditions, said Rahman.

"There has been a change in orders over the last year due to global warming, with less demand in Europe for heavy knitted sweaters in favour of medium and light," he said.

In terms of machinery and factory upgrades, many Bangladeshi manufacturers are adopting a wait-and-see approach in regard to the international financial crisis.