Rising orders have prompted many Bangladeshi ready-made garment exporters to think about expanding their production capacities. But despite this bullish outlook, they actually face a somewhat uncertain future, reports Jozef De Coster from Dhaka.

Spirits were high in Dhaka earlier this month as sourcing executives flocked to the 5th Knit Expo show and the 20th Bangladesh Apparel and Textile Exposition (Batexpo).

Talks between Bangladeshi ready-made garment (RMG) exporters and business delegations from countries such as Japan, Hong Kong, South Africa and Australia revealed that Bangladesh is also gaining ground as a sourcing location for buyers outside its core EU and US markets.

And many Bangladeshi RMG exporters say they are now thinking about expanding their production capacities.

It's difficult to predict, though, if foreign investors will also step in.

Anyone who carries out a serious risk assessment can't help but conclude further growth of Bangladeshi RMG exports in the middle and long term is far from guaranteed - especially if the country doesn't quickly remove some major constraints.

Uninterrupted access to energy, improved social compliance, enhanced productivity and further backward integration of the sector (spinning, weaving and dyeing) are all preconditions if Bangladesh is to continue its successful climb to a top position among the world's leading clothing exporting countries. 

Impressive growth
That said, the Bangladeshi RMG industry has seen impressive growth over the last 12 years, with annual growth averaging nearly 20%.

And the manifest interest from new large buyers for Bangladeshi products at Knit Expo 2009 suggests there is still plenty of untapped demand.

So one could forgive Fazlul Hoque, the dynamic president of BKMEA (Bangladesh Knitwear Manufacturers & Exporters Association), for making some bold predictions.

He boasts that: "Bangladeshi knitwear exporters will break the Chinese wall."

And that within a few years, "Bangladeshi apparel manufacturers will export US$2bn to Japan," up from US$74m in 2008-09. Did he really mean that?

Hoque explains: "Bangladesh is presently the world's number three knitwear exporter after China and Turkey.

"Pretty soon, maybe next year, we'll snatch position two from Turkey.

"Okay, I know that our current knitwear exports at US$6.43bn [FY 2008-09] are only a fraction of Chinese exports. It may take us 10-12 years, maybe more, to beat China. But one must have a dream."

Exports to Japan
Fazlul Hoque is not alone in believing that the annual apparel export target of US$2bn to Japan is attainable.

Subhan Abdus, president of Japanese trading company Taiyo Japan, from Kawasaki, said: "Japanese buyers don't compromise on quality.

"But from what I saw in a number of selected Bangladeshi factories, I can conclude that with a few improvements these factories are fit to export to Japan. The US$2bn target sounds realistic to me."

The Japan Textile Product Quality and Technology Center QTec, from Tokyo, says that by February 2010 its Dhaka lab will be ready to carry out the specific tests demanded by Japanese buyers.

Also, most of the Bangladeshi exhibitors of shirts, pants and other woven garments at Batexpo 2009 appeared confident about their future.

An example: the denim and jeans manufacturer Sasha Denim, from Dhaka, will increase its monthly jeans production capacity within three months from 100,000 to 150,000 pieces, and start up a new jeans plant (100,000 pieces/month) by the end of 2010.

The fact that big numbers of foreign buyers are flocking to Bangladesh is excellent news, not only for the 4,825 garment factories and their 3.1m workers, but for the whole economy too.

In 2008-09, RMG exports from Bangladesh represented 79.3% of national exports. 

Major constraints
Garment sourcing is a flexible business.

International buyers are well aware that Bangladesh is the country with the lowest hourly labour cost according to the 2008 comparisons made by Werner International and Jassin O'Rourke; and the lowest garment production cost according to the KSA 2009 sourcing guide.

No wonder, then, that many of them are thinking of shifting part of their orders from China and other countries to Bangladesh.

Foreign investors, in contrast, especially in the primary textile industry, are long-term thinkers. So it will be interesting to see how they react on the growing popularity of 'sourcing location Bangladesh'.

"For the time being no-one is coming. Everybody is scared and adopts a 'wait and see' policy," Hassan Towfique, secretary general of BTMA (Bangladesh Textile Mills Association) comments regretfully.

It's not hard to imagine the main worries - even nightmares - holding back foreign as well as local would be-investors. 

  • Will the government of Bangladesh be capable of fixing the problem of frequent energy shortages and breakdowns? 
  • What effect will the battle for a higher minimum wage have on the RMG sector? Labour unions want to see the minimum wage raised from its current EUR16.6 to EUR50 per month. But credible union leader Mushrefa Mushi (GWUF) says that many manufacturers still stubbornly pay their workers as little as EUR10-12 a month.
  • What could save the Bangladeshi primary textile sector from collapse if the EU rules of origin for EBA-countries (Everyting But Arms) are changed and based on 'single-stage' criterion?