Wednesday | 15 January 2025 | Reg No- 06
বাংলা
   
Wednesday | 15 January 2025 | Epaper

Newer challenges for our RMG sector

Published : Friday, 15 November, 2024 at 12:00 AM  Count : 1207
Dr Md Aynul Hoque
Bangladesh's ready-made garment (RMG) industry, which contributes over 80% of its export earnings, has emerged as a cornerstone of the nation's economy over the past few decades. It has earned a strong global position in the highly competitive apparel market. The RMG industry employs more than 4 (four) million workers of whose more than 80% are women. The sector also immensely contributes to the forward and backward supply chain that contributes to huge employment opportunities in logistics and bank industries too. Thus, the RMG industry is the backbone of Bangladesh's economy and development. Increased competition from Vietnam and India may reduce Bangladesh's share in the global export market. Countries like Vietnam and India are investing in automation and industry 4.0 technologies to boost their export capacities while Bangladeshi RMG stands far behind them. Moreover, repetitive labor unrests imply that some foreign and local vested quartes are trying to destabilizeour apparel industry and thus cause production and shipments delay. This propels   Western buyers to transfer their orders from Bangladesh to similar other countries like India, Vietnam, Cambodia, and Sri Lanka. Therefore, we assume that this sector is recently facing a mix of domestic and external threats that may weaken its competitive edge. 

Competition from South Asia and Neighboring Region: Countries like India, Vietnam, Cambodia, and even Pakistan are intensifying their presence in the global apparel market. These countries are investing heavily in their textile sectors, boosting productivity and infrastructure to meet the demands of major European and North American buyers. India, for example, has policies aimed at increasing its share of the global textile and apparel market, which contributes to  divert orders away from Bangladesh. Vietnam, with its trade agreements and a well-organized supply chain, also poses a strong competitive challenge.

Labor and Compliance Pressures: Global consumers and brands, such as Zara, H&M, Walmart etc, are increasingly focusing on ethical sourcing and sustainable production. Bangladesh has faced scrutiny over labor rights and factory safety standards, especially after the Rana Plaza collapsethus resulted in hundreds of workers' deaths in 2013. Any failure to maintain high labor standards and environmental regulations could result in reduced demand as Western buyers may shift to countries with better compliance records.

Environmental Regulations and Sustainable Manufacturing: Major apparel buyers, particularly from Europe and North America, are increasingly demanding eco-friendly practices and sustainable sourcing. Implementing green technologies and reducing carbon footprints can be costly, and for a developing country like Bangladesh, the industry may face higher operational costs to meet these demands.

Geopolitical and Trade Shifts: Trade relationships and tariffs can shift quickly due to geopolitical changes, and Bangladesh's reliance on a few key markets such as the US and EU and makes it vulnerable to such changes. Trade deals like the Regional Comprehensive Economic Partnership (RCEP), which includes countries such as China and Vietnam, could enable other countries to gain a price advantage over Bangladesh due to preferential tariffs.Vietnam has already signed a Free Trade Agreement (FTA) with the European Union, ensuring that from 2027 onwards, its exports will face zero tariffs. This is a significant advantage for Vietnam in the European market. Bangladesh, if it graduates from Least Developed Country (LDC) status in 2026, will retain tariff-free access to European markets only until 2029. Vietnam, aiming to capitalize on this impending shift, is actively working to capture a substantial portion of the European market.

Technological Advancements and Automation: Our RMG sector is relatively labor-intensive which focuses less on technology adoption and lags behind India, Pakistan, and Vietnam in investing in automation, sustainable technology, and Industry 4.0 to cope with the fourth industrial revolution. Countries such as China, India, and Vietnam are moving towards automation, which can lower production costs in the long run and increase efficiency thus making them more attractive to international buyers. Bangladesh should invest in automation and Industry 4.0 technologies to remain competitive.

There are unverified claims and speculations that neighboring countries may be engaged in strategic lobbying or other practices to position themselves more favorably in the global garment sector. The following tactics are probably adopted by the competing neighbors:

Trade Lobbying: Some argue that regional competitors lobby with Western buyers to promote their textile sectors by highlighting their capabilities in compliance, efficiency, and sustainability.

Strategic Investment: Countries like China and India have been investing in Bangladesh's garment sector, sometimes perceived as ways to influence it indirectly. While these investments can provide growth opportunities, some view this as a way to curb Bangladesh's autonomy in critical industry decisions. Bangladesh should attract more FDIs from the Middle East and Europe into its RMG industry.

Manipulation of Raw Material Prices: With Bangladesh heavily dependent on imported raw materials like cotton from India and China, any sudden restrictions or pricing changes can have significant ripple effects on production costs and timelines. Bangladesh should also consider opening diversified sources for the RMG raw materials to mitigate future supply uncertainties and unseen shocks. 

Labor Unrest: According to reliable sources August-September labor unrest is largely fueled by foreign actors, stoking disputes among labor groups over claims and control over the recycled fabric trade. Members of BGMEA claimed on 5th October 2024 that there is a third-party plot behind recent labor unrest that aims to destroy the sector. It is speculated that these issues are being exacerbated by influence from neighboring countries.

Bangladesh could consider the following strategic responses to cope with the above-mentioned challenges and looming threats:

Investing in Sustainable Practices: Embracing sustainable, energy-efficient, and environment-friendly technologies and improving environmental compliance could give Bangladesh a competitive edge in the era of sustainable manufacturing and ethical consumerism.

Diversifying Export Markets: Reducing dependency on the US and European markets by exploring trade relationships in Africa, the Middle East, and Latin America could cushion if Bangladesh faces any market share loss in Europe and North America.

Investing in Automation and Industry 4.0 Technologies: Moving towards automated and semi-automated processes can improve productivity, reduce costs, and enable Bangladesh to compete with technologically advanced competitors.Some studies suggest that incremental technological automation is happening in the Bangladeshi RMG industry. However, the Indian, Sri Lankan, and Vietnamese apparel industries are increasingly adopting digital technological elements of Industry 4.0. The Bangladeshi apparel industry has to invest in smart automation, artificial intelligence, big data analytics, and robotics as part of the Industry 4.0 journey. Industry 4.0 technologies can reduce production costs, improve quality, and reduce lead time which will enhance Bangladesh's competitiveness in the global market.

Improving Worker Rights and Conditions: By ensuring safer working conditions, fair wages, and improved labor rights, Bangladesh can maintain its positive reputation and satisfy global buyers who prioritize ethical sourcing.

Developing a high-value chain in the apparel industry:Presently, the RMG sector mostly competes in low-value-adding tasks such as cutting, sewing, and finishing. Our apparel industry should develop competitive capacities in R&D, design, and branding management which are considered high-value-added activities. With the help of industry 4.0 technologies, our graduates and experts can also be able to create world-class fashion designs and branding for our apparel sector. 

Strategic response to these threats will be essential to sustain growth in the face of intensified competition and evolving global geopolitical dynamics. The RMG industry in Bangladesh is not only crucial for the country's economy but also supports the livelihoods of millions. To address challenges such as political instability, labor unrest, and adverse international market conditions, the government and relevant authorities should implement long-term strategies with investment in Industry 4.0 and automation technologies, developing value chains, and promoting export diversification. 

Maintaining unity is essential in countering the conspiracies and tactics employed by neighboring countries. To retain a competitive edge in the international market and thwart these conspiracies, Bangladesh should act with heightened vigilance and resolute measures.

The writer is an academician


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