6 March 2012
Although Bangladesh continues to be the favorite origin for low-cost apparel, it is experiencing a slowdown of its exports. Increased competition from rival countries, higher wages and less productivity in the country has hurt its competitive edge. Our statistical tables provide a comprehensive view of latest export trends with detailed EU and US import data per category of products.
Bangladesh’s apparel exports have further increased to US$ 9.2 billion for the second half of the year 2011, accounting for 78.5% of the total exports for the country.
This represents a jump of 16.4% from same period the year before.
Bangladesh is one of the biggest beneficiaries of the rising production costs in China and the shift of lower value added manufacturing away to other Asian countries.
Knit and woven apparel exports are almost equal share in US$ value terms, with respectively 4.8 and US$ 4.5 billion.
Woven apparel exports had a noticeable increase of 22.6% in second half last year while knit exports have only gained 11.1%.
Bangladesh’s apparel industry however faces a worrying downturn.
The 12-month growth of total apparel exports have slowed dramatically down in the second half of 2011 to 16.4% from 42.2% the year before.
The demand in the global clothing market was low, with a relatively weaker apparel consumption in the US and most importantly in the EU.
With the export sector narrowly concentrated on ready-made garments (and nearly 60% of these for export to EU markets), this slowdown is likely to worsen in the months ahead.
Europe is the first apparel market of Bangladesh with US$ billion 7.4 over a 12-month period (Q4-10 to Q3-11).
Bangladesh continues to enjoy a duty-free access to EU as well as a relaxation of the rules of origin (RoO) under the Generalised System of Preferences (GSP).
Apparel exports to the EU grew by 26.1% in value and by 6% in volume in the third quarter of 2011 from the year before, to an absolute value of 2.2 billion euros.
This represents a gain in market share up to 10.7% for Q3 2011 from 9.0% a year before.
Knit apparel exports represented twice the value of woven apparel exports, but had a smaller growth in Euro terms during the third quarter of 2011 at 20.1% from a year before and quasi-flat in volume terms.
Woven apparel have had a strong growth of 41.1% in Euro terms and 17.2% in volume terms on the same period, increasing Bangladesh’s market share in value to 6.8% from 5.2% a year before.
One out of 3 knitted T-shirts, or out of 3 Men’s knitted shirt, is imported in the EU and made out of Bangladesh.
If the EU is importing approximately the same amount of knit and woven clothing (around 10.5 billion euros per quarter), woven clothing has had a much higher growth in volume over the past year than knit clothing.
Bangladesh has been able to increase its pricing on both categories while remaining cheaper than the world average at 10-15% discount, yet the price pressure on woven apparel may feel stronger in the coming year.
A similar slowing-down trend can be observed for the EU market with for instance, Bangladesh 12-month growth in Q3 2011, falling to 20.1% from 33.2% in the previous quarter.
This trend observed with the other countries and the US imports will have to be confirmed in the following quarters.
The ready made garment industry (RMG) export earnings from the US, the largest export destination for Bangladesh ready-made garment, witnessed a slight growth in the last seven months.
US apparel imports from Bangladesh for the year 2011 gained 14.7% in US$ terms to 4.5B$, yet lost 4.1% in volume terms compared to the same period the year before.
The fourth largest supplier of the US performed better than the overall US apparel imports which only grew by 8.8% over the same period, allowing to increase its total market share at 5.8%.
Cotton is the most meaningful apparel category at US$ 3.5 billion, with 7.8% of value share and representing almost 4 times the MMF apparel.
In spite of higher raw material cost, cotton apparel exports have still progressed in US$ terms by 11.6% in 2011 compared to 2010, even though the volumes have regressed by 7.7%, allowing Bangladesh to maintain and improve slightly its market share in US$ terms to 7.8% from 7.2% the year before.
MMF apparel imports have mostly benefited from the shift from cotton to less expensive materials with a 24.7% increase in value terms.
Noticeably one out of 5 woven cotton blouses and cotton trousers for women are imported from Bangladesh.
Unit values have benefited from the rise of raw materials in 2011, recording high increase 21% for cotton apparel and 17.8% for MMF.
Bangladesh managed to remain less expensive than the world average with a discount of 11 to 13%, yet the gap is closing.
Bangladesh’s rapid inflation remains an issue as it stays high at 11.6% in January 2012, steadily increasing all over the year 2011 from 9.8% a year before.
The nation’s currency, the taka, depreciated 13% against the dollar during the past year.
The weaker currency boosted the cost of imported goods, which means that energy costs continued to rise rapidly.
Bangladesh faces increased competition from other emerging markets, namely China.
Wages have increased in Bangladesh due to riots and strikes.
This may result in other countries such as Cambodia being cheaper sourcing option.
Also, Bangladesh mostly produces cotton apparel and costs have been boosted by higher cotton prices.
In the latest data of US apparel imports, China has become more competitive and managed to curb its costs and is more cheaper than the rest of the world in apparel imports.
Bangladesh is now 2% more expensive than China in terms of unit value.
China has rebounded and improved productivity, countries such as Cambodia and Honduras have also managed to lower their costs more than Bangladesh.
Bangladesh in the Q4 2011 had the greatest decrease in volume of exports with a 28% fall.
The latest stock market crash, violent social unrests, and the inability of the government to deal with corruption, all may also hurt its competitiveness and scare off investors looking for stability.
In addition, the greatest problem impeding the apparel industry to grow further, is the country’s weak and inadequate infrastructure (utilities, roads, port facilities) that must improve in order to take advantage of the shift from China due to rising costs.
Power load-shedding has interrupted production causing loss in productivity and failure to meet buyers' deadlines.
Bangladesh’s high reliance to EU market is a vulnerability, in order to offset a decline in European sales the country is looking into cultivating new markets and particularly in Asia.
It can seek further potential markets in China, as China’s domestic market looks for sources that can offer apparels for cheap and competitive prices.
Bangladesh can improve relations with its neighbors especially India (it already allows duty-free access).
With export demand faltering, oil imports rising, workers' remittances slowing, further gains and capturing more in the global apparel markets depends on how the country can tackle timely the impediments to their progress.
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