Limitless Possibilities Ahead for Bangladesh

Collected from Prothom Alo

Limitless Possibilities Ahead for Bangladesh

Monzur Ahmed | Date: 04-11-2010

Germany’s renowned brands Hugo Boss and Adidas have been actively working for some time now to source garments directly from Bangladesh. They are set to begin purchasing next year. These two globally acclaimed brands are collaborating with Viela Tex Group to buy apparel.
Not just Hugo Boss and Adidas, but almost all renowned global companies, brands, and retailers are now turning their focus toward Bangladesh. Alongside these big names, small and medium importers and retailers are also flocking here. Buyers from countries like China, Sri Lanka, Turkey, and many others are shifting their attention to Bangladesh to source apparel.

Many companies that previously purchased goods from Bangladesh via offices in other countries or through third-party buyers (buying houses) are now coming directly. This enables Bangladesh to get 15 to 20 percent higher prices for its garments.
At the same time, there is now tremendous potential for Bangladesh to export higher-value and premium-quality fashion garments. German companies like Addi Buyer, S.Oliver, Esprit, and American brands like DKNY, Kohl’s, and Tommy Hilfiger are all sourcing and selling high-quality fabrics. Addi Buyer, which previously operated in Sri Lanka, has now shifted to Bangladesh and has already provided work orders to one of the leading apparel manufacturers here.
Inditex is one of Europe’s largest buyers, with brands like Zara, Pull & Bear, and Bershka. Inditex is now entering Bangladesh in a new way. Europe’s Benetton, Esprit, Penitton, Max, Mango—all have increased operations here. The major UK buyer, Next, which had previously closed its operations, has reopened, while JCPenney and ANF have expanded their presence.
In August, Eric Wiseman, President and CEO of VF Corporation, owner of the Levi’s brand, visited Bangladesh. In May, Tesco’s International Sourcing Director Christophe Rosell paid a visit, and Doug McMillon, CEO of Walmart, was here last February. Walmart already purchases over $1 billion worth of products annually, both directly and indirectly, from Bangladesh and aims to double or triple this amount. Others have also shown great interest in increasing their sourcing from Bangladesh, inquiring whether local suppliers can reliably provide 30-40 percent more products on time.
At a meeting at Dhaka’s Westin Hotel on May 1st, a businessman recounted how Tesco’s Christophe Rosell wanted to know how Bangladesh could deliver 30-40 percent more goods, given the situation in the country’s gas-electricity sector and port mismanagement.
Beyond Europe and America, Japan is also showing strong potential as a major market for Bangladeshi products. Several large companies have visited multiple times to inspect factories and initiate business, and some have made significant progress. Notable among these buyers are Marubeni and One World, a major retailer in Japan.
Bangladesh has been exporting denim and jeans for quite some time. About one-third of the country’s total apparel exports—worth around $3.5 billion—come from denim products. Now, there’s a new addition: advanced, high-quality rope denim, which is being seen as an extremely promising product. Traditionally, Bangladesh exported massive quantities of jeans at lower prices. Now, fashionable and premium denim products are joining the mix. Two rope denim factories have already been established: Envoy Group was the first to set up a textile mill for rope denim and, for the first time in 40 years of the country’s RMG industry, exported denim fabric themselves, receiving significant orders. Group Chairman Kutubuddin Ahmed said that they have already exported fabric to Sri Lanka, India, Germany, and Turkey, and are in the process of exporting to Egypt. He commented, “Major buyers are now choosing us for denim fabrics.”
Nearly all of the 20–22 jeans or denim factories established in the country are preparing to double their production capacity. India’s Arvind, the world’s number one denim producer, is building a factory in Comilla EPZ, Bangladesh.
The enormous potential of Bangladesh’s garment industry is largely due to buyers turning away from Nepal and Pakistan, primarily because of political instability. India, meanwhile, is struggling to compete due to the strong value of its currency. Cambodia’s export volume is not particularly large, and wages in Vietnam have surged. In the world’s leading exporting nations, such as China and Turkey, production costs have dramatically increased, leaving them unable to supply low-priced goods in the global market. Conversely, countries like Taiwan, Korea, and Japan, which once dominated the apparel and textiles sector, are now buying from Bangladesh themselves.
Last year, during the global recession, Bangladesh’s exports were affected as worldwide consumption dropped. However, recent trends indicate that while the market for high-priced goods suffered, demand for lower-priced products has soared.
Overall, Bangladesh now stands before enormous opportunities. One could say that opportunity itself has come knocking at Bangladesh’s door. The big question, however, is whether the country can capitalize on it—industry leaders say.
Abdus Salam Murshedy, President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said, “Given the way buyers are turning to Bangladesh, doubling export earnings wouldn’t be an issue if we could ensure energy and port infrastructure.”
The stagnation in industrial investment due to the gas and electricity crisis has not yet been resolved, and no new gas and power connections are being provided. Countless industrial and commercial enterprises across the country are unable to start operations for lack of these services. Yet, entrepreneurs in the garment sector want to make use of this tremendous potential to strengthen the national economic foundation.
Another reason for recent growth in the apparel sector is the backward linkage in the knit sector—i.e., the development in the textile sector. Furthermore, the country has also seen the rise of textile industries for denim within the woven garment sector. Fazlul Haque, former president of the Knitwear Manufacturers Association, believes, “To harness this potential, we have to increase our industry’s production capacity—both by expanding existing industries and establishing new ones.” Like others, however, he is also concerned about energy issues.
Similarly, BGMEA President Abdus Salam Murshedy feels that the Chittagong port is inhibiting the export potential of this industry. He says that, in the September quarter, more than 30 percent growth in export volume was recorded, but a significant portion of the foreign currency earned will not be repatriated to Bangladesh. That’s because, failing to ship products via Chittagong port, many exporters had to bring their goods back and send them by air. Exporters will absorb the air freight costs from their export earnings after discussion with buyers, thus bringing down the rate of repatriation.
Meanwhile, nearly 30,000 crore Taka remains idle in banks across the country. Daily transactions in the stock market now regularly exceed 2,000 crore Taka. National savings outpace investment. In other words, there is plentiful investable capital within the formal economy, but it is not being invested. With investment stagnating, job creation in the production sector is not rising. Stakeholders emphasize the need to resolve the power, energy, and port issues, as well as maintain political stability and establish good governance.
Distinguished economist and former advisor to the caretaker government, Professor Wahiduddin Mahmud, analyzing the overall situation, has noted that the foundation for significant potential in the economy is already in place. In social sector indicators, Bangladesh has advanced far beyond other countries at a comparable level. However, to sustain this progress, per capita government spending and the quality of services in the social sector must be improved.
Professor Wahiduddin also noted that it is clear Bangladesh’s readymade garment sector has weathered the effects of the global recession—mainly due to our competitive edge. Even as the global market has shrunk, our share of exports has risen.
According to Wahiduddin, while our main export success thus far has been in the apparel sector, new possibilities are emerging in pharmaceuticals, small machinery, shipbuilding, processed foods, and other areas. Everything, however, will depend on the quality of our economic management and resolving infrastructure and energy issues.
He sums up, “Maintaining continuity in democracy is difficult for low-income countries—democratic good governance is an even bigger challenge. But there’s no reason for us to be disheartened. We need to move forward with both economic progress and democratic good governance, hand in hand.”

2010 November 04. Added from Canada, 2010  November 03. 

Shafiul Islam