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Bangladesh garment exporters hope for a rebound after falling behind peers in Vietnam
2020-08-16 14:04:53
Abdur Rahim Harmachi, Chief Economics Correspondent, bdnews24.com
Workers wearing face masks sew garment at a factory in Dhaka's Mirpur amid the coronavirus outbreak. Photo: Asif Mahmud Ove
Workers wearing face masks sew garment at a factory in Dhaka's Mirpur amid the coronavirus outbreak. Photo: Asif Mahmud Ove
Garment exporters are not worried over falling behind their peers in Vietnam in overseas sales. They hope exports will rebound by December, buoyed by demand in the Western world ahead of Christmas.
They also dream of having an ‘opportunity’ to have a bigger market share in the United States, as China, which dominates the US market, is having a ‘trade war’ with it.
As the coronavirus pandemic has upended the world economy, it affected the exports too. People stopped buying clothes after their income collapsed. Big fashion houses are yet to reopen. Only some online shops have opened their business.
Under the present circumstances, there will be a downward trend in the garment exports in August and September. But exports will get a boost from Christmas sales in December.
Vietnam exported about $30 billion of garment products between July and June, surpassing Bangladesh that shipped about $28 billion of clothes, according to the General Statistics Office of Vietnam and the Bangladesh Export Promotion Bureau.
Vietnam, therefore, superseded Bangladesh as the second-largest garment exporter, a crown the South Asian country held for a long time.
In Bangladesh, garments account for about 85 percent of its export proceeds. The fall of Bangladesh from the second position came as bad news to local manufacturers.
“We’re operating at 60-70 percent of our capacity at present. We’re getting work orders, but not enough. Only the basic items are exported now. Big fashion houses haven't opened yet,” said Anwarul-Alam-Chowdhury Parvez, former president of Bangladesh Garment Manufacturers and Exporters Association.
Global exports have shrunk, but the coronavirus pandemic has hit the exports from China the most as clothing shipments declined at least 49 percent between January and June this year. For Bangladesh, the decrease was 18 percent. Vietnam, that superseded Bangladesh in garment exports, lost 11.7 percent of exports in the six months.
“We’re not worried at all that Vietnam surpassed us in garment exports. It is not the absolute number of exports but the growth that matters. The question is, if we can reach our target or if we’re making enough growth,” Chowdhury said.
As Bangladesh experienced continuous year-on-year growth, the export earnings reached $34.13 billion in fiscal 2018-19. It declined to $32.83 billion in fiscal 2019-20 due to the pandemic.
“All we need to do now is to tackle the challenges created by the pandemic. Then we may reap some good results from it. We need to use this opportunity and both the government and the private sector must start working on a long-term plan to ensure it,” said Chowdhury, also president of Bangladesh Chamber of Industries.
“China has been engaged in a trade war with the US for quite a long time, which intensified during the coronavirus pandemic. If the US stops or reduces buying garment from China, Bangladesh may have a bigger market there,” Chowdhury explained.
“This will be a ‘golden chance’ for Bangladesh to grab a share of the Chinese garment market in the US,” he said.
China has been reducing its garment exports to the US gradually after the trade war began, but it nosedived after the coronavirus epidemic broke out in Wuhan in December, according to the US Department of Commerce Office of Textile and Apparel.
Last year China exported readymade garment worth $24.88 billion to the US market and had a 9 percent reduction in export that time. The Chinese export decreased 36 percent in January this year due to the COVID-19 outbreak. China exported garments worth $3.89 billion to the US in the first four months of the current year, which is 46 percent less than the last year.
Vietnam, on the other hand, exported garments worth $4.18 billion to the US in the first four months of the year. Though their exports declined 1.31 percent, Vietnam’s exports were $290 million more than that of China. Therefore, Vietnam tops the list of garment exporters to the US.
As Vietnam topped the list surpassing China in exporting garments to the US, Bangladesh still holds the third spot on the list. While China and Vietnam lost their exports, Bangladesh had a slight increase in its shipments.
Bangladesh exported readymade garments worth $2.07 billion to the US market in January-April, which is 2.13 percent higher than last year’s exports.
“Four reasons are there for Vietnam superseding us in garment exports. Firstly, our factories were closed in April due to the COVID-19 outbreak. They reopened on a limited scale in May and June. We were supposed to export garments worth $9 billion in those three months, when we could only export garments worth $3.5 billion,” said Mohammed Hatem, vice president of Bangladesh Knitwear Manufacturers and Exporters Association.
“Vietnam, on the other hand, had no reported COVID-19 cases and could export garments worth $3 billion more than us in the three months and reached the second position surpassing us.”
“Secondly, most of the investors in Vietnam are from China or Hong Kong. They have a better communication system. They can collect the raw materials from China in 3-4 days and can deliver the finished products soon to the buyers. Naturally, the buyers tend to buy more from them.”
“Vietnam’s Free Trade Agreement with the US and other countries is the third reason behind their growth. Bangladesh failed to have an FTA.”
“We need to pay 15 percent duty when we export garments to the US, while Vietnam pays only 5 percent. This is how we fell behind,” Hatem said.
“The fourth and biggest reason is that the workers in Vietnam are far more skilled than ours, reducing their production cost. They have to pay lower utility bills too. They pay Tk 2.5 for each unit of electricity, while we pay Tk 8.5.”
Hatem also mentioned that industrial units in Vietnam enjoy “uninterrupted power supply with no voltage fluctuations”, while factories in Bangladesh sometimes struggle.
But Hatem was optimistic about a rebound in exports.
The factory owners had a boost when the government provided four months’ salary for the workers under its incentive package to cushion the effects of the pandemic on the economy. It ensured that the garment sector goes back to full production. The country could export garments worth $3.24 billion in July, which was better than in April, May and June.
“In August and September, however, the export won’t be as good as in July. It may drop to half of July’s exports. This is because the July export was based on the old orders placed in March, April and May, which the buyers had deferred earlier,” Hatem said.
Overall, the garment sector is going through a tough time, said Hatem. Bangladesh is having very few orders, and those are small orders with small prices. “In some cases, we accept orders at a loss,” he said.
People lost their income to the COVID-19 pandemic, depressing the demand for garments, while the supply is still on the upward curve. Prices drop when demand decreases and supply increases, a condition that is now defining the global garment market.
“The situation will not remain the same though. Prices will go up when the demand increases after the situation goes back to normal. I hope we can do a better business during Christmas,” Hatem said.
Bangladesh will be able to gain back its second position in exporting garments if it can survive the challenge for a year, he said.
Garment exports in Bangladesh nosedived to $360 million in April, which was 85.37 percent less than last year after the COVID-19 pandemic hit the country in March.
The factories restarted in May after the lockdown was relaxed, but exports were far from normal.
In July, the first month of the 2020-21 fiscal year, overall exports increased only 0.59 percent, but the garment exports fell 1.92 percent.
Exports in July amid the pandemic were satisfactory, said Ahsan H Mansur, executive director of the Policy Research Institute.
“We must remember that our export income was going through a bad phase even before the pandemic had hit our economy. We were losing growth every month,” he told bdnews24.com.
“There would be an 8-9 percent decrease in our garment export even without the pandemic. The COVID-19 pandemic pushed it to 18 percent.”
He suggested observing the global situation. “In the past, we have seen many incidents that brought good luck to our readymade garment sector. Everyone predicted a disaster in the readymade garment sector in Bangladesh after the quota system was abolished in 2004. But it proved to be a boon instead. Bangladesh exported garments worth $34 billion that time, which was earlier $7 billion,” he said.
https://www.google.com/amp/s/m.bdnews24.com/amp/en/detail/business/1791345
2020-08-16 14:04:53
Abdur Rahim Harmachi, Chief Economics Correspondent, bdnews24.com
Workers wearing face masks sew garment at a factory in Dhaka's Mirpur amid the coronavirus outbreak. Photo: Asif Mahmud Ove
Workers wearing face masks sew garment at a factory in Dhaka's Mirpur amid the coronavirus outbreak. Photo: Asif Mahmud Ove
Garment exporters are not worried over falling behind their peers in Vietnam in overseas sales. They hope exports will rebound by December, buoyed by demand in the Western world ahead of Christmas.
They also dream of having an ‘opportunity’ to have a bigger market share in the United States, as China, which dominates the US market, is having a ‘trade war’ with it.
As the coronavirus pandemic has upended the world economy, it affected the exports too. People stopped buying clothes after their income collapsed. Big fashion houses are yet to reopen. Only some online shops have opened their business.
Under the present circumstances, there will be a downward trend in the garment exports in August and September. But exports will get a boost from Christmas sales in December.
Vietnam exported about $30 billion of garment products between July and June, surpassing Bangladesh that shipped about $28 billion of clothes, according to the General Statistics Office of Vietnam and the Bangladesh Export Promotion Bureau.
Vietnam, therefore, superseded Bangladesh as the second-largest garment exporter, a crown the South Asian country held for a long time.
In Bangladesh, garments account for about 85 percent of its export proceeds. The fall of Bangladesh from the second position came as bad news to local manufacturers.
“We’re operating at 60-70 percent of our capacity at present. We’re getting work orders, but not enough. Only the basic items are exported now. Big fashion houses haven't opened yet,” said Anwarul-Alam-Chowdhury Parvez, former president of Bangladesh Garment Manufacturers and Exporters Association.
Global exports have shrunk, but the coronavirus pandemic has hit the exports from China the most as clothing shipments declined at least 49 percent between January and June this year. For Bangladesh, the decrease was 18 percent. Vietnam, that superseded Bangladesh in garment exports, lost 11.7 percent of exports in the six months.
“We’re not worried at all that Vietnam surpassed us in garment exports. It is not the absolute number of exports but the growth that matters. The question is, if we can reach our target or if we’re making enough growth,” Chowdhury said.
As Bangladesh experienced continuous year-on-year growth, the export earnings reached $34.13 billion in fiscal 2018-19. It declined to $32.83 billion in fiscal 2019-20 due to the pandemic.
“All we need to do now is to tackle the challenges created by the pandemic. Then we may reap some good results from it. We need to use this opportunity and both the government and the private sector must start working on a long-term plan to ensure it,” said Chowdhury, also president of Bangladesh Chamber of Industries.
“China has been engaged in a trade war with the US for quite a long time, which intensified during the coronavirus pandemic. If the US stops or reduces buying garment from China, Bangladesh may have a bigger market there,” Chowdhury explained.
“This will be a ‘golden chance’ for Bangladesh to grab a share of the Chinese garment market in the US,” he said.
China has been reducing its garment exports to the US gradually after the trade war began, but it nosedived after the coronavirus epidemic broke out in Wuhan in December, according to the US Department of Commerce Office of Textile and Apparel.
Last year China exported readymade garment worth $24.88 billion to the US market and had a 9 percent reduction in export that time. The Chinese export decreased 36 percent in January this year due to the COVID-19 outbreak. China exported garments worth $3.89 billion to the US in the first four months of the current year, which is 46 percent less than the last year.
Vietnam, on the other hand, exported garments worth $4.18 billion to the US in the first four months of the year. Though their exports declined 1.31 percent, Vietnam’s exports were $290 million more than that of China. Therefore, Vietnam tops the list of garment exporters to the US.
As Vietnam topped the list surpassing China in exporting garments to the US, Bangladesh still holds the third spot on the list. While China and Vietnam lost their exports, Bangladesh had a slight increase in its shipments.
Bangladesh exported readymade garments worth $2.07 billion to the US market in January-April, which is 2.13 percent higher than last year’s exports.
“Four reasons are there for Vietnam superseding us in garment exports. Firstly, our factories were closed in April due to the COVID-19 outbreak. They reopened on a limited scale in May and June. We were supposed to export garments worth $9 billion in those three months, when we could only export garments worth $3.5 billion,” said Mohammed Hatem, vice president of Bangladesh Knitwear Manufacturers and Exporters Association.
“Vietnam, on the other hand, had no reported COVID-19 cases and could export garments worth $3 billion more than us in the three months and reached the second position surpassing us.”
“Secondly, most of the investors in Vietnam are from China or Hong Kong. They have a better communication system. They can collect the raw materials from China in 3-4 days and can deliver the finished products soon to the buyers. Naturally, the buyers tend to buy more from them.”
“Vietnam’s Free Trade Agreement with the US and other countries is the third reason behind their growth. Bangladesh failed to have an FTA.”
“We need to pay 15 percent duty when we export garments to the US, while Vietnam pays only 5 percent. This is how we fell behind,” Hatem said.
“The fourth and biggest reason is that the workers in Vietnam are far more skilled than ours, reducing their production cost. They have to pay lower utility bills too. They pay Tk 2.5 for each unit of electricity, while we pay Tk 8.5.”
Hatem also mentioned that industrial units in Vietnam enjoy “uninterrupted power supply with no voltage fluctuations”, while factories in Bangladesh sometimes struggle.
But Hatem was optimistic about a rebound in exports.
The factory owners had a boost when the government provided four months’ salary for the workers under its incentive package to cushion the effects of the pandemic on the economy. It ensured that the garment sector goes back to full production. The country could export garments worth $3.24 billion in July, which was better than in April, May and June.
“In August and September, however, the export won’t be as good as in July. It may drop to half of July’s exports. This is because the July export was based on the old orders placed in March, April and May, which the buyers had deferred earlier,” Hatem said.
Overall, the garment sector is going through a tough time, said Hatem. Bangladesh is having very few orders, and those are small orders with small prices. “In some cases, we accept orders at a loss,” he said.
People lost their income to the COVID-19 pandemic, depressing the demand for garments, while the supply is still on the upward curve. Prices drop when demand decreases and supply increases, a condition that is now defining the global garment market.
“The situation will not remain the same though. Prices will go up when the demand increases after the situation goes back to normal. I hope we can do a better business during Christmas,” Hatem said.
Bangladesh will be able to gain back its second position in exporting garments if it can survive the challenge for a year, he said.
Garment exports in Bangladesh nosedived to $360 million in April, which was 85.37 percent less than last year after the COVID-19 pandemic hit the country in March.
The factories restarted in May after the lockdown was relaxed, but exports were far from normal.
In July, the first month of the 2020-21 fiscal year, overall exports increased only 0.59 percent, but the garment exports fell 1.92 percent.
Exports in July amid the pandemic were satisfactory, said Ahsan H Mansur, executive director of the Policy Research Institute.
“We must remember that our export income was going through a bad phase even before the pandemic had hit our economy. We were losing growth every month,” he told bdnews24.com.
“There would be an 8-9 percent decrease in our garment export even without the pandemic. The COVID-19 pandemic pushed it to 18 percent.”
He suggested observing the global situation. “In the past, we have seen many incidents that brought good luck to our readymade garment sector. Everyone predicted a disaster in the readymade garment sector in Bangladesh after the quota system was abolished in 2004. But it proved to be a boon instead. Bangladesh exported garments worth $34 billion that time, which was earlier $7 billion,” he said.
https://www.google.com/amp/s/m.bdnews24.com/amp/en/detail/business/1791345
