Bangladesh ready to topple China as top clothing exporter to EU

ZOOMBANGLA DESK: Bangladesh’s massive clothing industry is looking to grab China’s crown as the top garment exporter to the European Union, as shifting supply chains in the wake of the conflict in Ukraine and other global geopolitical tensions drive up orders to the densely populated South Asian nation.

Boosting shipments to Europe will bolster a crucial part of Bangladesh’s economy, with ready-made garment (RMG) manufacturers already contributing around a fifth of the country’s gross domestic product and more than 80% of its export earnings.

Bangladesh’s exports of clothing to the EU surged nearly 42% in the first nine months of 2022 from the same period the year before to $19.4 billion, while Chinese shipments grew about 22% to $25.5 billion, according to the latest data from the EU’s statistical office, Eurostat.

“A lot of work orders were shifted to Bangladesh from China because of the recent trade war between China and the U.S.,” Shahidullah Azim, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told Nikkei Asia. Mounting tensions between Washington and Beijing have driven many brands to seek out non-Chinese suppliers in sectors ranging from clothing and textiles to consumer electronics and smartphones.

Major EU buyers of clothes made in Bangladesh include fashion chains H&M, Primark, Zara, G-Star Raw and Marks & Spencer.

Strong clothing exports are vital to Bangladesh as it struggles with dwindling foreign exchange reserves, even as it received a dose of economic relief earlier this year when the International Monetary Fund’s board approved a $4.7 billion loan program to the country.

With a population of nearly 170 million people, Bangladesh has a sizable potential workforce and is one of around 45 developing countries that currently enjoy duty-free and quota-free access to all EU markets, except arms and ammunition. In contrast, Chinese exporters must pay duty.

“Buyers prefer Bangladesh due to its zero-tariff export facilities to EU markets,” said Ashikur Rahman Tuhin, managing director of TAD Group, which manufactures a range of products including clothing. All the garments it makes go to Europe.

Producers in Bangladesh have also been moving away from so-called fast fashion — disposable attire churned out to suit rapidly shifting consumer tastes — to higher quality and more profitable clothing.

“Bangladesh is shifting its production base to high-end, value-added garment items from basic products, which are also helping the country to increase its share in the EU market [where such items are increasingly in demand],” said Azim from the BGMEA.

But obstacles await Bangladeshi clothing exporters as they push further into Europe. From 2026, the country will stop being classed as a so-called least developed country (LDC) under United Nations guidelines, and will then no longer qualify for many of its current EU trade advantages. The country is negotiating to qualify for the bloc’s generalized system of preferences-plus (GSP-plus) scheme, however, which would enable it to retain some trade privileges.

“We will perform even better after the country’s LDC graduation, and it is expected that Bangladesh will get GSP-plus privileges in the EU bloc,” said TAD’s Rahman.

Meanwhile, Paul Marchant, chief executive of Britain’s Primark, said on a visit last month to Dhaka, the Bangladeshi capital, that his company plans to ramp up its sourcing from the country.

Bangladesh’s clothing industry was enveloped in tragedy around a decade ago, when over 1,100 people died after an eight-story garment factory complex collapsed in Dhaka just months after a fire at another factory killed 112. Since then, authorities have pushed to improve safety in coordination with Western groups of buyers, who have also been demanding that companies use more sustainable production methods.

“The country’s garment sector operates in line with the standards pertaining to environmental safety, water and energy saving and workers’ welfare,” said Mohiuddin Rubel, a BGMEA director.

Producers and others in the country are confident it will be the top exporter to Europe soon. “In the EU market, Bangladesh is close to China, so within four to five years we can overtake it,” said Ahsan H. Mansur, executive director of the Policy Research Institute of Bangladesh.

“China’s RMG market share is decreasing worldwide. I think China has no strategic interest to protect this share as the country is now focusing on developing and producing higher valued goods like electric cars. So they are not concentrating on the apparel industry as before.” (NIKKEI Asia)