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Garment sector lashed by giant waves

Refayet Ullah Mirdha
A tale of two halves sums up best how the garment sector, Bangladesh's main export earner, fared in 2019.
In the first six months of the year, apparel shipments fetched $17.05 billion. And the trend continued into fiscal 2019-20, which began on
July 1.
But from August exports started dipping and the trend appears to be continuing. Yet, $13.09 billion was received between the months of July and November, down 7.74 percent year-on-year.
"I consider this is a correction," said David Hasanat, chairman and managing director of Viyellatex Group, a leading garment exporter.
Companies can take this opportunity to restructure their capital
expenditure, operating expenditure and supply chain.
"Then they will have a very good future," he added.
But the general sentiment of experts and analysts is that the slowdown in apparel shipment is a reflection of
the decaying competitiveness of Bangladesh's garment industry.
For instance, Bangladesh's garment exports dropped 6.67 percent between the months of July and October whereas its closest competitor Vietnam's grew 6.41 percent.
Vietnam is honing in on Bangladesh's position as the world's second largest apparel supplier by focusing on product diversification.
Even after four decades, the country's garment sector is still
stuck in basic items: still 73 percent of the shipments consist of T-shirts, trousers, sweaters, formal shirts and jackets.
There has been a slow graduation towards value-added and high-end garment items for upscale customers in the Western world.
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Bangladesh is still lagging behind in production of technical and smart clothing items, due to which it could not tap into the global market for hospital clothing, school uniforms and armed forces, worth billions of dollars.
Garment exporters and sector analysts though blamed the strength of the local currency against the US dollar as the main reason for declining shipments from Bangladesh.
Currently, one US dollar is exchanging forTk 85.
Another reason for diminishing shipments is over-reliance on traditional markets, which can be construed as laziness or complacency.
Shipments to the traditional markets of the US, the EU and Canada are on the wane due to economic slowdown there.
But the emerging markets are providing a ray of hope: garment exports to non-traditional markets grew to nearly $7 billion from somewhere between $400 million and $500 million in 2008.
India, China and Japan are showing big potential, with shipments to the Fareast Asian nation crossing $1 billion.
The government's 4 percent incentive for shipments to new export destinations accelerated the process.
The US-China trade war can be a boon for Bangladesh as China has been losing its export orders. However, in this case, Bangladesh will have to improve the business climate and productivity at the factory level.
In the near future, duty concessions in international trade will vanish as the country is set to graduate from the least-developed bracket to the developing bracket.
So, Bangladesh needs to sign the free trade agreements or join to different regional trading blocs for continuation of the duty benefit in international trade.
"It was a happening year for the garment industry," said Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, adding that the year saw a number of positive developments.
The end to the deadlock to the Accord’s phase out from Bangladesh and formation of the national safety monitoring regime the 'RMG Sustainability Council (RSC)' were major breakthroughs.
"Our journey to sustainability continued with pride," she said, adding that the number of green factories crossed 100, 25 of which were platinum LEED-certified. Some 500 more are waiting for certification.
But despite all investments made in workplace safety, compliance,
implementation of new wage structure and green industrialisation the unit price did not see much improvement.
The unit price to the EU and the US increased 2.22 percent and 5.57 percent respectively in the first 10 months of the year and yet the price level remains significantly lower on a five-year comparison, she said.
The price of apparel imported by the US from Bangladesh between January and October was down 2.20 percent from five years earlier, according to the Office of Textiles and Apparel. The same happened for EU: 1.94 percent, according to Eurostat.
But looking ahead, garment manufacturers are expecting a better year in 2020.
"It's difficult to project the trend since the global market looks volatile due to the emergence of a number of factors," Huq said.
The EU-Vietnam free trade agreement, the strategic move by China to offset the impact of punitive tariff by lowering prices and the emergence of new sourcing destinations are becoming sources of concern for Bangladesh.
"If we do not take proper steps now to get ourselves at par with our competitors, it will be difficult to get the rhythm back in our exports," she added.