The recently concluded financial year (FY ’22), which ended on 30th June, has been a record breaking one for Bangladesh!
For the first time ever, the country’s overall exports crossed the US $ 50 billion mark. Bangladesh registered an overwhelming 34.38 per cent year-on-year growth from that of US $ 38.75 billion (in FY ’21) to bag US $ 52.08 billion (in exports) in FY ’22.
As always, apparels played a major role in this contributing a staggering US $ 42.6 billion in US $ 52.08 billion, marking Y-o-Y growth of 35.47 per cent, compared to what was US $ 31.45 billion in the previous financial year.
It is the burgeoning role of the non-conventional/new destinations — overall, Bangladesh exported apparel items worth US $ 6.37 billion to the non-traditional markets (in FY ’22), marking a year-on-year growth of 25.4 per cent (from FY ’21) — which is worth noting.
Bangladesh’s apparel export to the non-traditional markets during fiscal 2008-09 was only 6.87 per cent, to put things in perspective.
European Union (EU) countries along with United States of America (USA), Canada and the United Kingdom (UK) are considered the conventional apparel export strongholds, while the rest are looked upon as non-traditional, amongst which are names like Japan, Australia, Russia, India, China, South Korea, UAE, Malaysia, Brazil Mexico, etc., most of which played important roles in giving that extra boost to Bangladesh’s apparel export growth.
What’s more, future prospects in most of these destinations are considerably high even though a couple odd seem to be failing to deliver as per their billing, currently.
Japan: The land of rising apparel exports
According to figures from the country’s Export Promotion Bureau (EPB), Japan held the pole position amongst all the non-traditional apparel export destinations in FY ’22.
Bangladesh shipped apparel items worth US $ 1.09 billion to Japan, registering a growth of 16.28 per cent (US $ 944 million) over FY ’21.
Bangladesh’s readymade garment exports started entering the Japanese market since 1972 and over the years, the volume of export has only increased to touch the one-billion mark for the first time in FY ’19 (US $ 1.091 billion) before faltering in the next two fiscal years on account of the COVID-19 pandemic.
It, however, made a strong rebound in FY ’22.
“Bangladesh is exporting to all the renowned brands in the major markets, including in USA and EU with great success. Naturally, the confidence of the Japanese buyers is also increasing as far as our product and their quality are concerned,” says Fazlee Shamim Ehsan, Vice-President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) citing one of the principal reasons of rising apparel exports to Japan.
Japan’s ‘China-plus policy’ and the so-called leniency in the rules of origin, others claim are also helping in the export growth even if they cited Japanese buyers’ zero tolerance on quality (they check products piece by piece) and communication issues (language barrier) amongst some of the challenges faced by many Bangladesh garment makers still.
“But if one can meet the quality parameters and ensure timely shipments, getting orders is not that difficult,” in the meanwhile claimed a garment maker to Apparel Resources (AR).
To make further inroads in the lucrative Japanese market, while also effectively engage with the Japanese entrepreneurs to attract more FDIs, the BGMEA President called on the Japanese Ambassador in Dhaka ITO Naoki seeking his help and cooperation.
Adding a new dimension in the Japan-Bangladesh trade relationship, which could give a further facelift to apparel exports, is a possible FTA — as per Bangladesh Minister for Planning MA Mannan, draft Free Trade Agreement (FTA) between the two countries was being developed — which holds even more significance in light of Bangladesh’s upcoming LDC graduation.
The promise Down Under!
Trailing behind Japan in the second position is Australia, another strongly emerging name amongst the non-traditional destinations, from which Bangladesh earned US $ 812.24 million (from apparel exports) in FY ’22.
According to Statista, revenue in the Australian fashion segment is projected to reach US $ 11.12 billion by 2022 and is expected to show an annual growth rate (CAGR 2022-2025) of 14.86 per cent, resulting in a projected market volume of around US $ 16.85 billion by 2025.
Today, Australia is a veritable hub for contemporary style, with a fashion scene that continues to grow and thrive as overseas and local brands/retailers compete with each other for a larger share of the pie.
On one hand, there are global biggies of the likes of Inditex, H&M, Uniqlo, etc., vying with home-grown names like Billabong, Calibre, Rip Curl, Country Road, Cotton On, as they try to cash in on the opportunities, especially in cities like Sydney and Melbourne, which continue to be amongst the top globally.
To put things in perspective (Bangladesh and Australia share a very close relationship as Australia was amongst the first countries to recognise Bangladesh after it achieved independence in 1971), products from Bangladesh enter Australia duty-free and quota-free, riding on the trade privileges, thanks to which Bangladesh has been able to turn Australia into a major export hub.
In fiscal 2018-19, garment exports alone amounted to US $ 719.78 million, which unfortunately took a hit and came down to US $ 601.14 million in fiscal 2019-20 due to COVID-19, before making a recovery in FY ’22 again.
In fiscal 2017-18, apparel exports to Australia was recorded at US $ 634.01 million.
Furthermore, even if Bangladesh’s LDC graduation is imminent, there’s not much of a concern when it comes to Australia after Australian High Commissioner to Bangladesh Jeremy Bruer confirmed his Government’s decision to provide ‘Made in Bangladesh’ products duty-free access post-transition.
Bangladesh’s apparel export to India is also on a new high!
India, the shining star
India contributed around US $ 715.41 million in Bangladesh’s US $ 42.6 billion in apparel exports in FY ’22. Even though India’s contribution may not be as high as that of Japan, it’s the prospects that it holds from Bangladesh’s perspective going forward which makes India a very exciting proposition for the Bangladesh garment makers.
Being one of the largest consumer markets in the world with US $ 88 billion worth of apparel retail market in 2022, as per Statista, India poses a massive marketplace for Bangladesh to tap.
“As we ship via land, the high freight cost is avoided. Also, India offers duty-free facility to Bangladeshi products, which is a big plus,” states BGMEA Vice President Shahidullah Azim, citing one amongst the multiple reasons behind Bangladesh’s increasing apparel export to its neighbour.
India allowed duty-free import of apparels from Bangladesh under SAFTA in 2006. Earlier, this facility was limited to 8 million pieces per annum even as the restriction was removed in 2010 following which imports from Bangladesh started growing at a steady pace.
“In all aspects, India has a huge population and their buying capacity is also commendable,” says BGMEA Director Shehrin Salam Oishee, who is joined by a fellow apparel exporter, who credited Bangladesh’s price competitiveness and competency for the increased sourcing from Bangladesh by domestic and multinational brands and retailers, operating in the fast evolving Indian fashion retail landscape.
Exports to Korea on new high
In FY ’22, South Korea accounted for US $ 439.75 million in Bangladesh’s apparel export and it is the growth in apparel exports to Korea which have led many to sit up and take note of the Korean market.
In last one decade till 2021, Bangladesh’s apparel export to South Korea has doubled, while import from the country decreased marginally. Despite this, the trade gap between the two countries is still over a billion dollars, in favour of South Korea, according to data from EPB and the Korea Trade Association.
Apparel export to South Korea was US $ 266.60 million in 2000.
Boasting of continental climate characterised by very cold, dry winters and very hot, humid summers, Korea has high demand for jackets, pullovers and other high value-added clothing items as it has for lighter summer apparels, most of which it currently imports from China.
But as Bangladesh continues to move up the value chain, it will have opportunities galore to increase its share in the Korean market, felt industry insiders, who are equally hopeful about Malaysia too as an export destination.
Eyes on Malaysia
Bangladesh’s apparel export to Malaysia was US $ 155.09 million in FY ’21, which in FY ’ 22 rose to US $ 209.31 million even if as per Statista, revenue in the Malaysian apparel market amounts to US $ 4.70 billion in 2022, and is expected to grow annually by 7.21 per cent (CAGR 2022-2026).
The industry players are now keenly following the trade negotiation with Malaysia as it would only give that added momentum to export and help increase footprints there.
“Malaysia-Bangladesh free trade agreement will bring about tremendous benefits and business opportunities,” claimed Malaysian High Commissioner to Bangladesh Haznah Md Hashim even if Bangladesh Commerce Minister Tipu Munshi on his part added, Bangladesh has a long-standing trade and economic relationship with Malaysia and there was a need for signing FTA to boost trade.
“Discussion on signing FTA between the two countries has advanced considerably. It will be possible to sign the FTA, if Malaysia comes forward,” the Commerce Minister said further.
Gulf and Middle-East: The next frontiers
In FY ’22, UAE accounted for US $ 282.41 million in Bangladesh’s US $ 42.6 billion apparel export.
However, as per reports, despite good diplomatic relations with the Gulf countries, Bangladesh has been missing out on the US $ 10 billion unexplored apparel market owing to a lack of initiatives on part of the Government and the private sector even as a study has underlined Bangladesh can supply about 5 per cent of the annual demand of the UAE, around 4 per cent of Saudi Arabia’s and less than 1 per cent of the rest.
The Gulf Cooperation Council (GCC) is a political and economic union of Arab states, including the UAE, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain.
According to the International Trade Centre data, in 2020, the UAE sourced about US $ 4.40 billion worth of apparel items from global markets, Saudi Arabia US $ 3.01 billion, Kuwait US $ 1.13 billion, Qatar US $ 660 million, Oman US $ 608 million and Bahrain US $ 274 million.
“We are planning to explore those markets in association with the Commerce Ministry and the Foreign Affairs Ministry,” said Faruque Hassan, adding Bangladeshi apparel exporters have a massive opportunity in the Gulf and Middle East markets, which have sort of remained untapped for a long time.
“Our target is to now expand exports to the Middle-East,” opined an exciting BGMEA Chair, who is joined by BGMEA Vice-President Shaidullah Azim, who felt despite being the second-largest apparel exporter globally, Bangladesh’s share in Middle-East market is limited still.
However, former BGMEA President Kutubuddin Ahmed thinks if the Government takes initiatives, Bangladesh can easily take at least US $ 5 to US $ 6 billion market share.
Then there are also countries like Mexico, Chile and Brazil, which are coming up very strongly as well.
The call of Latin America
Latin America has long been considered a very potential apparel export destination from Bangladesh’s perspective.
However, it is only lately that this region has started to contribute notably — in FY ’22, apparel exports to Chile stood at US $ 183.34 million compared to US $ 82.56 million in FY ’21, Mexico at US $ 275.10 million in FY ’22 from that of US $ 158.70 million in FY ’21, Brazil at US $ 93.49 million in FY ’22 from US $ 70.73 million in FY ’21 — in Bangladesh’s apparel exports.
Sensing the future opportunities, BGMEA had long ago initiated several scoping missions to Brazil, Mexico and Chile to enter Latin America when there were no Bangladesh embassies in any of these countries (before 2011), nor were there any embassies of Latin American countries in Bangladesh.
The trade body also organised several trade missions to Latin America in 2010 and 2011, and submitted reports to the Government, requesting it to open missions there.
These efforts are slowly but surely paying off now.
In view of the opportunities that still remain unexplored while also effectively tackling the upcoming LDC graduation, Argentine Ambassador to India, Bangladesh, Nepal, Bhutan, Sri Lanka and the Maldives, Hugo Gobbi suggested Bangladesh opt for a preferential trade agreement (PTA) with the MERCOSUR even as Bangladesh Chambers of Commerce and Industry (FBCCI) President Jashim Uddin sought Argentina’s support to expedite the process of signing the FTA with the trade bloc.
However, unlike Australia, Japan and India, Russia, despite its promises — as per Statista, Russian apparel market amounts to US $ 38 billion in 2022 and is expected to grow annually by 2.75 per cent (CAGR 2022-2026) — and accounting for US $ 583.78 million in Bangladesh’s US $ 42.6 billion in apparel exports in FY ’22, seems to have lost some sheen compared to the year before.
Bangladesh’s apparel exports to Russia went up by 45.25 per cent in 2021 to US $ 687.81 million from what was US $ 473.54 million a year before.
The Russian roulette!
In the first eight months of FY ’22 (July to February), Bangladesh’s earnings from apparel export to Russia stood at US $ 482.23 million, translating to average monthly earning of US $ 60.15 million before slowing down due to the war between Russia and Ukraine as between March and May, the earnings from apparel exports to Russian market declined to US $ 27.05 million per month. Though earnings from apparel shipment during the July-May period showed a 4.32 per cent year-on-year growth to US $ 562.40 billion before ending up at US $ 583.78 million by the end of FY ’22.
“Russia is an emerging market,” Faruque accepted but conceded they have missed the chance to increase exports to the largest country in Europe due to the ongoing war.
The Russia-Ukraine conflict showing very little signs of abating anytime soon, uncertainty over Russia continues to worry the garment makers who had earlier pinned a lot of hope on it.
Somewhat similar has been the case with China where shipments aggregated to US $ 222.33 million, down from US $ 271.28 million in FY ’21.
“As Russia is not that big a market yet for us, our total exports hasn’t been affected significantly,” claimed Muhammad Hatem, Executive President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
Besides, with China still fighting COVID-19, its apparel imports from Bangladesh have declined too, felt the BKMEA Executive President, who is hopeful things will improve in terms of exports to China in the coming days and so would in Russia and the adjoining countries once the war ends.
“We preferred to explore new markets as part of the diversification endeavours. This has helped us to earn more from the non-traditional destinations,” opined Md. Khosru Chowdhury, Managing Director of Nipa Fashion Wear Industry to wind up on a positive note, but not before accepting the role of Government incentive (Bangladesh Government provides 4 per cent cash incentive against exports to non-traditional export markets) leading more and more garment exporters to focus on new and non-conventional hubs to give further boost to Bangladesh’s apparel exports.
