The rise of Bangladesh as an RMG giant is a phenomenal story. As a country once dubbed as a bottomless basket, it has been reaching new heights. However, we need to learn from history and the consequences that befell giants who became complacent after their initial success. It is certain from the rise and fall of Nokia, Blackberry, and Kodak that everyone needs to focus on how to increase long term growth.
BANGLADESH RECENTLY RECORDED THE LOWEST GROWTH IN THE LAST 15 YEARS WHICH IS A MERE 0.20%
It is an alarming situation for an RMG export based country like Bangladesh to have the recorded lowest growth rate in its exports in the last 15 years of 0.2% as shown in Figure 1. Around 80% of our total export is RMG. Therefore, further development of this sector is vital. According to statistical figures, the country is falling behind Vietnam as they are considering $200 billion as an export target.
Moreover, the interesting part is that Bangladesh has captured competitors’ attention by declaring that the RMG exports will reach $50 billion by 2021. The declaration ignited the competitors to consolidate their progress. However, without a proper long term strategy, the $50 billion declaration will seem hollow. Annual growth rates need to be at least 12% for Bangladesh to achieve its target.
Bangladesh registered only 13% growth in the FY 2013-14 which dropped to 0.2% recently. The country is yet to figure out the real reason behind this below average growth. However, according to the industry leaders, the reasons for this withering growth rate could be international politics, slower demand, currency exchange, Accord-Alliance compliance issues and so on.
The above figures show that Bangladesh has the lowest wage rates in Asia, one of the primary reasons being productivity and skill level. According to the RMG leaders, factors like currency exchange, weaker world demand, lack of raw of materials are other to be blamed. Moreover, the country is hiring unskilled people from the villages who do not have any formal training or primary education. Thus, government support is vital in this case. Moreover, with the rapid growth of Vietnam, India, Cambodia, Myanmar, it is high time that Bangladesh should start investing in productivity and skill development.
India plans to be the number one producer of RMG by 2030, whereas, Vietnam stands second. Also, Vietnam and Cambodia have heavily invested in skill development and productivity enhancement and are concentrating on producing the best workers and merchandisers in the world. Bangladesh, on the other hand, has no skill development or productivity enhancement centers to aim for such a long term vision.
Bangladesh lacks behind in a lot of factors like skill development and sustainability, low productivity of the workers and minimal fashion designing capacity and is also considered a risky country to invest in, followed by the Rana Plaza collapse and Tazreen Fashion Fire incidents. Country branding is at its poorest as we depend on others for even running our factories. A large number of expats are employed in the RMG sector so what does it say about our capacity? As per Bangladesh Bank data, in 2015, $5 billion was earned by the expats working in Bangladesh and that’s only the official money transfers.
Bangladesh produces basic items and they are marketed by the retailers. The retailers are engaged in a bitter war over discounting for survival so the price will keep falling. There is nothing anybody can do except accepting it. A change in this behavior cannot be expected from the current business model.
It can be observed that nowadays more and more Bangladeshi entrepreneurs are engaging in greener ways of doing business and coming up with environment-friendly solutions, despite the fact that setting up a green factory is way costlier than a conventional one. Reasons behind this can be to engage more stakeholders in the business and get more orders rather than making a profit. However, Bangladesh still needs to produce more value added products to aim for higher profit margins. Bangladesh’s RMG exports to the USA have been suffering, however, its exports to Germany have improved which has saved the overall growth from going to negative.
Bangladesh has shifted its focus to Europe from the USA solely because of the availability of the Generalized System of Preference (GSP) facility in Europe. This system will ensure a higher level of exports from a developing country like Bangladesh by charging lower tariffs. However, complying with the regulations set by the ACCORD might be difficult now that they have unilaterally extended their activities in Bangladesh which was supposed to expire in 2018.
It can also be seen that Europe is gradually moving towards sustainable production. Therefore, Bangladesh might have to face inquiries regarding their ways of production, labor rights and other regulations. An example of which could be that Bangladesh was pressurized by Europe to ratify its Labor Laws. Due to the detox movement in Europe, Bangladesh also needs to eliminate the use of harmful chemicals in production to ensure a sustainable relationship the continent and its countries over time. However, the communication gap between Bangladesh and Germany is still a matter of concern so the private sector must come forward and help build great bilateral relations.
The government has already been doing its bit by lowering corporate taxes, establishing an individual policy for setting up a green factory and heavily investing in infrastructure and energy. However, it falls under the responsibilities of the private sector to come up with a functional bilateral chamber and attend conferences to promote Bangladesh’s brand, and a failure of the RMG exports may cause the banks, the general people and the environment to suffer. Moreover, the phenomenal growth of RMG at the cost of the environment has also been overlooked for the sake of industrialization. Hence, the cost of environmental damage when truly assessed will be too heavy to overcome for an underdeveloped country like Bangladesh.
PHOTOGRAPH BY DIN M SHIBLY
The writer is an investment and marketing consultant and can be reached at adnannafis@hotmail.com.
