In terms of product quality, lead times and durability, Bangladesh’s garment sector is not as good as its neck and neck market counterpart, Vietnam, according to a recent competitiveness report by the World Trade Organization (WTO), as Dhaka scores remarkably low against Hanoi over ten years. clues out of a total of twelve.
The lead time for apparel exports is the period between placing an order and delivering the finished product. Vietnam is better able to source raw materials, according to the report, and can also release the imported consignment at its ports within 24 hours.
By contrast, Bangladesh takes 48 hours to a month to free imports of raw materials for the garment industry, local garment factory owners said. They said Vietnamese workers are 10-15% more efficient in manufacturing, while the country can deliver the final product to European buyers 10-15 days earlier than Bangladesh.
“Transportation to and from Chattogram Port takes up a large portion of our delivery time. Vietnam is certainly way ahead of us in overall logistics support,” said Shovon Islam, managing director of Bangladeshi clothing manufacturer Sparrow. Group, at The Business Standard.
Then comes the time of shipping. Vietnam sends products directly to buyers from its seaports, but Bangladesh cannot.
Due to the unavailability of a deep water port, feeder vessels have to take the products to countries such as Singapore and Sri Lanka, where the products are transferred to mother ships for shipment to Europe and United States.
“Delivery time is very crucial in today’s competitive market,” said Fazlul Hoque, former chairman of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), adding that Bangladesh is lagging behind in port management. and customs.
With approximately $29 billion in apparel exports, Vietnam overtook Bangladesh to become the second largest ready-to-wear apparel exporter after China in the global market in 2020. According to unofficial data, Bangladesh regained the second position by earning $1.94 billion more than Vietnam in the first seven months of 2021.
The other main indicators of the recent WTO report – prepared after surveying at least 150 exporters and 30 global brands and retailers – are the ability to create value-added products, innovation, efficiency, flexibility of order quantity, financial stability and political stability.
Vietnam’s fashion industry on the top ten indexes scores at least one score ahead of Bangladesh, while the gaps are 1.5 and 2 respectively on sustainability and political stability, the report said. The report was prepared with data provided by several United Nations agencies, including the United Nations Conference on Trade and Development (UNCTAD).
On just two indicators – price and tariff advantage, Bangladesh is ahead of Vietnam and China thanks to duty-free access to major world markets and cheap local labour. The country is slightly ahead on some indicators compared to three other least developed countries in Asia, including Cambodia, Laos and Nepal.
Shovon Islam of Sparrow Group said any problems in the supply chain would ultimately affect efficiency. “If a fabric does not arrive at the port in time, if there is a disruption in the supply chain or if the labor cannot be used correctly, efficiency would suffer. This is what happens to us,” he noted.
However, Fazlee Shamim Ehsan, vice president of BKMEA, said he disagreed with all the indicators showing Bangladeshi clothing behind Vietnam.
“None are supposed to be ahead of us in terms of order quantity flexibility. We accept orders with such flexibility that buyers can pick up several thousand pieces to just a few hundred pieces from us,” a- he asserted.
The BKMEA Vice President also defended the quality of products made in Bangladesh saying, “We make products as buyers want. Since Bangladesh is able to satisfy brands with quality, the country receives more and more orders.
Fazlee Shamim Ehsan, however, agreed that Bangladesh has a lot to improve on in terms of adding value.
As BKMEA Vice Chairman, Faruque Hassan, Chairman of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), also said that the report in some cases surprisingly underestimates the progress made by the garment industry. in Bangladesh over the past decade.
“The report cites environmental compliance risks as a downside to sourcing in Bangladesh, as the industry has taken a huge leap forward in transforming workplace safety, worker wellbeing and environmental sustainability. . The rating seems inappropriate,” he noted.
Vietnam’s FDI and FTAs have the upper hand
Renowned economist Dr. Abdur Razzaque, who authored the report, said Vietnam and Cambodia have a strong presence of foreign direct investment (FDI) in their garment sectors, which helps them set improved standards. and bargaining power.
“Most importantly, while Bangladesh is likely to lose its preferential treatment in the EU apparel market, the already developing Vietnam will be able to gain duty-free access to this market. through an FTA. [free trade agreement]“, Dr. Razzaque told The Business Standard.
Bangladesh will no longer be eligible for duty-free market access after 2029, as the country will graduate from the least developed country club in 2026 and its exports will benefit from extended facilities for another three years until 2029. For uninterrupted market access, Dhaka would then require a preferential trade agreement and free trade agreement (FTA) with countries and trading blocs.
But Bangladesh so far has the only bilateral preferential trade agreement with neighboring Bhutan.
Dr Razzaque said: “Many buyers view duty-free status as a critical determinant of sourcing decisions. Although the entire supply will certainly not be concentrated in Vietnam, but with the loss of tariff advantages, Bangladesh will come under intense competitive pressure from these market peers. such as India, Indonesia and Sri Lanka.”
According to the report, Bangladesh could admit a loss of $5.37 billion due to the impact of LDC graduation on exports.
There will always be orders
The WTO report says fashion brands and retailers are adopting a variety of sourcing considerations, including cost, speed to market, flexibility, agility and compliance risk.
With China and Vietnam as key sourcing bases, fashion brands mainly consider the least developed countries of Bangladesh, Cambodia, Laos and Nepal as part of their various sourcing locations.
According to the report, Turkey is another major sourcing destination for European Union-based fashion companies, while EU-based buyers buy fewer complex products (such as dresses and designer clothes). outside) in Bangladesh, Cambodia, Laos and Nepal due to their limited production capacities.
The report mentions that fashion brands and retailers may still find it attractive to source from Bangladesh, Cambodia, Laos and Nepal after they graduate from PMA. Major brands and retailers believe that the graduation of PMAs will only modestly affect their supply.
He also said that over the next three to five years they will increase their supply to Bangladesh and Cambodia.
BGMEA Chairman Faruque Hassan said that Bangladesh’s transition to developing country status will certainly bring about significant changes that will require collaborative and joint efforts to overcome.
Md Fazlul Hoque, former chairman of BKMEA, said, “Bangladesh is working on the issues mentioned in the report, but it needs to be accelerated. We need to focus on FTAs and PTAs.
“Although it is not covered by the GSP [Generalised System of Preferences] installation, we are still ahead of China and Vietnam in terms of export growth in the US market,” he added.
Trade Minister Tipu Munshi told The Business Standard that Bangladesh would try to benefit from the duty-free export facility until 2031, five years after LDC graduation.
“In addition, we are looking for PTA and free trade agreements with several countries this year”, commented the minister.