Adding insult to injury, the reputation of the textile and apparel sector in Bangladesh is in crisis among international buyers. Due to the lack of value-added innovation and a long history of cheap labour, international buyers want cheap products out of Bangladesh, but at the same level of quality as Turkey, without wanting to close the price gap.
Another damage was the Rana Plaza incident. The industry is still working on improving health and safety conditions for the workers for all the right reasons, but the premium paid to Accord and Alliance also adds extra pressure on the margins.
Changing fashions of consumers is also stressing the production run and thereby minimizing the productivity in terms of margins. Western consumers are seeking faster fashion products, and every week new collections are offered to the consumers. As a result, Bangladesh has to reduce lead times and value chains re-design, which hits the margins negatively.
External infrastructural deficiencies, like road transport, ports, and customs are not as efficient in Bangladesh and are challenging factors in the global world of competitiveness.
Regional trade arrangements can improve efficiency, allow us to develop high value items, ensure vertical integration, and reduce lead time to keep the attraction of the international buyers
And finally, the shortage of skilled workers in the textile and apparel industry is eminent. Every year, millions are paid to skilled foreign workers who help to deliver quality control. All of the above factors have an implication on the margins in the textile industry.
Need all the help we can get
One of the most important implications for the future growth of the textile and apparel sector in Bangladesh, and consequently the prosperous growth of the nation, is the fact that all international brands have long-term sourcing strategies.
They plan their buying strategies for thee to five years. But the moment Bangladesh steps out of being an LDC, we can expect that buyers will start calculating their landed cost of apparel sourced from Bangladesh, so three years down the line from 2018, the trade preference will most likely last till 2021. It is, however, only a short-term relief.
We need to encourage the government to assist the textile and apparel industry to start preparing to retain the trade preferences wherever possible, like GSP which allows vulnerable developing countries like Bangladesh to pay fewer or no duties on exports to the EU, giving us vital access to the EU market and contributing to our growth.
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We should invite to the creative hub, a think tank where the civil society and the NGOs will set the scene for transformation for Bangladesh as a nation in transition.
In addition, we should factor for commercial diplomacy to get into regional trade arrangements. This will offset some of the burdens of the industry, and allow us adopt more measures to offset the cost impact of the duty to be imposed as a result of losing LDC status.
Regional trade arrangements can thereby improve efficiency, allow us to develop high value items, ensure vertical integration, and reduce lead time to keep the attraction of the international buyers for more than the forecast of three years’ sourcing strategy -- allowing them time and space to readjust their business models to accommodate their own margins, the needs of their consumers, and simultaneously the welfare of Bangladesh.
I congratulate us all on how far we’ve come as a nation and look forward to the next 10 years. In order to see us through the next decade -- and thus sustaining the next growth curve and move Bangladesh towards a developed nation -- there are crucial topics which to be addressed in addition to the above.
We need to build on human capital transformation. A nation’s workforce is one of the most important assets of the country. Our will to improve our workers and management productivity, in addition to increasing value addition and reducing costs, can lead Bangladesh to a create a transformed, value-driven, and successful workforce which will be the next golden opportunity set against a back drop of technological innovation and sustainability.
Under the given circumstances, the textile and apparel industry needs the help of the nation and the government, if Bangladesh is to stay competitive. In conjunction, branding Bangladesh and positioning the nation for growth, not only in the textile and apparel sector, but new sectors requires a focus on developing infrastructure, investing in R&D, and policy support from the government.
Mostafiz Uddin is the Managing Director of Denim Expert Limited, and Founder and CEO of Bangladesh Apparel Exchange (BAE).