For the past five years, Bangladesh has been the top exporter of denim to the EU and one of the top exporters to the US
In the 146 years since Claude Levi-Strauss began marketing denim fabric as durable, sustainable clothing for workers, the world has embraced it as a mainstay in any society in any nation. From the US to Europe, it would be hard-pressed to find someone who does not own a pair of denim jeans.
And in the global market today, Bangladesh has made an indelible mark in the ever-growing European and US markets, by exporting ever-increasing, record value of denim.
According to the European Statistical Office – the statistics directorate of the European Commission – Bangladesh exported denim products worth $1.65 billion in 2018, up by 11.46% from $1.47 billion in 2017. The country holds a 29.12% denim export market share – the highest - in Europe.
And in the US, the market share was 14.68% with $566.39 million worth of denim exports in 2018, behind only China and Mexico, as per the US Office of Textiles and Apparel (OTEXA). With an 11.72% growth in 2018 up from $506.94 million in 2017, Bangladesh has solidified itself as a top denim exporter against as countries like China, Vietnam, Mexico, Pakistan, and Turkey.
According to the US Office of Textiles and Apparel (OTEXA), China – the biggest denim exporter to US market – noted a mere 1.51% rise to $937 million from $923 million, while Mexico saw a 3.11% increase from 2017 to $817.82 million in 2018.
Vietnam, a close competitor of Bangladesh in US market registered 43% rise to $296.47 million which was $207.28 million during 2017. Cambodia saw a 20.50% rise in export to $112.86 million followed by Pakistan 15.26% growth to $246.40 million. While the developing economies are doing rather well, Bangladesh has been pulling further ahead.
Why is Bangladesh taking the lead?
With timely technological upgrades, strong backward linkage, especially fabrics and branding of products, Bangladesh is beating the competitors in the EU and US markets, according to apparel sector experts.
In addition, the ongoing trade war between the US and China has helped export growth as brands consider alternatives to China fearing retaliations in the form of tariffs and embargoes from the US.
Faruque Hassan, former senior vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said: “In the denim industry, fabric and washing are the two key elements to good performance, and Bangladesh has been excelling.”
Bangladeshi denim manufacturers have introduced latest technology both in washing and fabrics manufacturing in improving the quality of goods, said Faruque, who is also the managing director of Giant Group, a textile company.
He also said: “On top of that, denim manufacturers are producing a variety of denim products, while value added product areas are gradually developing here.”
However, the sense of safe workplace and sustainability are two factors which acted as catalysts to draw buyers’ attention. In the aftermath of Rana Plaza, growth slowed, but did not take a nosedive.
“I would rather ask why exports earnings should not go up. We are safe, sustainable and also cheaper than any other denim producing country in the world. We use the latest technologies in washing and dyeing,” Mostafiz Uddin, founder of Bangladesh Denim Expo, told Dhaka Tribune.
Bangladesh now uses laser technology in denim to wash and design instead of water and stone wash, which gives the sector a leap to sustainability, Mostafiz said.
“And of course events like Bangladesh Denim Expo are helping Bangladesh to grow and go to the desired level.”
Increased capacity of fabric manufacturing and other backward linkage also helped the sector in grabbing a greater market share.
“Denim buyers in the US want reasonable prices and shorter lead time in shipping goods. So, Bangladesh’s opportunity in US market is very high as the country can meet over 50% of the demand, which reduces lead time,” Anwar-Ul-Alam Chowdhury Parvez, managing director of Argon Denim told Dhaka Tribune.
Currently, there are 32 denim mills with a capacity of 450 million meters of fabrics per annum, according to the Bangladesh Textile Mill Association (BTMA) data. Bangladesh can meet over 50% of local denim demand with the current capacity.
More space to grow
In the current global market situation, there is more opportunity for Bangladesh to increase export volume as the markets continued to shift and expand.
The Asian Development Bank estimates that if trade conflicts escalate, Bangladesh will earn an additional $200 million from apparel exports over the next two years.
According to a report by Zion Market Research, the global denim market was valued at around $66.02 billion in 2018 and is expected to reach approximately $85.4 billion by 2025, at a CAGR of around 3.7% between 2019 and 2025.
In the US market, there are lots of opportunities for Bangladesh as it has more capacity for growth.
Anwar, a former BGMEA president, said: “As buyers are shifting orders from China to other countries, it gives us more opportunity to take up greater market shares. Import duties in the US markets are higher for Bangladesh in comparison to our competitors. If Bangladesh reduce tariff rates, the sector further grow.”
He observed that Bangladesh needs to develop apparel diplomacy and increase negotiation capacity to improve trade facilities.
According to Cotton Incorporated, US consumers buy approximately 450 million pairs of jeans every year. The average American has seven pairs of jeans in their wardrobe.
71% of people in Europe and Latin America wear denim, followed by 70% in the US, 58% in China, and 57% in Japan.
How to sustain the growth
Bangladesh’s cornerstones of success are highly competitive prices and capacity to execute bulk orders. However, the low prices may no longer be an advantage as production costs have gone up.
Mostafiz cautioned: “Cheap prices can just as well become an obstacle. We need to innovate to sustain the growth.”
He stressed that Bangladesh has to concentrate on technology-driven manufacturing to get better prices and enter the high-value market. He suggested that Bangladesh attract foreign investments to gain knowledge and experts.
Economist AB Mirza Azizul Islam said: “In producing value added goods, Bangladesh does not have sufficiently skilled and experienced workforce. Allowing foreign investments will create opportunity to acquire knowledge and create skilled workforce from the foreign companies.”
He said the apparel export sector is in need of policy support regarding gas and electricity connections at reasonable prices to increase the production capacity of fabrics.
“In past few years, production cost went up on an average of 8% per annum. But the buyers did not increase the prices of goods. They actually reduced them to some extent,” Abdus Salam Murshedy, another former BGMEA president told Dhaka Tribune.
“As a result, we are losing competitiveness in the global market to our competitors who enjoy more government benefits. I hope the government will work to reduce production cost,” said Salam, who is also president of the Exporters Association of Bangladesh.