The increasing concentration of Bangladesh’s exports has raised eyebrows and there are calls for diversifying our export basket
Following its debut in the early 1980s, garment exports have come to dominate Bangladesh’s export basket in a big way.
In fiscal 2019-20, it accounted for an overwhelming 83 per cent of the country’s export earnings.
This proportion has been rising over time. It was about 50 per cent in fiscal 1990-91, rising to 78 per cent by fiscal 2010-11.
The increasing concentration of Bangladesh’s exports has raised eyebrows and there are calls for diversifying our export basket. That makes sense.
But it may also be worthwhile to explore the scope to further diversify our garment exports. After all, we know the trade.
Over the past three decades, Bangladeshi entrepreneurs have learned how to procure the inputs, manufacture the products and sell these in distant markets.
They have learned how to survive in a competitive global market and how to navigate the treacherous business environment in the country. Why not use this expertise to venture into additional garment products?
Our garment exports are also concentrated in a few products.
Five products, i.e., T-shirts, trousers, sweaters, jackets, and shirts account for just over 70 per cent of all garment exports, according to data from the Bangladesh Garment Manufacturers and Exporters Association.
This proportion was even higher a few years ago, at around 80-82 per cent during 2006-2014, indicating that some diversification has happened within the garment basket.
Moreover, industry insiders tell me that the product composition has changed even within these five broad product categories.
Nonetheless, the industry acknowledges the scope for further diversification. Hundreds of apparel products are traded in the global marketplace and for most of these our market share is still minuscule.
So where can we start? Let us go a bit granular and look at more disaggregated data.
What do the patterns and trends of the past two decades tell us? The chart depicts the trends in export earnings from five garment products for the period 1995 to 2018.
The data are from the Atlas of Economic Complexity produced by the Centre for International Development at Harvard University and reflect figures as recorded by the importers of our products.
Twenty-five years ago, these products, defined at the four-digit level of the HS code, had a relatively modest presence in our garment export basket.
Thus in 1995, exports of gloves, activewear, non-knitted men’s undergarments, knitted men’s undergarments, and knitted women’s suits were roughly $2.5 million, $6.3 million, $16 million, $17 million, and $23 million, respectively.
These numbers may be compared to the export values of two leading garments products of that time (and now), i.e., men’s shirts and T-shirts with 1995 exports of $567 million and $218 million, respectively.
Let us look at what has happened since then.
Two of these five products, i.e., gloves and men’s woven undergarments, have had little or no growth in the subsequent two and a half decades. This is evident from their relatively flat trend lines in the chart.
In 2018, the export value of men’s woven undergarments was about $62 million, just 3.6 times that in 1995. For gloves, the 2018 exports of $2 million were lower than the 1995 level.
Two products, activewear and men’s knitted undergarments, have fared much better with 2018 export values of $120 million and $544 million, i.e., 19 and 31 times that of the 1995 levels, respectively.
But the product that really stands out from this group is women’s knitted suits, whose export value in 2018 was $1.8 billion, eighty times the value in 1995.
Trends like this, which show strong growth in exports of products that once did not figure prominently in our export basket, point to the diversification potential within garments.
These widely differing trends, with some products achieving little or no growth and others growing by leaps and bounds, lead to an important question: why do some exports grow, and others do not?
One possible reason is the difficulty of replication.
Often an entrepreneurial garment producer may identify a sophisticated product, find a buyer, procure the needed technology, and start making and exporting the product.
Over time, the initial buyer gives larger and larger orders, and some other buyers may also join in.
However, the product or technology may be such that other garment producers cannot easily step in and start making the same product, at least not for many years.
Differences in such “replication potential” across garment products is one reason why we see these different trends.
But there could be other reasons too why some exports grow significantly, and others do not.
Identifying and addressing these factors is important for realising the diversification potential existing within the garment industry.
Syed Akhtar Mahmood is an economist, previously with an international development agency