Vietnam has captured the opportunities and gained most from China's losing market share in the US
Bangladesh, which ranks second in global apparel trade, is failing to capitalise on China’s slowly losing grip on the US market, with Vietnam and others making better headway last year.
In 2020, China lost its market share by about 3 percentage points to 23.7 per cent, according to data from the US Department of Commerce’s Office of Textiles and Apparel (Otexa).
From over $64 billion of apparel imports by the US in 2020, China solely supplied 23.7 per cent. In 2019, it was $13.6 billion.
Vietnam has captured the opportunities and gained most from China's losing market share in the US: its market share rose to 19.2 per cent from 16.2 per cent.
Bangladesh’s market share in the US expanded by 1.08 percentage points to 8.16 per cent last year.
In 2020, Indonesia's market share rose to 5.5 per cent from 5.3 per cent in 2019, while Cambodia's market share increased to 4.4 per cent from 3.2 per cent.
India's market share declined to 4.7 per cent from 4.9 per cent.
As per the Otexa data, Bangladesh’s export earnings from the US, the single largest export destination, saw an 11.73 per cent fall to $5.2 billion in 2020.
Vietnam, one of Bangladesh's closest competitors, recorded a 7.2 per cent negative growth to $12.6 billion in the US apparel market.
After the US-China trade conflict, a good number of Chinese investors relocated apparel factories to Vietnam due to its readiness in entertaining investment and proximity, SM Khaled, managing director of Snowtex, told Dhaka Tribune.
The Southeast Asian can buy raw materials from China within a shorter period, while it takes less time than Bangladesh to ship goods to the US as it has a deep-sea port, said Khaled.
“Besides, Vietnam's investment capacity is much higher than us and workers productivity and efficiency are much higher.”
These advantages helped Vietnam to grab more market share.
“If we do not invest, we will not be able to take orders. So, increasing investment from home and abroad is the key to gaining from China’s losing market share.”
Bangladesh could gain more if the pandemic did not hit the exporters badly.
“During the pandemic, we had to shut production for almost a month and a half, while Vietnam kept their production operational nevertheless.”
To grab more market share, a strong backward linkage is very important, which was felt during the pandemic.
For reducing lead time, the backward linkage is very crucial, he added.
Since the labour cost is less than its competitors and there are huge opportunities for business expansion, Bangladesh has ample opportunity to grow in the US market, said Sharif Zahir, a director of the Bangladesh Garment Manufacturers and Exporters Association.
Vietnam has limited capacity to expand business in manufacturing apparel goods, while Bangladesh has an opportunity to enlarge the sector.
Bangladesh's government is offering investment opportunities in special economic zones, said Zahir, also the managing director of Ananta Denim Technology.
On the other hand, there is a surplus labour force in Bangladesh and the workers' wages are comparatively lower.
On top of that, Bangladesh has to improve relations with the US and negotiate with the United States Trade Representative (USTR) to explore opportunities for duty-free market access, Zahir added.
However, economists said that limited products and capacity were getting in the way of gaining more from the opportunity.
As Trump policy restricted China's trade in the US, exports to the country declined. Taking the advantage, other Asian countries grabbed market share in the US market.
But Bangladesh's gain was comparative lower than Vietnam and others, said Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD).
“This is because of our low capacity to produce diversified products. From low end to mid and high valued products shifted from China due to trade conflict.”
Vietnam can make all types of goods, while Bangladesh produces basic and mid-range products.
On top of that, Bangladesh's competitors like India, Myanmar, Cambodia and Turkey have taken a bigger share of the pie.
“Bangladeshi manufacturers are not interested in diversifying products. They rather prefer to expand businesses within the same product lines.”
In the given context, Bangladesh has to attract foreign direct investment in the value-added segment.
This will help the country to transfer technology and share experiences with foreign investors.
Special economic zones as well as export processing zones (EPZs) can be a great tool for attracting investment as Bangladesh is offering country-specific zones for investors, he added.