2020s offer exciting new chapter for Bangladesh RMG
The year 2019 was a year of highs and lows for Bangladesh's RMG sector. On balance, it was a year of positivity. However, it would be naïve to ignore the fact that things were not all plain sailing and that there is a great deal of work to be done as we enter the new decade.
At the start of the year, we saw positive growth in apparel exports, however, it declined as the year went on, with significant falls in woven and knit apparel exports to our global partners in the months of November and December. While this is a concern, one also has to factor in the unstable nature of the global economy at the present time which undoubtedly impacted global trading patterns during 2019.
The ongoing trade spat between the USA and China, for example, might be beneficial to Bangladesh in the long-term but in the short-term, this is causing volatility and unpredictability in the markets as well as global exchange rates. No business likes uncertainty.
Likewise, there has been significant instability in our main export market, the EU, as the issue of Brexit and a decision over the UK's participation in the EU trading bloc rumbled on throughout 2019. However, this issue looks like being resolved in January 2020.
One of the challenges faced by the Bangladesh RMG sector in 2019 was the number of staff being laid off. In October, figures from the BGMEA showed that around 30,000 workers had been laid off in the RMG sector since January amidst the closure of 59 factories. Factories are still closing and the industry is undergoing another period of rationalisation. Nobody likes to see businesses close but if this ultimately leads to a fitter, leaner, more globally competitive industry, then perhaps it is a price worth paying.
Various factors can be blamed here, although obvious reasons include low and declining prices from brands, a lack of orders and over-production in the industry.
We saw wages for garment workers increase at the turn of the year; however, this sizeable increase of the cost base of the industry was not matched by increases in sector productivity. The net result of such a dynamic was always going to be that some factories would struggle to make ends meet.
These issues are not going to go away overnight and are worth a closer look as we head into 2020. I have argued for some time that the Bangladesh RMG sector faces an over-capacity issue and is too narrowly focused on low-value, staple items. A period of serious industrial upgrading is required and I hope that this can begin during 2020.
Where does this upgrading need to focus? It needs to focus on research and development to help bring about product and process innovation. Increasing productivity has to be the long-term objective of the RMG industry, for with higher productivity, we can achieve higher wages. But this will only happen if we innovate in order to enable us to produce higher value-added products.
Does this mean we should abandon low-value, staple items? Of course not. But we do need more parts of our industry to diversify into new, higher value-added products which have USPs (unique selling points/propositions) in areas such as sustainability, technical qualities or design attributes. We have to get out of the race to the bottom and take control of our own destiny.
We also need to use technology to better manage costs and overheads. Greater efficiency in terms of water and energy use is rising up the agenda in the Bangladesh RMG sector and, once again, the BGMEA has led the way on a number of initiatives in these areas. Long may that continue during 2020. Increased sustainability and increased efficiency are, in many respects, two sides of the same coin. Put another way, what's good for the environment often makes smart business sense and, thankfully, more RMG factory owners are recognising this fact.
While 2019 was a mixed year, it also presented enough evidence that Bangladesh's RMG sector is waking up to the dawn of a new era, with a growing recognition that what has worked in the past won't necessarily work in the future.
So 2020 could be a year of real change. That's no bad thing. We enter the new decade in a position of relative strength and we are well-placed to capitalise on the opportunities that will surely present themselves as China's share of the global apparel market shrinks (as many pundits predict).
Safety will continue to be a major issue in 2020. In 2019, we saw the formation of RMG Sustainable Council (RSC) which will look after the safety monitoring issues after the departure of Accord and Alliance. This step shows that Bangladesh is determined to continue to lead the global apparel industry on factory compliance and safety issues.
I expect the growing popularity of online buying to continue in 2020, and this is an area where we—as suppliers—need to be prepared, as brick-and-mortar stores are replaced by delivery to huge warehouses, Amazon-style.
While it will be 2021 when Bangladesh sees its graduation to a developing country status from an LDC, we need to be preparing for this during 2020. This will pose serious challenges, particularly with regard to the potential loss of tariff-free trading benefits in the EU market.
Image building will be all-important to Bangladesh as we enter the 2020s. On this front, we surely must learn from the mistakes of the past. For too long, Bangladesh's RMG sector suffered from poor reputation and, in many ways, became a scapegoat for broader industry failings. Bangladesh was under the spotlight during the past decade unlike any other apparel sourcing hub.
It is time to turn over a new leaf in the new decade. We need mention of the phrase "Bangladesh RMG" to bring positive connotations. What might these be? Here are a few: world-class safety; innovation; digitisation; responsiveness; social and environmental compliance; value-added products; transparency and openness; circularity.
In short, Bangladesh needs to brand itself as the de-facto sourcing destination for brands which want high-quality apparel produced in safe, compliant factories to world-class production standards, adhering to high levels of environmental and social responsibility.
We should all drive the above message home as we head into 2020.
It's time to change the narrative on Bangladesh RMG for good.
Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE). Email: mostafiz@denimexpert.com
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