Rapid growth, modernisation and improved working conditions have helped make Bangladesh one of the world's largest garment exporters, yet the industry will need to innovate, upgrade and diversify to overcome challenges brought on by the pandemic and shifts in global markets.
A global management consulting firm McKinsey & Company study titled "What's next for Bangladesh's garment industry, after a decade of growth?" made the observation, adding that the pandemic has stalled the sector's progress at a crucial moment just as global shifts in fashion sourcing threaten Bangladesh's position in industry supply chains.
The industry must invest in flexibility, sustainability, workers' welfare, and infrastructure if it is to move forward successfully, reports UK based fashion portal Just-style quoting the authors Achim Berg, Harsh Chhaparia, Saskia Hedrich, and Karl-Hendrik Magnus.
Speaking with The Business Standard, world's greenest knitwear factory Plummy Fashions Ltd Managing Director Md Fazlul Hoque said, "Sourcing model shifts has become a challenge for the apparel makers in Bangladesh, but it is not a threat for the country's apparel industry.
"The apparel makers in Bangladesh are aware of this challenge, but I think we should be more mindful of the issue."
Bangladesh has a large advantage in the apparel sector as the country has the largest number of green factories and it focuses on environmental and social compliance
– which the other countries do not have yet, said Hoque, also a former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
"If we can overcome the challenges mentioned in the report, those will turn into opportunities for us. It will be up to us on how much we will be able to take advantage of these opportunities. Besides, we need some changes at the policy level and our mindset," he pointed out.
"The Covid-19 crisis has taught us a lot of things, and we have made changes regarding how we operate to adapt to the new normal. A feat we did not was possible. For example, we have been maintaining strict health safety guidelines while running production," Hoque said.
He also acknowledged that the report rightly mentioned improvements made by the industry over the last decade. "But at the same time, the industry also missed some opportunities, which could have made Bangladesh's position better."
Sector growth over the decade
Ten years ago, McKinsey forecasted sector growth of 7%-9%. Indeed RMG exports from Bangladesh more than doubled, from US$14.6bn in 2011 to $33.1bn in 2019 – a compound annual growth rate of 7%.
Over this period, Bangladesh's RMG industry increased its share of global garment exports from 4.7% to 6.7%.
"This is within the range we forecasted in our report, however, it also shows that the country has not captured the full potential we had foreseen ten years ago," the authors say.
As the pandemic threatened the lives and livelihoods of Bangladeshi workers, many smaller, less well-funded factories closed their doors, and competition for smaller orders increased, they added.
The value of Bangladesh's RMG exports fell by 17% in the first year of the pandemic, representing revenue losses of up to $5.6bn, according to the report.
Progress vs challenges
Despite this, the report points to the "impressive progress" made by the RMG sector over the last decade in tackling the challenges of growth, particularly in diversifying customers and products, improving supplier and workforce performance, and strengthening compliance and sustainability.
For instance, there is now a greater capacity to produce garments made from synthetic fibres; manufacture more complex products such as outerwear, tailored items, and lingerie; and provide new washes, prints, and laser finishings.
Entry into these new segments has been supported by the changing rules of origin for preferential trade with the European Union, allowing for the use of imported fabrics. There also has been some increase in vertical integration of the supply chain, with the result that more suppliers are now able to offer lead times below the standard 90 days.
McKinsey however says many of Bangladesh's factories have not yet transitioned to providing these new offerings, and have shied away from the investment required to do so. The report shows that T-shirts, trousers, and sweaters continue to dominate the country's exports.
The second major challenge facing the sector has been worker empowerment and the gender gap. Digitisation of wage payment has increased, and there have been marked improvements in employment rights.
Though the gender gap remains an issue when it comes to opportunities for career progression from entry level, authors say.
Infrastructure remains one of the biggest issues facing the RMG sector. For its apparel industry to prosper in the future, Bangladesh will need to strengthen transport, energy, and digitisation infrastructure, McKinsey says.
Rising up to the challenge
Bangladesh's garment sector has every prospect of remaining one of the world's largest RMG manufacturers, and continuing its impressive story of growth and improvement. However, the country's apparel industry is facing headwinds, and will need to take decisive action in several areas if it is to prosper, the report read.
McKinsey further said the sector will need to rise to the challenges of competing without preferential trade access, meeting decreased demand from traditional customer markets, and making a fundamental shift toward a demand-driven and more sustainable sourcing model.
Some of the international buyers the Just-Style spoke to believe that the industry is not moving fast enough in this direction.
Others are more positive and they feel that given the resilience and adaptability Bangladesh's manufacturers have shown in the past, the RMG industry will be able to navigate the necessary transformation, though structural changes will be inevitable.
Some sourcing executives also mentioned a shift of sourcing volumes towards foreign-owned factories in Bangladesh, especially for more complex or technical products and synthetics. They are also looking for suppliers who continuously invest in sustainability, worker welfare, and transparency.
The report suggests Bangladesh's government might benefit from recalibrating its strategies to attract foreign investors.
Bangladesh's RMG sector has achieved impressive growth and transformation over the past decade, overcoming significant obstacles along the way.
Today, however, it faces a new set of challenges, amid a global pandemic and a shifting global apparel-sourcing market. In the years ahead, the industry will need to embrace a more holistic transformation, in partnership with manufacturers, international buyers, worker representatives, the government, and other stakeholders.
"As international buyers navigate the rapidly changing environment, they are tasked to work with more advanced suppliers to develop demand-driven, more sustainable supply chains. To do so, they will need to build deeper, truly strategic partnerships, while pushing to overcome the past decades' deflationary dynamics in global apparel retail markets," the report concludes.