RMG sector: The road ahead
The concerned industry leaders, experts and manufactures are required to rethink and conduct focused research to progress on new brand creation using the name and fame of �Made in Bangladesh�
AKM Asaduzzaman Patwary
Bangladesh is one of the largest sourcing countries to many global garment brands and got recognized as low cost and economic manufacturing hub. Global brand leaders Zara, Next, Gap, HM, Marks Spencer, Primark, TK MAX usually outsource from different countries including Bangladesh. The persistent incremental growth was fueled by relatively low labour cost, overhead, uncompromising and unerring quality textile finished products meeting buyers needs met by Bangladesh.
The vision of $50 billion export earning in RMG industry envisioned in 2014 based on the Mckinsey forecast on RMG industry has geared hope and aspiration among the industry insiders but materialisation of this vision has been questioned by gripping uncertainties and panic, as the industry often encounters various challenges.
The RMG industry is witnessed hovering around $25 billion with required 17 percent incremental growth down the line to gain $50 billion. It is rolling despite wide range of visible and invisible restraints and gripping bottlenecks during the last decade.
The low pricing of RMG has long been a burning issue and bone of contention between the retailers and suppliers groups.
The manufacturers selling price and retail price difference analysis marked huge income imbalance leading to severe disparity with the producers, usually the retail price of Polo shirt is maximum $20 whereas the manufacturer gets paid at maximum $3. The local manufacturers have struggled and negotiated US and EU buyers to raise the selling price of the supplied garments but failed to achieve and gain as expected in several occasions which have established the fact that Bangladesh can supply low cost products in retailers brand name across the global market relative to other apparel suppliers.
The retailers have got discretion and liberty to change and stretch the retail price as their requirements to regulate business, profit making and maximization whereas manufacturers are limited and subjected to the discretion of buyers and retailers intention.
The cost of manufacturing is constantly increasing due to cost of doing business and other influential factors of business and manufacturing including cross border trade above all utilities and compliance which end up with losing the cost minimization and cost competitiveness in business which foil and deprive from expected return and profit making to our local RMG producers and suppliers. The cascading and spill over effects on the direct stakeholders of this industry as well as in macro-economic state are largely disparaging.
The primary textile industry, backward linkage industry stakeholders and RMG finished producers are largely aligned and inter-dependent on RMG manufacturing business value chain process which also remains limited to minimum earning and profit making due to lowering pricing strategy of RMG supplied from Bangladesh,
Indeed, the textile and RMG sector hugely contributes to industrial growth, large employment generation, solo and stand alone contributing manufacturing sector to GDP increase and boost of Per Capita Income as more than 10 million people directly and indirectly are related and survive based on this industry. This sector may expand its horizon and help ensuring inclusive economic growth with cascading economic benefits including poverty alleviation to in many ways across the country.
On the contrary, RMG is underprivileged in tariff regime due to deprivation of DFQF access to Developed Country, as single largest export destination, USA, which also to some extent scrapped Bangladesh behind towards our goal and global competitiveness from other contending countries.
The pathway of achieving $50 Billion is yet to be discovered and drawn. There has not been any clear roadmap and course of actions to materialize this target so far in achieving the $50 billion under the tumultuous, volatile, flexible global cross border and geo-economic environment as well as manifold diverse challenges including strict compliance posed by different heavyweight buyers forum, agencies and their representatives. In addition government, private sector and other major stakeholders have not framed and rolled out coordinated pathway with private sector to get to the target rather different organizations plan and expose it disorganized and
scattered.
In my critical observation, the simple workout of making 20 percent growth over regular and consistent growth in RMG sector may not be as easy as thought due to shaky EU political economic state, frequent fall of exchange rate of BDT against Euro, Dollar as well as devaluation of Remimbi and frequent Pegging US GSP cancellation, Chinese economic downturn, regional economic bloc and regional trade agreements alter and rule out our simple equation calculated.
The ideal and strategic means is not following the economics of scale production rather creation of new brand name originating from Bangladesh as well as concentration of high value product creation and diversity. As our locally manufactured products sold at maximum of 500 times higher at retail price is unilateral and beneficial to end sellers and vendors at the expanse of manufacturers and suppliers from Bangladesh which will never help to boost our export earning to a large extent in line with vision of achieving 10 percent of global textile market size.
As we often come across the news that US market export quantity is on rise with relative growth but the price is on decline which really disappoints the industry concerned and government too.
Thus the concerned industry leaders, experts and manufactures are required to rethink and conduct focused research to progress on new brand creation using the name and fame of Made in Bangladesh status and popularise our own brands likewise MS GAP, Zara global brands though it is not going to happen overnight but sooner or later transition to creating Bangladeshi brands are essential if we like to materialise the vision of RMG export earning in due course.
The mystery lies in development of local brands which may enable our local producers to gain at least 50 per cent additional earning or sales revenue on total sales and remaining 50 per cent may be gained by means of new market development, expansion and product diversification globally, strategically aggressive promotion by possible means above all relocation of highly labour intensive textile business in Bangladesh. But this relocation process is apparently not an overnight process expected to begin and benefit our economy. The conventional dictum and philosophy in economics of doubling the export earnings by economic scale of production will hardly materialize our huge target by 2021 as cost of production including labour cost in Bangladesh is progressively going high and much debate has failed to reach that perceived belief.
Considering the long-cherished vision, the analytical and critical assessment based on the real life learning curve and time series of earning derives that new brand generation, positioning, diversity, pricing negotiation with global marketer instead of conventional marketing and selling in other global brands can generate overwhelming and exceeding revenue. It has been the high time for the analysts, industry leaders and market experts of RMG industry to take necessary actions critically assessing the target markets, buyers behavioral aspects and consideration of creating local brand generation, recognition, re-assessment and resetting targets in revised market ambience in line with the $50 billion target achievement which may flourish the industrialization-led economic growth trajectory of Bangladesh in the days to come and help achieve governments Vision 2021 in deed.
The writer is a research fellow,
Head of RD, DCCI
