Four steps to put the RMG sector back on track
Mostafiz Uddin, Managing Director of Denim Expert Limited and Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE)/CGS
(Centre for Government Studies)
Recent figures show the export of ready-made garments (RMG) from Bangladesh during the first four months of the current fiscal year (FY2019-20) fell by 6.67 percent to USD 10.5 billion.
Step 1: Diversify
We continue, as an industry, to be heavily reliant on the export of cheap, basic commodity garments for the mass market retail sector. Such commodities represent more than half of all total exports, around 54 percent according to the most recent world trade figures.
Meanwhile, RMG exports represent about 84 percent of Bangladesh’s total exports. With more than half of that 84 percent being cheap, commodity garments, this leaves Bangladesh hugely exposed in this area. What if the market for such products shrinks? Where will that leave our national economy?
We need to diversify from commodity products, firstly, because a shift to more high added value products will boost margins for exporters but secondly, because an over-dependence on one product category exposes Bangladesh’s economy to far too much risk.
Step 2: Work smarter
Are all our RMG factories working to their maximum efficiency? There is plenty of evidence to suggest that this is not the case and that productivity rates continue to languish at relatively low levels compared to one of our biggest competitors, China.
There are a whole host of statistics in this area but most observers on this issue claim that productivity in Bangladesh stands at around 40-50 percent, significantly below China. This means garments being made in Bangladesh are, in many cases, taking twice as many labour hours as they take to make in China.
With labour representing such a large proportion of overall overheads in Bangladesh, low labour productivity rates mean that extra time—and wages—are being spent by RMG factories on per unit of production.
Increase productivity, and we can increase overall profits and exports revenues.
Step 3: Improve energy efficiency
There is so much “low hanging fruit” to be had for RMG factories in Bangladesh when it comes to the issue of energy efficiency. Whether it be through the use of inverters, thermal oil heaters, biogas plants, sky lights, boiler economisers, the use of solar—and a whole lot more—energy saving opportunities represent a huge opening.
Already, the industry has been proactive in embracing energy saving initiatives but there is always more that can be done. This includes the industry as a whole—led by the BGMEA—addressing strategic issues such as affordable rates of interest and broader regulatory reform required to scale up energy saving methods.
Suppliers need to understand that our industry is only heading in one direction on this issue, with many apparel retailers looking to enrol suppliers into energy projects to help them meet their own climate goals.
Step 4: Change the brand—go circular
Bangladesh is known for its discounted garment products. This has been a successful backbone of our economy for many years but there are signs that this model is running out of steam. As indicated earlier, it is time to diversify.
So why can we not become known for something else? Why can’t we take the lead in the circular economy?
There are very few areas of huge untapped potential in the global apparel industry at the present time. However, the circular economy is certainly one of them.