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Improvements required to accelerate Bangladeshi garment exports
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Accelerating the garment exports of Bangladesh will require a diversification into other product areas such as higher value garments, according to a World Bank report.
The study highlighted weaknesses in Bangladesh such as a lack of labour skills, poor infrastructure, a weak business environment, and the lack of clusters.
But focusing on improving trade logistics, skills and compliance with labour standards, could provide benefits for the country’s garment exports.
The World Bank said evidence from garment-exporting countries suggests that there is a ‘threshold’ level of per capita GDP (gross domestic product), after which per-capita garment exports begin to decline (Figure 0.1).
For instance, real per capita exports of garments in Thailand grew until it reached a ‘threshold’ per capita GDP of about US$2,000, about US$1,000 in the Philippines, and around US$1,150 in Sri Lanka. But before reaching this threshold, each country’s export basket showed a diversified mix of basic-and-higher value garments.
By this reasoning, there is room for the garment sector in Bangladesh to grow and capture an increasing share of the world market. Especially as Figure 0.1 shows that the country’s per capita GDP of US$482 is well below the threshold level.
However, as per capita income grows and reaches closer to the threshold level, Bangladesh will lose its competitive edge to other countries with lower wages, first in basic, and later in higher value garments, said the World Bank.
Efficient logistics could give Bangladesh a competitive edge in the exports of basic-and medium value garments. But it needs to ensure that exports as well as imported inputs are shipped on time, are cost effective and reliable.
According to the report, improvements in trade logistics will also increase overall external competitiveness of the country and will have spillover benefits for other existing and potential merchandise export sectors.
But a lack of skills is becoming a key constraint to growth in exports, and this gap will become more acute as Bangladesh moves into producing higher-value garments, as compliance with internationally-acceptable labour standards is becoming increasingly important for consumers in the US and EU – the main markets for garment exports from Bangladesh.
Responding to this, the Government of Bangladesh adopted a ‘unified code of conduct’ in 2006 and modernised the existing labour laws, but monitoring remains weak. As Bangladesh moves towards higher value garment exports, it becomes even more important to enforce compliance as the consumers who buy these products can afford to be more discerning about their buying decisions.
