As any sourcing executives will tell you, there are myriad parameters that go into making production-related decisions, and with each variable apparel producing countries are compared to one another. For Bangladesh, those calculations have often worked in the country’s favor, at least for specific types of product. But there are areas in which it must improve if the nation hopes to command an even larger share of market.
Recently, the Bangladesh Apparel Exchange (BAE) published a chart (shown below) summarizing how the country currently stacks up against its competitors that deserved a deeper dive. Hertzman Global Intelligence caught up with Mohiuddin Rubel, a managing director for the BAE and former BGMEA board member, to take a closer look at what’s fueling Bangladesh’s ready-made garment industry today—and what it needs to do in order to position itself for further growth.
Here, Rubel breaks down why Bangladesh must make meaningful inroads into the better and value-added sectors, how the demand for short lead times is putting the country at a disadvantage, why developing its raw materials sector is critical to its future and the role buyers play in helping to make it all happen.
HGI: How would you characterize Bangladesh’s competitiveness today?
MR: Obviously, Bangladesh is one of the largest manufacturing apparel countries in the world right now, after China. And if you keep apart China, because they are doing more than $165 billion of the total world, then all other countries, including Bangladesh, they are more or less the same because they’re competing with each other, and each country has their own strengths and weakness.
Among those, Bangladesh is right now on the top in terms of volume, in terms of value and in terms of many other things like they’re very good in sustainability. They’re the number one in LEED green factories in the world. They can handle big orders, bulk orders, volume orders that no other countries can handle other than China. So, these are the good things. And manufacturers are very passionate here. The government is very supportive. The economic backbone is rising based on the garment and textile industry.
That [volume] is the weakness as well because it’s the only industry producing 84 percent of export currency for the country. So, there is risk as well, because when the world is not doing good, when there is a shortage of orders or any other obstacles, then the whole country gets stuck as well.
The weakness in a sense that we are very much experienced in handling the bulk orders mostly. So now we need to develop the backward industry in a way that we can now produce higher value orders as well, and we can now produce the small orders. And if you want to be in the market. And if you want to be the leader, you need to actually play in all the areas. You just cannot do the basic and the mid categories of the orders. So, you need to actually do better in terms of design development, research, high value-added fabric, accessories, backward industry, all other things.
And of course, in terms of infrastructure, lead time is one of the main, main factors. For the small orders, for the value-added orders, these are mostly fast fashion. The buyers want very fast deliveries. And globally, Bangladesh is not in a very advantaged position for that… because mostly the raw materials and everything comes from China so for the lead time, China plays a critical role. And of course, Vietnam and Cambodia, those countries also get advantage from China. But in terms of that, Bangladesh gets a little bit delayed in terms of the raw materials to import from China. So, what they need to do, they need to develop their own backward industries so that they can cut the lead time.
At the same time, we do have a few internal issues, like the handling of the customs, ports, all of the things. Those need to be very efficient, so that we can cut the lead time from there as well. At the same time, the country needs to be very competitive in terms of financial support from the bank. And of course, the gas, the electricity, they need to be very competitive, and they need to make sure that the factories can get the gas supplies continuously, uninterrupted and with competitive prices. And of course, we need to make workers’ life good; we need to pay them good also at the same time. The problem is we need to get paid from the buyer as well. We need to go to the higher value and higher end so that we can earn more. We can get paid well, and so that we can make our workers’ life well.
HGI: Let’s talk about raw materials first. Why is it important for Bangladesh to develop its backward industry?
MR: Bangladesh will be graduating from its Least Developed Country [designation] very soon, if all goes okay. In that case, if they want to get the benefit of the duty-free access to other countries, mostly in Europe, they need to pass the double transformation rule. At the same time, for the duty-free access, they need to have a certain percentage of value addition in the country. We need to actually develop your own backward industry. [Or] you can play well maybe at the same level, but you cannot grow.
HGI: How can Bangladesh accelerate that growth?
MR: We need to get the financial support with good interest rates from the financial institutions and the utility support with a good price. It’s [not] only because of expense, the quality of supply is very important. Because in a big garment industry like in Bangladesh, if you don’t get the gas support uninterrupted, then you have a problem. You cannot actually manufacture goods in a timely manner. You cannot ship in a timely manner.
HGI: What are the issues that need to be resolved at the port with customs? What, in your perspective, needs to happen there?
MR: We need to be more efficient. If you see Vietnam and our competitors, to import a good and to release from the port and to export, they take less time than us. So, we need to cut our time, and we need to make the process simple. There should not be any bureaucratic difficulties to get the document processed.
HGI: In terms of turnaround times, moving from basics to fashion is going to impact the pressure there.
MR: Lead time is always a factor in our trade because Bangladesh is far from the Western countries. The global supply chain also is now not working as before. Before, we used to send the goods to U.S. and Canada by 30 to 40 days. Now it takes 40 to 50 days in many cases, because of many other reasons after Covid. So, lead time is a very crucial factor. When you want to do small orders, variable orders, fast fashion, you need to ship the goods faster and to have the goods in your shelf also faster. For the basic orders, we have plenty of time to get goods on the shelf so you can plan in a longer way. But in today’s world, everything changes so fast. I mean the buyer, actually, to be honest, sometimes doesn’t even know what quantity and what style they will be playing in the next season. They try to see the last moment reaction from the market to order the goods. For example, why America is still buying from Honduras and all other surrounding countries? To get the goods faster.
It’s a very big deal. But the thing is Bangladesh has the structure and it has the potential to grow, because you have plenty of garments, you have plenty of machines, plenty of workers, the government supports, the bank supports, everything.
HGI: How would you characterize the impact of the U.S. tariffs on Bangladesh’s industry?
MR: Bangladesh produces around 20% of its export for the U.S., and I believe it [makes up] around 9% to 10% for the U.S. imports. Whatever impact tariffs had directly, indirectly the impact is even more—much more. Before, we used to grow a lot in Europe and the USA, both markets. But interestingly, we grew less in Europe than the USA last year. We export around 50% of our total exports to Europe. When the U.S. tariff implemented, first of all, the U.S. sales came down. Buyers bought less, they waited for the last minute. All other countries, like mainly China, were very aggressive in Europe because they knew that they will be in trouble in the U.S. They were very smart. They increased their share remarkably last year, for the last six months, and Bangladesh grew very much less compared to before. So, the indirect effect is much more than the direct effect.
And Bangladesh was very much dependent on a single country, which is not good. The world is around a $500 to $600 billion market. The U.S. consumes $80 billion, and $200 billion goes for Europe. There is a big market in other areas as well, like Asia, like the Middle East, like Latin America, like Australia, like Japan. But we are not doing very good over there, because we were very much dependent on the U.S. and Europe. So, we need to focus in those areas, because interestingly, those markets are even better in terms of price than the USA. The buying power is good and they pay good.
HGI: What do you think the long-term impact of the tariff situation will be on the apparel supply chain?
MR: You know, in the USA, Bangladesh will always play a good role because Bangladesh mostly supplies their basic and medium categories of goods, and Bangladesh doing around 10% of their import. So, there will be a business always with Bangladesh and they have a chance to grow even in the high-end product for the USA as well — as long as Bangladesh is competitive with others, which is becoming now tougher than before. And as long as there is no big impact, like a recession or any other Covid effect or those kind of things, I think Bangladesh will grow in the USA, because China, they will not grow in the USA. They won’t bother actually right now because they want to get rid of the RMG. They are more in tech product, high-end product, high-end industry. So, Vietnam, India and Bangladesh will always play a good role over there, I believe. The more China will get out of the USA, the more Bangladesh has the chance to go there.
HGI: You said Bangladesh has grown less in Europe because of the tariffs. Do you think it can make that up?
MR: That will be a challenge. To be honest, I can’t say boldly right now because we need, as I always say in my country, to be competitive no matter what. If you have seen the Europe data, their buying prices per unit went down around 3 to 6%. And China grew a lot over there with 6 to 7% price cut. So, Bangladesh, do we have that ability to cut the price in that extent? We need to be competitive with others to absorb that competition. That means we need to be competitive internally as well.
One big impact we can have, our workers are still not as productive as our competitors. So, there is a big, big, big chance, and a long way you can grow [as a result]. You can implement technology. Then you can improve the productivity of your workers. Then you can be very competitive. Also, you can produce more with less cost. In that way, Bangladesh can be competitive in Europe—everywhere also, actually.
HGI: What role does the government play in supporting the industry in its efforts?
MR: I’ve always said the government has a very critical role. The government should have a practical 10- to 20-year long-term plan. And we have to be with them on that plan. No matter which government comes and which government goes, the policies should be long-term and steady. We don’t need to change the policies again and again. That’s the weakness for us, that we don’t have a long term, strong plan.
HGI: How would you characterize the political situation in Bangladesh right now?
MR: As soon as there should be an elected government, I think that will be good for the overall country, overall business. There is no doubt of that—for the internal situation, is for external situation, the confidence of the buyers.
“When [buyers] are demanding ethical change, they should be ethical with the clients and the manufacturers also.”
—Mohiuddin Rubel, Bangladesh Apparel Exchange
HGI: Yes, because buyers want predictability so that could be a main factor as well.
MR: But one thing I must tell you, because I have been saying all the negative, positive, everything, right? So the one thing I should say is the buyer should pay the right price. If you want all the good things from me, you need to pay me good also, where from I will do good for you. You are asking me to pay my workers a good price, good labor. But if you are giving me the cheapest price in the world, why are you expecting that and from what will I do it? This is the business. This is not a charity show.
If you see the record, in the U.S. market and Europe market, mainly, their prices are going down even for the same item for three, four, five years back. The price they used to pay, now they’re paying less for that same thing, whereas the cost has increased remarkably over these years. So, where will the manufacturer go?
What is happening now is the manufacturing base is so big in Bangladesh. They have invested a lot. They have increased their capacity tremendously. So, now they cannot shut the factories. Also, they have to live. They have to be in the market. So, sometimes what they do, they accept the price from the buyer, because they have no choice. So, the buyer should be also very ethical. When they are demanding ethical change, they should be ethical with the clients and the manufacturers also.
HGI: What’s the health of the manufacturing base in Bangladesh right now? Are you seeing closures and consolidation?
MR: You know, there are factories [that have] closed down. There will be factories that will be closing down. There will be factories that will be coming up. But in the last year it was a little bit more a closing trend. But because of many reasons. The cost has increased. The international price is going down. The factories cannot survive. Their bank interests are higher in Bangladesh. Also, if you see in 2024 the workers after the government fall, they have demanded more, and the government has revised their salary increment for three years from next year. So over that part, also, the cost is increasing, remarkably.
