After a period of global economic turbulence, Bangladesh's ready-made garment (RMG) sector is showing signs of resurgence, with exports to key markets like the EU and the US showing good growth in the first seven months of the 2024-25 fiscal. This rebound, however, raises questions about its sustainability and the underlying factors driving it.

Growing shipments a positive sign

The numbers are compelling. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data shows, apparel shipments to the EU grew 13.91 per cent year-on-year, reaching $11.81 billion. In the US, the largest single market, exports grew 16.45 per cent to $4.47 billion.

Table: Bangladesh RMG exports to key markets

This growth has translated into higher market share for Bangladesh, with the EU now accounting for 50.15 per cent of total exports, up from 49.31 per cent in the same period last year. The US share also rose to 18.99 per cent from 18.27 per cent.

Growth triggers

Several factors have contributed to this positive trend. Firstly, the gradual recovery of global economy, particularly Europe and the US, has led to increased consumer demand. "Apparel consumption declined worldwide in the last fiscal year," says Mohiuddin Rubel, MD, Bangladesh Apparel Exchange. "Now these economies are doing better. And buyers are placing more orders."

Secondly, the ongoing trade tensions between the US and China have resulted in some buyers diverting orders to Bangladesh. "Some buyers have shifted orders from China because of the US-China tariff war," confirms Shams Mahmud, MD, Shasha Denims. This is proving beneficial for Bangladesh, positioning it as a viable alternative for global brands.

Also, improvements in internal factors, such as law and order, have also played a role. "Global brands that have outlets in Asia have increased sourcing from us," says Mahmud, highlighting the growing confidence in Bangladesh's stability. This growth is not without anxieties. "If a day is lost due to unrest or any other reason, we work at night or on Fridays. We are resilient," points out AKM Shaheed Reza, Chairman, Reza Group, highlighting the industry's ability to adapt.

Fragility of current business order

While the current growth is encouraging, its reliance on external factors like geopolitical tensions and fluctuating global demand raises concerns about its long-term sustainability. The industry's ability to capitalize on opportunities hinges on its capacity to enhance its own competitiveness and resilience. "The ongoing global trade tensions were reshaping the landscape, presenting opportunities that Bangladesh could capitalise on, provided the country possesses the necessary productive capacity," emphasizes Rubel.

Despite the positive trend, certain markets and product categories are struggling. Exports to Russia, South Korea, China, the UAE, and Malaysia have declined, indicating a need for targeted strategies to address these markets. Moreover, the industry faces several challenges. Ensuring a stable energy supply and managing worker payments during peak demand periods like Eid are crucial for maintaining momentum. "If we can pass this critical period, we will be able to achieve our export projections," cautions Mahmud.

Energy supply disruptions are a major concern, particularly for vertically integrated factories. "Gas shortages are a pressing concern, particularly for vertically integrated factories that rely on a steady supply," states Mahmud Hassan Khan Babu, MD, Rising Group. The Bangladesh Textile Mills Association President Showkat Aziz Russell also reports that most textile and spinning mills are running at 50 per cent capacity due to gas shortages, creating opportunities for competing nations like India, who have seen 40 per cent growth in exports to Bangladesh.

Another pressing concern is the need for product diversification and market expansion. While non-traditional markets like Japan and Australia are showing promise, further efforts are needed to tap new opportunities. "There should be a focus on non-traditional markets for product diversification and the development of new markets," advises Rubel. The positive exports growth to South Korea is a good example. "Bangladesh had been performing well in South Korea. We should explore the reasons," suggests Rubel.

Policy inconsistencies are another issue. "Some buyers place orders six months in advance. If the government introduces policies that hike utility bills or wages during that period, it could significantly impact businesses," explains Babu. Abdullah Hil Rakib, MD, Team Group, criticizes the lack of government support, urging a review of policies aligned with industry needs. What’s more, investment in backward linkages is vital for enhancing the RMG sector's competitiveness.

Challenges confronting Ashulia industrial zone

The Ashulia industrial zone faces numerous challenges, with buyers opting against placing orders due to law-and-order concerns and gas shortages. "Some buyers have already developed a map assessing the risks in this zone to relocate their orders away from the Ashulia zone," warns Mirza Shams Mahmud Shakti, CEO, SM Sourcing. While overall orders are strong, those catering to the fast fashion segment have only confirmed orders until April, highlighting potential volatility.

The closure of numerous factories due to financial crises, as reported by BGMEA, underscores the sector's vulnerability. BGMEA data reveals, over a hundred factories started operations in 2024, and the same number of factories closed operations due to the financial crisis.

Despite challenges, there is optimism for 2025. "Our projection for 2025 is about 15 per cent growth," says Sheikh HM Mustafiz, CEO, Cute Dress Industries. "We believe the interim government will take policy decisions to protect domestic industries," adds Russell. Industry leaders emphasize the potential to benefit from the China-US trade war, provided internal factors improve. However, the need for government support and policy reforms is crucial.