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Bangladesh’s aim for $50 billion RMG exports by 2021 seems too high

In December 2016, at a seminar organised by the BGMEA ‘Taking Bangladesh Apparel Sector Forward’, the state minister for foreign affairs Shahriar Alam said, last fiscal, from July 2015 to June 2016, the country’s garments exports touched $28.09 billion whereas in the calendar year ending in December 2016, exports were $28.67 billion. To reach the target of $50 billion in 2021, the export rate needs to grow at a 12.25 per cent cumulative rate.

Past growth rates have been in double digits, but given the current international economic and trade environment, whether it is possible for Bangladesh to continue gain double-digit growth rates is doubtful. Asia-Pacific Trade and Investment Report 2016 notes, price growth of export goods of Bangladesh will fall in 2017 as against the current year, however, volumes will significantly increase.

At a recent conference at Harvard organised by ISDI, all stakeholders including representatives from buyers and labour unions unanimously felt the price of clothing has been falling in recent years. The downward pressure on price, from the demand side, has been two-fold: Consumers are now buying more high-end products and apparel and footwear sellers are losing consumer big bucks to healthcare, rent, home-related products, electronics and cars.

An additional reason for the lower price is that with greater prosperity, basic needs such as food and clothing have low price elasticity. The commerce minister Tofail Ahmed last month asked labour bodies to press buyers to raise RMG prices. Ahmed urged union leaders to connect with their counterparts in importing countries to use their influence on buyers and consumers. He said labour organisations of the RMG sector should tell buyers to raise product prices, which would help increase labour wages in the sector.

Readymade garments exporters have recently demanded higher cash incentives and devaluation of the Taka against the US dollar. To retain market share in the low-cost-and-high-efficient region, the path to profitability and export growth is increased efficiency, higher productivity and quality management.