Indians ‘Wait & Watch’ Bangladesh’s Textile Market Situation
By Avinash Mayekar, MD – Suvin Expo LLP
It is better to be cautious than to invest hastily. The recent unexpected political turmoil in Bangladesh has created quite a stir in the Indian textile industry. Many discussions are taking place across various forums about the possible advantages that India might soon benefit from. However, in my honest and unbiased opinion, I would like to present some facts before making any premature statements about a potential growth surge.
- To begin with, the textile and apparel industry in Bangladesh contributes 80% of its export earnings and employs a workforce of 4.5 million people. The current situation in Bangladesh is a temporary turn of events, likely a political coup that may have been influenced by other countries. However, Bangladesh, as a nation, cannot afford to neglect its most important industry: textiles and apparel.
- In recent years, Bangladesh’s textile and apparel industry has performed exceptionally well, securing a strong double-digit market share in major global apparel markets such as Europe and the USA. Bangladesh is a preferred market for apparel, enjoying zero-duty access to Europe.
- Given Bangladesh’s strong background and support for apparel exports, if there is an “acclaimed advantage” for India from this situation, we need to compare the Indian textile and apparel industry with that of Bangladesh.
- Bangladesh benefits from very low interest rates, thanks to various unbeatable financial arrangements, especially those offered by most developed countries.
- Numerous brands from countries such as Europe, the USA, and China have investments in Bangladesh’s apparel industry, providing financing at much lower interest rates than those available in India.
- Another point of consideration is the higher operational efficiency of apparel plants in Bangladesh compared to India. Bangladesh’s apparel industry enjoys a 10-15% higher plant efficiency than India, primarily because of the higher skill level of its workforce and the use of the best available technologies. The operational efficiency is also higher because the apparel industry is the primary income source for the people of Bangladesh.
- When comparing an Indian apparel unit with a Bangladeshi one on pricing, the following additional costs burden Indian manufacturers:
- 12% duties imposed on Bangladeshi goods in Europe.
- At least 1-2% higher interest rates in India compared to those offered to investors in Bangladesh.
- Lower plant efficiencies in India by about 10-15% compared to Bangladesh’s apparel industry.
- Effective labor costs are much cheaper in Bangladesh due to higher productivity.
- Chinese investors have factories in Bangladesh to fulfill their orders.
When we consider all these factors together, it becomes clear that it is challenging for Indian companies to compete with Bangladesh’s garment sector.
Considering the current situation, which is purely political, it is well understood that no country can afford to ignore its earnings. Bangladesh is renowned for exporting high-quality garments to major brands worldwide for many years. Most brands have complete control over the Bangladeshi market and are satisfied with sourcing from there due to the numerous advantages mentioned above.
Therefore, I, unfortunately, do not believe that the Indian apparel industry will gain any immediate or long-term advantage from the current situation in Bangladesh.
Conclusion
In focusing on the challenges facing our apparel industry, we must acknowledge issues such as labor unions, political interference, and logistical problems. The working conditions in Bangladesh’s apparel industry are much more favorable than those in India. Hence, it is better not to harbor false hopes from this situation and understand that it is only a temporary glitch in the Bangladeshi system. However, we should closely monitor the situation and be ready to seize opportunities when disruptions occur in Bangladesh’s efficient operations.
To capitalize on such situations, we need effective skill management and full control over the PESTEL (Political, Economic, Social, Technological, Environmental, and Legal) factors around us. While there might be an immediate advantage from the current Bangladesh situation, it is unlikely to last in the long run, especially as long as they enjoy a duty advantage.
In conclusion, we should prepare ourselves for future opportunities or focus on developing our own global brands and pursuing Free Trade Agreements (FTAs) to gain a competitive edge. Until then, it is wise to simply wait and watch!
