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Five steps to put the RMG sector back on track

Started by grace.cdc, October 19, 2020, 03:35:50 PM

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Recent figures show the export of ready-made garments (RMG) from Bangladesh during the first four months of the current fiscal year (FY2019-20) fell by 6.67 percent to USD 10.5 billion. Knitwear exports for the four months fell 5.73 percent to USD 5.5 billion, while woven garments exports fell 7.67 percent to USD 5 billion.

These figures offer cause for concern and should encourage all of us involved in this most vital of industries to pause for reflection.

The most important markets for RMG exports from Bangladesh are the US and the EU. Neither of those markets are, at the present time, in recession. Therefore, we cannot blame wider economic forces for the decline in exports from Bangladesh.

Instead, we must look inwards, as difficult as that might be.

Unlike some, however, I do not think it is all doom and gloom right now for Bangladesh's RMG industry. However, I do think the industry is at a crossroads and has reached a stage of its development where fresh thinking and ideas are required if export growth is to get back on track. Blindly following the same road that we have been going down in the past will not, in my opinion, deliver the growth we all know our industry is capable of.

Here I offer five ways in which Bangladesh's RMG sector can get back on track in the medium to long term.

Step 1: Diversify

We continue, as an industry, to be heavily reliant on the export of cheap, basic commodity garments for the mass market retail sector. Such commodities represent more than half of all total exports, around 54 percent according to the most recent world trade figures.

Meanwhile, RMG exports represent about 84 percent of Bangladesh's total exports. With more than half of that 84 percent being cheap, commodity garments, this leaves Bangladesh hugely exposed in this area. What if the market for such products shrinks? Where will that leave our national economy?

We need to diversify from commodity products, firstly, because a shift to more high added value products will boost margins for exporters but secondly, because an over-dependence on one product category exposes Bangladesh's economy to far too much risk.

Step 2: Work smarter

Are all our RMG factories working to their maximum efficiency? There is plenty of evidence to suggest that this is not the case and that productivity rates continue to languish at relatively low levels compared to one of our biggest competitors, China.

There are a whole host of statistics in this area but most observers on this issue claim that productivity in Bangladesh stands at around 40-50 percent, significantly below China. This means garments being made in Bangladesh are, in many cases, taking twice as many labour hours as they take to make in China.

With labour representing such a large proportion of overall overheads in Bangladesh, low labour productivity rates mean that extra time—and wages—are being spent by RMG factories on per unit of production.

Increase productivity, and we can increase overall profits and exports revenues.

Step 3: Improve energy efficiency

There is so much "low hanging fruit" to be had for RMG factories in Bangladesh when it comes to the issue of energy efficiency. Whether it be through the use of inverters, thermal oil heaters, biogas plants, sky lights, boiler economisers, the use of solar—and a whole lot more—energy saving opportunities represent a huge opening.

Already, the industry has been proactive in embracing energy saving initiatives but there is always more that can be done. This includes the industry as a whole—led by the BGMEA—addressing strategic issues such as affordable rates of interest and broader regulatory reform required to scale up energy saving methods.

Suppliers need to understand that our industry is only heading in one direction on this issue, with many apparel retailers looking to enrol suppliers into energy projects to help them meet their own climate goals.

Step 4: Change the brand—go circular

Bangladesh is known for its discounted garment products. This has been a successful backbone of our economy for many years but there are signs that this model is running out of steam. As indicated earlier, it is time to diversify.

So why can we not become known for something else? Why can't we take the lead in the circular economy?

There are very few areas of huge untapped potential in the global apparel industry at the present time. However, the circular economy is certainly one of them.

There is a huge amount of technological developments in textile-textile recycling at the current time. Yet no textile producing country has seriously taken the bull by the horns on this issue—till now.

The opportunity is there for Bangladesh to do that: to become a testing bed for garment recycling at scale. If Bangladesh and the various players in its garments industry could collaborate on this issue, the country as a whole could gain major First Mover Advantage in this market of unlimited potential. But we must move quickly and decisively.

Step 5: Let's all be world class

There's a phrase we sometimes hear in business: you're only as good as your worst employee. One bad employee can easily tarnish the reputation of a whole business. In a similar way, one bad business can easily tarnish the reputation of a whole industry.

In the Bangladesh RMG sector, where the global spotlight always shines so bright, it only needs a report of products being sourced from one factory which is found to be unsafe, or reports of one factory mistreating its workers, and the whole industry is damaged.

We have a great many world class RMG factories in Bangladesh, but the achievements of the majority risk being overshadowed by the blemishes of a few, unless standards and levels of compliance are raised across the board.

In short, it's time for us all to be world class.