Economic Uncertainty: A Growing Threat to Bangladesh’s Garment Exports

A Growing Threat to Bangladesh’s Garment Exports

Bangladesh has garnered its attention worldwide by occupying its position as the second-largest apparel exporter in the world. Despite facing numerous challenges and economic instabilities, the nation has always managed to stand straight in the fierce and highly competitive global market. However, recent issues like the poor infrastructure of factories, pandemics, frequent strikes, natural calamities, and so on give birth to problems like economic uncertainty, inflation, and joblessness.

Here, Posh Garments Ltd will be discussing a growing threat to Bangladesh’s garment exports.

 

Economic Uncertainty: A Growing Threat to Bangladesh’s Garment Exports: Reasons

1. Price Hikes and Inflation

Currently, this is a burning global issue. The outbreak of war, pandemic, increase in foreign currency exchange rates, unavailability of commodities, corruption. etc. causing the increase in prices. Sometimes, they can be out of reach for many people, businesspersons, companies, and so on. Because of the drastic rise in costs, the essentials of factories like fuel, raw materials, and so on have become difficult to access. 

On the contrary, inflation problems in consumer markets like Europe and the USA have resulted in a reduction of disposable income decreasing the demand for apparel. 

 

2. Blockage in the Chain of Supply:

Shutdowns during a national crisis, frequent strikes, unrest, natural disasters, pandemics. etc. hampers the supply chain. Since Bangladesh relies mostly on imported raw materials e.g. synthetic fibers and cotton, disruptions like strikes, blockades, and so on lead to production delays. Delays in production lead to late deliveries to consumers.

So, uncertainty arises regarding payments and the exchange of foreign currencies.  In addition, the shipping costs have also escalated causing a new pile of challenges to the exporters. 

 

3. Frequent Ups and Downs in Currency:

The dodgy value of the Bangladeshi Taka (BDT) is a worth-mentioning threat in this export line. On the one hand, exports can be made more attractive on the global market by a weaker Taka resulting in increased cost of imported goods, and on the other hand, the export scenario gets more complicated due to the reduction of competitiveness of Bangladeshi garments abroad because of stronger Takas. 


4. Trade Drawbacks and Over-Protectiveness:

Undoubtedly, trade barriers can cause a downfall in export activities. Setting strong terms and boundaries in businesses can lead to the elimination of Bangladeshi apparel from the global trade markets. It is known to all that the United States is the key buyer of Bangladeshi garments. Currently, they have set strict tariffs and trade terms that might make Bangladeshi garments less competitive compared to those from other countries. 

Some agreements such as the Generalized System of Preferences (GSP) may also result in higher tariffs on exports, causing erosion to the country’s market share.        

 

5. Changes in Consumer Preferences:

With the rising concerns regarding the environment, consumers from North America, and Europe are learning about environment-friendly and ethically produced apparel. To produce such garments, advanced technology, and raw materials are needed. But a developing nation like ours lacks the funding to import such machinery or products. As a result, there are concerns regarding the ability to afford, especially by the small manufacturers, such machinery and products.    

 

6. Buying from Multiple Buyers:

Many key buyers of apparel are now adopting a special technique to diversify their sourcing. This is known as the “China Plus One” method. Here, buyers tend to buy from multiple producers apart from Bangladesh. These include Cambodia, Vietnam, and India. It is to be noted that these countries have a better economy than Bangladesh. So, if the buyers continue to buy from them then our country might lose its share of global apparel exports. 


7. Poor Infrastructure:

Sadly, despite being the backbone of the economy, there are some garment mills with poor infrastructure within the country. Timely delivery and production are hampered due to improper management of transport, inadequate spaces in port, and scanty power generation. On the global platform, the competitiveness is reduced. Moreover, these barriers lead to the increase of unnecessary costs that threaten export activities. 


8. Labor Problems:

Poor working environment and low wages are the most common issues in the garment industries of Bangladesh. Most industries lack safety equipment for workers which enhances their safety. Additionally, questionable payments make the workers lose their interest in working with satisfaction. This attracts foreign buyers and companies with strict labor protocol that leaves a negative impression on them. As a result, they feel disinterested in buying or investing in such factories.  

 

9. Unpredictable Political Environment:

Bangladesh’s political environment is unreliable in every possible way. Frequent strikes, blockades, violence, processions .etc. severely disrupts all sorts of economic and developmental activities. In such adverse environments, everything from production to delivery is hampered. Uncertainty among the workers and the affiliated people arises regarding safety, foreign investments, smooth conduction of the factories, transportation, and so on.

Learn More: The Journey of Sustainable RMG Industry in Bangladesh

 

Methods to Tackle the Threats in Bangladesh’s Garment Exports:

1. Expansion of the Export Markets:

It is high time Bangladesh considered exporting to countries with developing economies such as countries in Asia, Latin America, and Africa. This will help increase economic drawbacks and reduce dependence on key buyers such as the USA. If our country diversifies its export range of investments, then it can mitigate the risks related to apparel exports.

 

2. Investing for Proper Infrastructure and Modern Technology:

Improving the questionable infrastructure of the garment industries is a dire need for us. For, a proper infrastructure is the foundation of a safe and sound working environment. So, we should introduce budgets to ensure proper infrastructure in the mills. In addition, eco-friendly and modern technologies should also be installed in the industries to ensure ethical and environment-friendly production of apparel so that we can attract financially strong buyers.

 

3. Viability Measures:

Embracing renewable methods can open doors of new market scopes adjoining Bangladesh with the worldwide change towards ethical consumerism. Buyers with strict trade policies, tariffs,s, and protectionism can be attracted by ensuring proper wages for workers, eco-friendly technologies and productions, and transparency in the supply chain.


4. Bracing Local Policies:

Ensuring political stability and a business-friendly environment, can boost the industry to a different level. Additionally, it will also attract foreign investors and buyers. Simultaneously, the government should introduce fruitful policies such as tax breaks or subsidies for sustainable practices. Such policies will support the garment industries with financial inducement. 

 

Conclusion

Bangladesh, well-known as the garment factory of the world, is surely the backbone of the country’s growing economy. However, it is vulnerable in the face of global economic uncertainty. The reason for its economic crisis includes both external and internal challenges. However, such challenges can be dealt with through effective steps which include diversifying markets, investing in infrastructure, embracing sustainability, and strengthening domestic policies. 

Hopefully this guide on  a growing threat to Bangladesh’s garment exports has enlightened you!