Global fashion retailers, such as G-Star Raw, H&M, and Gap, H&M have pledged to raise purchase prices for Bangladesh-made apparel following the labor wage hike. Stephen Lamar, chief executive officer (CEO) of the American Apparel & Footwear Association (AAFA) — a US-based association representing more than 1,000 brands, also said that they will offset the additional cost Bangladeshi apparel makers have to face due to the labor wage hike, reports Reuters.
Bangladesh, the world’s second-largest apparel exporter after China, has raised the minimum monthly wage to Tk 12,500 from December. Factory owners warn that a wage hike ahead of the January general election will cut into their profit margins by 5-6%. Labor accounts for 10-13% of total manufacturing costs, according to industry estimates.
You Can Also Read: MEDIA REPORTS ON WITHDRAWAL OF RMG FROM 12 COUNTRIES ARE MISLEADING
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has also appealed to all brands and retailers to raise the prices of all goods to be shipped from December to cover the increased wages.
AAFA CEO Stephen Lamar said that they would raise purchase prices by 5-6% in line with the production cost rise. “As we [AAFA] and our members have reiterated several times now, we are committed to responsible purchasing practices to support the wage increases,” Lamar said.
Bangladesh is home to over 4,000 garment factories that supply global brands from fast fashion retailers like Zara and Gap to high-end brands like Hugo Boss and Lululemon. But like most consumer goods makers, fashion retailers are struggling with high inventories and a slowing global economy, which has led to a 14% drop in Bangladesh’s garment exports last month.
Bangladesh’s Garment Exports Remain Strong
Bangladesh lost its position as the world’s second-largest apparel exporter to Vietnam in 2020, earning $27.47 billion compared to Vietnam’s $29.80 billion. However, Bangladesh regained the second spot in 2021, with export earnings of $35.81 billion, and has successfully defended its position since then. Currently, Bangladesh holds a 7.9% share of the global apparel market.
As per the World Statistical Review 2023 released by the WTO, Bangladesh secured the second position globally in garment exports, recording $45 billion in apparel exports in 2022, while China maintained its top position.
The World Trade Statistical Review 2023 report shows that China remained the world’s top apparel exporter in 2022, with $182 billion in exports, although its market share slipped from 32.8% in 2021 to 31.7% in 2022. Vietnam stayed in third place with $35 billion in exports and a 6.1% market share. Turkey emerged as the fourth-largest apparel exporter with $20 billion in exports and a 3.5% market share, followed closely by India with $18 billion in exports and a 3.1% market share.
Bangladesh’s RMG Export Potential to EU $60b by 2030
- Bangladesh has the potential to increase its export earnings from ready-made garment up to $60 billion to the EU market through the diversification of garment items.
- Bangladesh has a golden opportunity in the EU market if the country successfully diversifies its export baskets, a study of the Research and Policy Integration for Development Bangladesh (RAPID) said recently.
- In FY23, Bangladesh’s exports to the world market were more than $55 billion, where RMG’s share was $47 billion and non-RMG’s share was $8.5 billion.
- The estimations indicate that the top 45 major products have the potential to range from $8.5 billion to $22.5 billion in the EU market.
- Bangladesh’s share in cotton fibre garments in the EU is 34.7%, while China’s share is only 14.9%. On the other hand, China’s share of non-cotton garment items in the EU is 41.2%, while Bangladesh’s is only 12.2%.
So, Bangladesh has the potential to rise its export revenue by diversifying its products.
The commitment of renowned brands, such as G-Star Raw, H&M, and Gap, to raise purchase prices in line with the increased production costs is a significant move. The assurance from the American Apparel & Footwear Association (AAFA) to offset additional costs further reinforces the industry’s dedication to responsible purchasing practices. Bangladesh, while navigating concerns about profit margins and economic slowdown, has successfully defended its position as the world’s second-largest apparel exporter, showcasing resilience in the face of challenges. Moreover, the potential for Bangladesh to diversify its garment items and increase export earnings to $60 billion in the EU market by 2030 signals a promising avenue for sustained growth. As the nation balances wage adjustments and export strategies, it continues to assert its prominence in the global apparel market.