Tuesday, December 09, 2008

Bangladesh bucks the global downturn trend

By Paul Cochrane in Dhaka, Bangladesh
International News Services

As the old dictum goes, one man’s loss is another man’s gain. In a globalized world in the midst of a financial downturn, this saying is particularly true, with certain countries unexpectedly benefiting from the ongoing crisis.
Bangladesh is one of the unexpected gainers, especially as 75.83% of its national exports come from knitwear (39.21%) and woven goods (36.62%), primarily to the EU and US markets. The expectation would be that exports of Bangladeshi ready made garments (RMG) would slide in accordance with the drop in global stock markets and plummeting retail sales. After all, India has laid off 700,000 textile workers, Indonesia 120,000 (10% of the sector), and China has equally downsized operations in the RMG sector in the past few months. But the reason that Bangladesh’s prospects are looking rosy – in woven, knitwear and footwear - is that the goods the country exports are not medium- to high-end wear, as China, India and elsewhere have increasingly moved into of late.
Bangladesh predominantly produces low-end goods, and low-end priced goods are in greater demand as people in the US and Europe tighten their belts for what appears to be a financially rocky road ahead. Bangladesh also has much lower minimum price fixation than elsewhere, with a dozen cotton t-shirts exported to the EU-27 market costing US$19.56 in 2006 but just US$15.60 in 2007, significantly less than nearest rival Cambodia at US$29.04, according to Eurostat.
In a period where companies are cutting costs at every possible corner, such figures speak for themselves. Sure, in the near term Bangladesh’s RMG sector will not report the kind of double digit growth figures they have experienced over the last few years, but static and marginal growth is certainly more preferable than laying off workers and downing tools. And if Bangladesh effectively utilizes the opportunities this crisis is providing to cement good working relations with major buyers, Bangladesh over the next few years will rise up the ranks to be among the top three RMG manufacturers in the world.

Photo by Paul Cochrane

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