Asia’s big three apparel exporting countries are rivals, to say the least.
According to a recent report by the World Trade Organization and the United Nations, Vietnam has once again emerged as the highest rated by brands and retailers among the top three garment-exporting locales including China and Bangladesh in a competitiveness assessment by selected suppliers. This judgment isn’t sitting well with Bangladesh.
Fashion brands and retailers view China and Vietnam as more critical sourcing bases, with Turkey another major sourcing destination for European Union-based fashion companies, according to the report.
“More than 70 percent of surveyed respondents currently source from more than six different countries, while nearly 40 percent source from more than 10 different countries. Larger companies, in general, adopt a more diversified sourcing base than smaller ones,” the report said.
While China still leads in terms of the four key parameters of innovation, vertical integration, efficiency and lead time, Vietnam leaps ahead on seven others, and is seen as on-par with China in terms of production quality.
Bangladesh, which has held its place for a number of years as the second largest garment exporter in the world–a position taken over by Vietnam, according to some counts in 2020–rates lower in 10 out of 12 categories compared with its Asian neighbor.
Many Bangladesh manufacturers take issue with this characterization and some of the comparison in the report. For example, Bangladesh received a 2 for sustainability, compared to Vietnam’s 3.5. This is puzzling to manufacturers there as they argue that Bangladesh has the highest number of green factories in the world.
“With 155 LEED certified green factories, Bangladesh has the highest number of green garment factories in the world,” said Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA). “While assessing the competitiveness, the report stresses the need for vertical integration, raw material sourcing, innovation, flexibility, agility and speed to market. We have also prioritized all these points.”
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Exports in Bangladesh have picked up over the last six months, seeing a 28.4 percent uptick in this period compared to the corresponding period of FY2020-21.
Manufacturers in Bangladesh also contend that the report doesn’t accurately measure product quality, as Vietnam’s expertise manufacturing higher-end items makes direct comparisons difficult.
However, other manufacturers and analysts in Bangladesh are taking heed of many of report’s points, but believe the sourcing powerhouse has enough strengths to maintain its position.
Mustafizur Rahman, distinguished fellow at Bangladesh’s Centre for Policy Dialogue, argues that the most crucial elements still favor Bangladesh. “Overall, it does give an appropriate picture in regard to the state of things,” he said, referring to the competitiveness survey. “In regard to the quality, efficiency, lead time, vertical integration, financial stability, political stability Bangladesh falls behind Vietnam.”
On the other hand, “If you look at the two crucial elements of competitiveness–price and tariffs–at the end of the day if you are efficient or not, for the buyers and brands the major issue in a particular segment is the price and second is the tariff,” he added. “If they import at that price and then have to pay tariff or not, that adds to their buying decision.”
“The other point important for buyers is lead time. In that case Bangladesh is somewhat lower than China and Vietnam, but brands and buyers can deal with that if they place orders beforehand. That’s what they do now when they negotiate with Bangladesh–they factor that in knowing manufacturers have to import yarn and cotton and the knitwear section has been growing in strength,” he said.
The report also pointed out Bangladesh’s strong domestic links to spinning factories in the knitwear sector, creating high domestic value-added content for this export.
The garment manufacturing sector in Bangladesh accounts for more than 80 percent of the country exports, or more than 11 percent of GDP, and employs more than 4 million workers.