Covid has escalated a shift atop the world’s most dominant apparel exporting nations.
Vietnam has displaced Bangladesh as the world’s second-largest apparel exporter, while Turkey surpassed India as the fourth largest, according to the World Trade Statistical Review 2021, a World Trade Organization (WTO) publication released Friday that breaks out global trade numbers.
The news unleashed anger and analysis in the manufacturing sector in Asia where the race for growth is not just within a country itself, but also competitive across borders.
The race for the second slot behind China is of course still a very tight affair. Apparel exports from Vietnam in 2020 were estimated at $29 billion, accounting for 6.4 percent of the global market, up from 6.2 percent in 2019. Bangladesh, meanwhile, tallied $28 billion last year, with a 6.3 percent share of the global market, compared to 6.8 in 2019.
China continues to retain global dominance, with exports of $142 billion in 2020, or 31.6 percent of the global market—up from 30.8 percent in 2019.
With markets in the European Union and the U.S. under lockdown for a large part of 2020, overall exports dropped substantially.
The top 10 exporters, including China, the European Union, Vietnam, Bangladesh, Turkey, India, Malaysia, United Kingdom, Hong Kong and Indonesia, shipped a total of $378 billion in goods in 2020, down from $411 billion in 2019.
Manufacturers in Bangladesh made hurried reviews and analyses over the weekend about the factors that led them to lose pride of place as the world’s second-largest apparel exporter. While many industry insiders primarily blamed Covid-19, and a longer Bangladesh lockdown against Vietnam’s well-managed Covid situation, others believed that the shift was years in the making—for a variety of reasons.
Khondaker Golam Moazzem, research director, Centre for Policy Dialogue (CPD), Dhaka a think tank, said that Bangladesh’s fall wasn’t just a fluke, or a hiccup related to Covid that allowed Vietnam to gain traction.
“Bangladesh and Vietnam have been both seeing growth the apparel export over the past decade with a close margin,” Moazzem said. “But there is a difference in that while Bangladesh has some weaknesses, and Vietnam has particular advantages, for a start a lot of the China business moved towards Vietnam because it is a diversified product market. Although it was earlier thought that the China-U.S. relationship was tense because of President Trump, it is a continuing factor, and Vietnam will become a growing source.”
Bangladesh has primarily attracted domestic investors, and with very few foreign investors supporting the sector, he added. On the other hand, Vietnam welcomes foreign investment, thanks in large part to its strong economic zones.
“Vietnam also has a strong regional value chain—both in terms of proximity for yarn and other materials and also in terms of trade agreements, including a free trade agreement with Europe,” Moazzem continued. “While Bangladesh does have a MultiFibre Agreement (MFA) with several countries, this incentive-based completeness also causes damage—we didn’t invest enough in technology, in foreign direct investment and this did not give any additional benefit.”
The differences don’t end there. “Compliance is very strong in Vietnam, and while Bangladesh is doing well, environmental pollution is still high,” Moazzem added. “The online marketing skills in Vietnam are very high, and while a bulk of Bangladesh production is cotton, Vietnam has a capacity to manufacture both cotton and other textiles.”
What’s more, “Vietnam worker productivity is higher—in 2018, Bangladesh worker productivity was at 58 percent, while Vietnam was 72 percent, and their workers are more educated,” he added.
Looking ahead, Moazzam said: “This neck-to-neck competition may sustain for another year, but if Bangladesh does not make enough investments in foreign direct investment, productivity, diversification and online and ICT-based market sales, the country will face challenges.”
Members of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) are cognizant of these factors.
“Who wants to lose the position, right?” asked Abdullah Hil Rakib, director BGMEA and managing director Team Group, which has six factories around Dhaka. “In the exporters’ minds, we are losing our position, so we have to take it back by understanding what we need to do to gain it back in the near future.”
This change called for a renewed look at the initiatives and efficiencies, he said.
“We’re looking at the different parameters, including a comparison of wages versus productivity,” Rakib said. “We have a better wage structure but the output is not in line with what it should be. It is a time to see the challenges, and turn them around to meet them better.”
Meanwhile, India which exported $13 billion worth of apparel in 2020 was outdone by Turkey’s $15 billion. India had a 2.9 percent share in global exports, compared to Turkey’s 3.4 percent in 2020.
Several factors collided to bump Turkey ahead of India.
While manufacturing in Turkey stepped up because of reshoring due to Covid-19, India also had several woes that were unique to itself—not only did the pandemic cause an extended lockdown of more than two months, but migrant workers were slow to return, and buyers subsequently moved orders to other locations.
Industry analysts in India believe that although buyers will start to come back, other systemic problems and policies that have affected the industry include those related to the goods and service tax, the value added tax, the demonetization slowdown, and the fact that different states in India have their own initiatives that need to be understood and negotiated.
In terms of textiles exports, India remained second after China, according to the WTO report – with exports of $15 billion, while China was at $154 billion in 2020. India has a 4.2 percent share in global exports, compared to China’s 43.5 percent.