Bangladesh could overtake China to become
the EU’s largest apparel supplier by 2020, according to a report from the global
business information company Textiles Intelligence.
In 2016 EU apparel imports from Bangladesh
rose in volume for the ninth consecutive year and, as a result, Bangladesh’s
share of EU apparel imports from all sources almost doubled over the nine-year
period, from 12.2% to 23.4%.
China, by contrast, suffered further losses
in share in the EU apparel import market in 2016. This trend has been apparent
for some time now and it seems set to continue as the Chinese apparel industry
grapples with problems of rising costs and labour shortages, says the report.
In 2016 the share of EU apparel imports
which came from China fell in volume terms for the sixth consecutive year to
37.9%. In 2010 over half of the volume of EU apparel imports came from China
but by 2016 barely a third did so -- reflecting a sustained trend by EU buyers
towards sourcing from alternative locations.
In an attempt to hold on to their market
share, Chinese exporters appear to be having to cut prices. In 2016 alone, the
average price of EU apparel imports from China fell by a sharp 8.2%.
However, a strategy of holding on to market
share by cutting prices is unsustainable for a country in which labour costs keep
on rising significantly and shortages of labour are a growing problem, states
the report.
The success of Bangladeshi garment
exporters in achieving rapid growth in market share and threatening the
dominance of China in the EU apparel market can be attributed to two main
factors.
One is their ability to export garments to
the EU duty-free under the EU’s Generalised Scheme of Preferences (GSP)
Everything But Arms (EBA) arrangement. The other is their focus on producing
and exporting simple, basic apparel at competitive prices, helped by low labour
costs.
In 2016 Bangladesh was the second cheapest
supplier of apparel to the EU out of the leading ten supplying countries,
behind Pakistan but ahead of China. Furthermore, it was the cheapest supplier
among the leading ten suppliers in 12 individual apparel categories.
However, it remains to be seen whether the
share of EU apparel imports which comes from China will continue to fall or
whether it will level out. China still has vast amounts of untapped potential
and the capacity of the Bangladeshi apparel industry to sustain growth at the
present rate remains an unknown quantity.
The Bangladeshi apparel industry will have
to tackle a number of issues in the coming years if it to maintain its
momentum. Such issues include rising production costs, concerns about security,
strikes relating to low wages, poor treatment of workers, and factory
compliance. However, addressing these issues may force the industry to increase
its export prices, and this could put a dampener on demand, concludes the
report.