[🇧🇩] Bangladesh Export Industries

[Bilal9]

Runner Auto returns to profit in Q2 with 49% revenue growth​

The automobile maker registered a Tk64.57 lakh profit in the second quarter of FY24​

Runner Automobiles, a local two and three-wheeler maker and assembler, returned to profit in the second quarter of FY24 with a 49 percent revenue growth riding on an upbeat three-wheeler sale in the October to December quarter of the 2023-24 fiscal.

According to its unaudited consolidated financial statement, its revenue grew to Tk216 crore during the October-December period from Tk145 crore during the same time in the previous fiscal year.
The automobile maker registered a Tk64.57 lakh profit in the second quarter of FY24 in contrast to Tk26.56 crore loss posted during Oct-Dec in 2022-23 fiscal year.


The company's earnings per share (EPS) stood at Tk0.05 in the second quarter.
In its price sensitive information (PSI), the engineering firm said its three-wheeler business witnessed a significant growth in revenues, which resulted in the positive EPS.


According to its half-yearly financial statement, its losses narrowed to Tk27.36 crore during the July-December period from Tk35.49 crore in same period of the last fiscal year.


In the PSI, Runner said, "Amidst very challenging economic and political conditions, the company had set clear target and ensured dedicated focus on high prospect segments as per plan in order to deliver a significant shift in business performance."

The completely revived 3W network played the biggest role in the sales turnaround for its Bajaj RE three-wheelers in Q2.

While the newly introduced Yadea electric scooter segment started an encouraging journey, smart planning and focused drive for specific motorcycles categories also helped the business growth of Runner despite the fact that the two-wheeler industry had further dropped in this quarter, the company said.

In 2022-23 fiscal year, the Runner Automobiles had incurred a loss of Tk87.90 crore, for which the company did not declare any dividend to its shareholders. It got listed on the stock exchange in 2019.

On Thursday, its shares price fell by 2.41% or Tk0.9 each to Tk36.40 at the Dhaka Stock Exchange (DSE).

 

[Bilal9]

 

[Bilal9]

Executive Woodworks envision reshaping Bangladesh’s furniture exports​

With furniture exports valued at $110.36m in the past fiscal year, Bangladesh’s 15-20 enterprises have already paved pathways across international borders​

A worker shapes wood in an automated furniture factory of Executive Woodworks Ltd, a subsidiary of Meghna Executive Holdings, in Sreepur upazila of Gazipur. The photo was taken recently. Photo: Saqlain Rizve

A worker shapes wood in an automated furniture factory of Executive Woodworks Ltd, a subsidiary of Meghna Executive Holdings, in Sreepur upazila of Gazipur. The photo was taken recently. Photo: Saqlain Rizve

In a world fuelled by creativity and innovation, the global furniture market seamlessly intertwines artistry with commerce. A monumental player, the industry boasted a staggering valuation of $516.66 billion in 2022, serving as a nexus of culture, design, and business on a worldwide canvas. Amid the frontrunners in this domain, China has emerged as an indomitable force, disseminating its craft to the far corners of the earth. With a remarkable annual furniture export figure of $86,876.3 million in 2021, China stands as a testament to manufacturing excellence and prowess.
Yet, amidst these giants, a new contender from Bangladesh takes centre stage – Executive Woodworks Limited, a subsidiary of Meghna Executive Holdings (MEH), which was established in 1965.
Meghna Executive has not only carved its niche in the furniture industry but has also diversified its business portfolio to encompass industrial goods manufacturing, light engineering, apparel and textiles, exclusive import and premium dealership of esteemed automobile brands like BMW and KIA, lifestyle products such as Kohler and Penthouse Livings, and authorised resale of cutting-edge electronics and IT products, including Apple.

Executive Woodworks Ltd, a subsidiary of Meghna Executive Holdings, in Sreepur upazila of Gazipur. Photo: Saqlain Rizvee

Executive Woodworks Ltd, a subsidiary of Meghna Executive Holdings, in Sreepur upazila of Gazipur. Photo: Saqlain Rizve

In the ever-evolving landscape of the furniture market, Executive Woodworks Limited embarks on a transformative journey that has the potential to reshape the narrative of furniture exports. Along with the Indian and Malaysian technical team, the company envisions a future where innovation and automation seamlessly converge to redefine the sector.

The company is headquartered within an expansive 6,80,000 square feet complex, housing an automated kiln dry unit, state-of-the-art woodworking machinery, dust free environment and robotic finishing lines that usher in a new era of precision and efficiency.


Yet, this story transcends mere statistics and technological advancements; it encapsulates Bangladesh's unwavering determination to etch its presence onto the global furniture stage.

With furniture exports valued at $110.36 million in the past fiscal year, Bangladesh's 15-20 enterprises have already paved pathways across international borders. As Executive Woodworks joins this esteemed group with a vision of 100% exports, it embarks on an audacious objective– to export its meticulously crafted furniture to every corner of the world, with a strategic focus on the Western market, particularly the US.


Inspired by Vietnam

In the year 2021, Vietnam secured the fifth position on the list of the world's leading furniture manufacturers and exporters. It solidified its position as Asia's second-largest furniture exporter, boasting a remarkable export value of $12,959.6 million.


A worker spray paints wood in an automated furniture factory of Executive Woodworks Ltd, a subsidiary of Meghna Executive Holdings, in Sreepur upazila of Gazipur. Photo: Saqlain Rizve

A worker spray paints wood in an automated furniture factory of Executive Woodworks Ltd, a subsidiary of Meghna Executive Holdings, in Sreepur upazila of Gazipur. Photo: Saqlain Rizve

"In 2021, during a business trip to Vietnam, Moklasur Rahman Pinto, the managing director of Meghna Executive Holdings, delved into the intricacies of furniture manufacturing and export. This experience sparked the contemplation of establishing a 100% export-oriented company in Bangladesh," revealed Masud Rana, deputy general manager of MEH.

He further said, "Over 80% of our nation's exports emanate from ready-made garments, rendering the export market somewhat monotonous. We aspire to inject diversity into this landscape through our business. We firmly believe that with augmented government support for this initiative, success is inevitable."


Fuelled by this vision, the journey commenced in 2022. The construction of the manufacturing facility began in Jaina Bazar, Gazipur, marking a significant step forward. The factory's operational capacity encompasses the production and shipment of 5 containers measuring 40ft HC each day to the US. This robust infrastructure caters to the medium-high and high-range furniture market, accompanied by a lofty annual export target of $70 million.

Dedicated to excellence and sustainability

As a 100% Export-Oriented Unit (EOU) factory, Executive Woodworks proudly holds certifications such as ISO 9001:2015, Fair Trade USA, EMS ISO 14000:2015, and UL Greengard certification. The company's commitment to sustainability is evident through the utilisation of FSC-certified timbers and sustainable materials, ranging from hogla, seagrass, water hyacinth, jute, and bamboo to ceramics, bone, and both local and imported timber.

The factory's modern manufacturing landscape stands as an indication to technological advancement.

Automated processes, including a kiln dry unit, sophisticated woodworking machinery, 6-axis CNC machines, automated veneer plants, robotic finishing lines, and a climatically controlled finished goods store, underscore a commitment to precision and quality. Notably, the factory's scope extends beyond modern creations, embracing the revival of traditional local Cane and Rattan Furniture, fostering rural employment and catering to overseas demand.

"Along with design western countries are more concerned with durability and sustainable finishing of products. Along with advanced technology, we have hired designers from different countries around the world," said Mohd Sakib, merchandising manager of Executive Woodworks Limited.

Empowering through employment

An instrumental facet of Executive Woodworks Limited's operations is its commitment to women's empowerment. The factory provides employment opportunities for 30% female workers, accompanied by amenities like daycare and breastfeeding centres, and facilities for sanitary pad usage and disposal.

Exployees plan for a project at the furniture factory of Executive Woodworks Ltd, a subsidiary of Meghna Executive Holdings, in Sreepur upazila of Gazipur. Photo: Saqlain Rizve

Exployees plan for a project at the furniture factory of Executive Woodworks Ltd, a subsidiary of Meghna Executive Holdings, in Sreepur upazila of Gazipur. Photo: Saqlain Rizve

In a world driven by innovation, Executive Woodworks Limited stands poised to redefine the furniture export landscape, embodying Bangladesh's determination to leave an indelible mark on the global stage. With its blend of craftsmanship, automation, and sustainability, the company envisions a future where every piece of meticulously crafted furniture finds its place in homes around the world.

 

[Bilal9]

Bay Economic Zone wooing local, foreign investors​

The EZ has received $175m investments so far​

Infograph: TBS
Bay Economic Zone, set up by Bay Group on 65 acres of land in Konabari, Gazipur with modern facilities, is now fully ready to woo local and foreign investments with 40% of the land already leased out to potential investors.

A number of foreign companies seeking to shift factories outside China and investors from Taiwan, South Korea and some European countries are keen on investing in the economic zone developed in the private sector.

Chinese toymaker Meigo (Bangladesh) and Bay's own sportswear factory have already gone into production there, according to high officials of Bay Group.


"Some 40% of the 65 acres of land have already been leased out to the investors. A number of companies from South Korea, Europe and Taiwan have shown investment interest," Bay Group Managing Director Ziaur Rahman told The Business Standard.


"It is mainly the companies that seek to transfer their production facilities from China to other countries who are coming. We're talking to their representatives. Hopefully, some foreign investments will come here soon," he added.

He stated that the Bay Economic Zone has roped in more than $100 million in foreign investment apart from Bay's own investment of nearly $75 million, including cost of infrastructure development.


Meigo (Bangladesh), which exports toys to Japanese and European markets, started its operations in the first economic zone in Gazipur in 2018 with $15.8 million investment – a year after the zone secured a licence from the Bangladesh Economic Zones Authority (Beza) in 2017.

Additionally, the Taiwanese apparel maker Makalot, under its registered name in Bangladesh – Makalot (BD) Ltd – will invest $17 million to set up a factory here, according to Bay officials.


With the setting up of a factory in a six-storey building, Makalot (BD) will create employment opportunities for around 1,500 people to produce sportswear, readymade garment, sleepwear, leisure clothing and outdoor garment.


In January 2023, the zone authorities signed an agreement with the Taiwanese investor for allotting 10,119 square metres of space. Currently, Makalot has over 33,000 employees in factories in Indonesia, Vietnam, Cambodia, China and the Philippines.

The Bay Group MD said the construction work of Makalot's factory in Bangladesh is now underway and the factory is likely to go into production by April this year.


Ziaur said their own factory in the economic zone – Bay Sports Wear Limited – manufactures export quality shoes in collaboration with international shoe-maker Stella.

Other factories awaiting the start of production at the economic zone include Formoza Mold and Lasting Ltd producing plastic items; Bay Box Limited manufacturing packaging and accessories items; Essential Dyeing Ltd producing composite knit garments; and Bay Cargo Centre Ltd producing logistic items.

"We'll now selectively allocate land to companies producing high-end value products. Some textile companies, which will manufacture man-made fibres, are talking to foreign companies to acquire land. We are ready to serve these investors," Ziaur Rahman told TBS.

Some 10,000 new direct employment will be created in the economic zone. Another 50% more indirect employment would be generated there through the supporting businesses.

There is a plan to expand the economic zone to 100 acres of land given the increased demand from the investors, both from home and abroad, Ziaur said while sharing his Bay's future expansion plan.

Currently, a total of eight private economic zones are in commercial operation. The Beza has set a target of setting up 100 economic zones across the country by 2041 to create some 10 million jobs.

The economic zone authority has set a target for $40 billion additional export earnings from those economic zones by that time frame.

Investors enjoy tax holidays, duty-free imports of raw materials and machinery, exemption from dividend tax, VAT-free electricity, gas and water and other financial facilities in the economic zones.

Besides, they also enjoy some other non-financial advantages such as bond facility, One Stop Service (OSS), repatriation of disinvestment, unlimited telephone transfers and separate customs procedures.

 

[Bilal9]

RMG expects order pickup from April based on US, UK market reports​

Bangladeshi exporters anticipate a surge in clothing orders from the beginning of the second quarter of 2024, particularly as global retail shops have successfully cleared out their winter inventories, thanks to several festive occasions and easing inflation in the West​

After a chilly winter for the apparel industry, a sunnier outlook may bloom in the coming summer.
Bangladeshi exporters anticipate a surge in clothing orders from the beginning of the second quarter of 2024, particularly as global retail shops have successfully cleared out their winter inventories, thanks to several festive occasions and easing inflation in the West.


In discussions with The Business Standard, Bangladesh's apparel industry leaders and representatives of global buyers said retail outlets in their major export destinations such as the USA and the UK experienced a sales boost during November and December due to various festivals such as Black Friday, Cyber Monday, Christmas Day, and Boxing Day.


Data from the US Census Bureau also indicates a consistent upward trajectory in apparel store sales over the past year, increasing from $13.7 billion in monthly sales in January 2023 to $21.8 billion in November.


In December last year, US monthly apparel store sales were estimated to be $29 billion, 9% higher than in December 2022. On a year-to-date basis, the sales in 2023 were 6% higher than in 2022, according to Wazir Advisor, an Indian market research firm.
The Conference Board, a worldwide think tank, carries out a monthly assessment of US consumer sentiments, spending intentions, and outlooks regarding inflation, stock prices, and interest rates.


According to its latest survey, the US Consumer Confidence Index rose to 110.7 in December 2023, marking an increase from 102.0 in the preceding month. This figure is slightly above the index recorded in December 2022.
Retail clothing sales in the UK market went up as well.

According to data from the Office of National Statistics, the executive office of the UK Statistics Authority, monthly retail sales for apparel in the UK market exhibited an upward trend throughout 2023. However, the market also experienced a slight downturn in the last quarter.

In December last year, Bangladesh achieved its highest monthly apparel export value, totalling $4.56 billion over the 12 months of 2023. However, this figure represented a 2.4% decrease compared to December 2022, according to Export Promotion Bureau (EPB) data.

The overall growth in exports for the entire 2023 saw a slight 3.67% increase. The total export for 2023 amounted to $47.39 billion compared to the $45.71 billion recorded in 2022, EPB data shows.

Orders expected to surge from Q2

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said, "Our exporters are expecting a surge in apparel orders from global buyers starting from the second quarter of this year."

Referring to the drop in inflation in Europe and the US, he said, "Brands are expected to boost their apparel sourcing from Bangladesh, having successfully cleared their inventory over the past year. Some buyers are already in talks with our exporters to ramp up orders."

Fazlee Shamim Ehsan, vice president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said countries belonging to the Organisation for Economic Co-operation and Development (OECD) are expected to witness a decline in inflation to 3.2%, along with projected GDP growth of 1.2% in 2024.

"We foresee a boost in Bangladesh's apparel exports during the second quarter of 2024," Shamim Ehsan said, adding that as inflation cools down, consumers are likely to spend more on clothing items.

Shofiqur Rahman, executive director (Sales and Marketing) of Zaber & Zubair Fabrics Ltd, the largest textile division of the Noman Group of Industries, also reflected the optimism expressed by leaders in the apparel industry.

"In the post-pandemic era, global brands engaged in extensive imports, with a substantial portion of the merchandise stored as inventory in their warehouses.

Nevertheless, a majority of retail outlets have already exhausted their inventories, attributed to an early winter in Western countries last year," He told TBS.

Drawing on his personal experience during last year's visit to Denmark, Shofiqur said typically, winter snowfall in the West occurs towards the end of December but snowfall occurred a month early this time which prompted retail stores to clear out their inventory.

"There is a potential for increased business opportunities. Some exporters are now in talks with buyers for order placements between May and June," Shofiqur Rahman said.

The textile manufacturers plan to start fabric production in early June, with garment production expected to start later in June, continuing through November, the Zaber & Zubair official added.

Preferring to remain anonymous, a senior official from a European brand informed TBS that they were apprehensive of potential political instability in view of the national election in Bangladesh. With the election now over, they are now of a positive outlook.

The head of business development for another multinational buying house, who also oversees the South Korean market, predicted that the current year will be favourable for the apparel business citing the decline in inflation across various countries.

The import market in Korea remains stable compared to the previous year and Bangladeshi exporters are experiencing growth due to their competitiveness, the buying house official added.

Some challenges yet to be addressed

BGMEA President Faruque Hassan said despite a potentially bright outlook, the industry is poised to encounter numerous challenges in the coming days. The recent increment in minimum wage at factories starting from December last year, a surge in lending rates, and elevated gas and electricity prices, are causing substantial increase in production costs.

Shofiqur Rahman, the executive director of Zaber & Zubair Fabrics, said freight costs hiked due to the Red Sea conflict, and lead time went up. Now every factory has to extend their shipment time and it has become a challenge for all apparel exporting countries, not only Bangladesh.

But those countries having deep sea ports will get a competitive advantage. Freight costs also will increase raw materials import costs. At this moment, our customers expect prices below the actual product cost.

Currently, some industrial zones are facing winter time gas supply shortages, but the government is looking for long-term sourcing partners for LNG, which might be a solution for gas supply, Shofiqur Rahman said.

Textile makers are trying to continue their business at break-even cost and in some cases a little bit below that, he said.

He, however, mentioned that Bangladesh's apparel industry has demonstrated resilience in dealing with adverse situations over the past 40 years.

"We have garment, textile, and accessory facilities in close proximity, which is a comparative advantage over other countries," he said.

"Our workers are using their maximum physical ability but they are not able to compete with China as they are using fully automated machinery. Workers are multi-tasking; they can operate various machines," Shofiqur Rahman added.

 

[Bilal9]

2023 sees 134 new RMG units despite global slowdown​

Most of these investors are new while some large players also joined the race to expand their business. A large number of these factories are supposed to come into production by this year.​

Employees working at an RMG factory. File PHOTO: TBS

Despite a global economic slowdown, Bangladeshi entrepreneurs came up with fresh investments in 2023 to set up some 134 new RMG factories to tap the growing potential of the thriving sector, according to industry insiders.

Most of these investors are new while some large players also joined the race to expand their business. A large number of these factories are supposed to come into production by this year.

Apparel-makers say there is a huge potential for Bangladeshi garments on the global market as many large global buyers are shifting their sourcing destination from China to other areas, preferably Bangladesh.


In some cases, buyers are moving to Bangladesh due to geopolitical reasons.

According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) membership data, Badsha Group of Industries, Pacific Jeans Group, Ha-Meem Group, Sadma Group, and Beximco invested in 2023 to diversify their exportable apparel items.


Among them, Badsha Group has invested Tk800 crore in its Pioneer Denim at Madhabpur, Habiganj, to set up a state-of-the-art unit with a target of $700 million export earning a year, said the group's founder Badsha Mia.

Under this project, they are constructing two buildings with seven floors as production units, two sheds for storage facilities and three sheds for dyeing and washing plants.

The construction of a five-storey research and development building was almost complete. It already started a limited-scale operation with 10 lines on a floor from December last year.

"Production will start on a large scale at the unit in 2024 and the factory will create employment for at least 15,000 people. Currently, the group has created employment for about 25,000 people," Badsha Mia told The Business Standard.

He said they had a target to export denim garments worth $700 million a year by 2028.

Talking with TBS Md Khairul Alam Rabbi, head of HR, Admin and Compliance of Pioneer Denim, said they got the BGMEA membership last year.

Pacific jeans, the country's largest investor in Chattogram EPZ, also invested $31.75 million in Pacific Attires Limited in the same EPZ.

The new factory will produce high-value formalwear such as suits, blazers, jackets, coats, pants, and casualwear, said Pacific Jeans Group Managing Director Syed Mohammad Tanvir.

"This new unit will create job opportunities for 9,000 people in the next three years. Once fully operational, this facility will boost our exports by $250 million," Tanvir said.

Ha-Meem Group, one of the leading garment exporters, also invested in an outerwear factory.

Earlier, AK Azad, managing director of Ha-Meem Group, told TBS that while they initiated the outerwear project with three production lines in April 2023 and they have plans to expand capacity to 16 lines.

Azad noted that their strategic focus had shifted from garment capacity expansion to diversification, underpinning their business' sustainability in the foreseeable future.

Sadma Group Managing Director Md Nasir Uddin said they took three permanent memberships at the BGMEA in 2023.

Appropriate Apparel, a knit composite of the group, will employ 3,000 people and Mouchak Apparel, an underwear factory, will employ another 2,000 people.

Nasir hoped that by 2024 the group's total manpower will be 18,000 and its turnover will reach $250 million. The group's current turnover is $100 million.

Talking with TBS, BGMEA President Faruque Hassan said the Beximco Group got the highest number of factory memberships in the last two years.

"We are encouraging our members to invest in high-technology factories to produce diversified apparel to increase export growth," he added.

He said despite the slow demand RMG's growth gaining momentum, the industry is forward with a vision of $100 billion export by 2030 having "sustainability" at the core of our vision.

He said in 2022 and 2023, a total of 278 factories became permanent members of BGMEA, and 316 factories received provisional membership.

 

[Bilal9]

Non-cotton garment exports could rise from $8.5b to $19b: Study​

ERD suggests formulating fibre security strategy, ensuring duty-free access for all fibres, establishing low-cost investment fund for man-made fibre entrepreneurship​

Infographic: TBS

The country's exports of non-cotton garments, including man-made fibres, could double to $19 billion by 2025, up from the current $8.5 billion, if the existing challenges are resolved, according to a study by the Economic Relations Division (ERD).

The study has been conducted based on global market share and export projection of 20 types of non-cotton apparel items exported by the country.

The study has also underscored the need for devising a fibre security strategy, ensuring duty-free access of all fibres and establishing a dedicated low-cost investment fund, skill development to support man-made fibre investments.

The ERD conducted the study in association with the Research and Policy Integration for Development (RAPID), a non-government think tank.

The study report, "Expanding Man-Made Fibre (MMF) Apparel Export: A Strategy for Upscaling the Garment Sector", was presented to stakeholders at a programme in Dhaka on Wednesday.

"The demand for man-made fibres is growing faster than cotton in the global market. Bangladesh's position in this market is still relatively low. There is a great potential for Bangladesh in this sector, and it can be achieved by addressing existing challenges," MA Razzaque, chairman of RAPID, told The Business Standard.

"To achieve this target, it is necessary to make raw materials easily available, provide logistics, and financial and policy support," he said.

Local entrepreneurs also agree with the potential outlined in the ERD study report.

Md Saleh uz Zaman Khan Jitu, managing director of NZ DY Flax Spinning Limited, a backward linkage industry for non-cotton apparel, told TBS, "Our main challenge is the import of man-made fibres. If we are given the facility to import its raw materials duty-free, like cotton, we have the potential to go a long way."

He added, "We have customers, the market is established, and there is an opportunity to produce this textile in the existing setup. But due to a lack of proper policies, we are not able to grab this huge market."

Challenges

The ERD study finds a lack of duty-free raw materials, delay in customs clearance, complicated duty-drawback procedures, inadequate short-term financing support, insufficient FDI inflow and absence of fibre security strategy are key challenges that need to be addressed to explore the potentiality of non-cotton garment exports.

A lack of modern technology adoption, skills gap in top and mid-level managerial positions, lack of skilled workers, limited research and development activities, low level of compliance and certifications practices also act as bottlenecks to reach the untapped potentials, the study reads.

While cotton and cotton textiles are imported duty-free, man-made fibres raw materials are subject to import duties of up to 59%, the study mentioned. Although these duties are supposed to be refunded upon export, businesses get discouraged from doing so due to the complexity and additional costs involved, it finds.

Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association, told TBS, "To increase our value addition, it is imperative to enhance the importance of man-made fibre."

He noted, "Flax fibre yarn is worth $18 per kilogram, while cotton yarn is worth $3 per kg. This is why we need to diversify. To do this, we must remove all types of duties and taxes on flax fibres, just as we have done in the case of cotton."

Abdullahil Rakib, MD of Team Group, one of the largest RMG exporters in Bangladesh, told TBS, "We fully agree with the findings of this study. We have opportunities ahead of us, but we need policy support to capitalise on them."

Non-cotton garments include waistcoats, T-shirts, wind jackets, brassieres, non-woven garments, trousers, synthetic dresses, shirts, overcoats, tracksuits, full or knee-length hosiery and socks, rubberized (Spandex, Lycra added) garments for women, non-knitted synthetic dress, etc.

According to the Export Promotion Bureau (EPB), non-cotton garments accounted for 29% of the country's $55.56 billion export earnings in FY23.

In 2021, non-cotton garments accounted for 54% of the global apparel market size of $505 billion, according to the ERD study.

 

[Bilal9]

Why RMG nearshoring never posed a real threat to Bangladeshi manufacturers​

Unit costs remain significantly lower when sourcing from Bangladesh, which is why creating nearshoring options is not a direct threat to Bangladesh’s apparel manufacturers when it comes to prices​

TBS Infographics

According to the sixth edition of McKinsey & Company's Apparel Chief Purchasing Officer (CPO) Survey published in 2021, 71% percent of apparel and fashion brands were planning to raise their nearshoring share by 2025.

The report, titled 'Revamping fashion sourcing: Speed and flexibility to the fore' was taken so seriously across the globe that it gave birth to a series of analyses and op-eds speculating what Asian RMG manufacturers' new strategies should be to ensure their survival in the new reality.

Even in 2024, stories continue to surface citing the McKinsey report, on how the apparel companies are looking to change their sourcing-country mix, mainly focusing on nearshoring.

The projection, or the perceived change, was influenced by supply-chain disruptions in the wake up of Covid-19, which were "here to stay," according to the report, necessitating "speed and flexibility."

This appears to be the latest in a series of enthusiastic reports published by McKinsey. Earlier in 2018, the global management consulting firm launched another report optimistically titled, 'Is apparel manufacturing coming home?'

Both the reports mention that the majority of the interviewed CPOs said nearshoring and automation were their top priorities.

At the beginning of 2024, it is only appropriate to take a deeper look into the matter, as to how much of that target was actually achieved, and if that ever posed a threat to Bangladesh's RMG as sourcing from the nearshore would automatically mean the decline of RMG exports from Asian countries.

As it turns out, the apparel manufacturing never quite "came home" or even near home, seen from a Global North perspective. At least, the current trends do not seem to support the fulfilment of the nearshoring goals anytime soon.

Although nearshoring is attractive for big brands due to shorter lead times and reduced risks emanating from 'skyrocketing transportation costs and potential shutdowns,' limited raw-material supply and cost hike makes it impractical.

For European brands, nearshoring would mean a strong shift toward Turkey. Besides, US brands also reportedly want to take advantage of the country's capacity for design and speed.

According to the McKinsey report, in response to a question with regards to their future view of the top five country hot spots by 2025, many CPOs mentioned Turkey, which stood third in the list.


Notably, Bangladesh topped the list with a significant lead against others in the list.

The prospects of other nearshoring options such as Morocco, Tunisia, Portugal, Macedonia or the UK is not significant.

In 2022, a year after the publication of the report, Turkey saw a 10.09% growth in RMG supply to the EU, being the third largest supplier to the latter. It supplied $11.98 billion worth of apparel that year.

At the same period, Bangladesh's RMG industry posted a growth of a whopping 35.69%, reaching $22.89 billion, up from $16.87 billion in 2021.

In the 2023 calendar year, of course, both countries experienced a decline in export as the apparel import of the EU from the world decreased by around 10%.

Bangladesh's apparel export to the US, its largest customer as a single country, saw a similar decline in the same year, but that too, does not have anything to do with nearshoring. The imports of RMG by the US dropped globally in 2023.

Overall, Bangladesh is still experiencing a steady upward trend in RMG export despite all the challenges. Apparel companies are continuously making new investments in the sector to attain sustainability and to ensure compliance.

The country now houses the world's top green factories, and the industry is regarded as the safest in the world, thanks to constant push and monitoring from the brands, reciprocated by the factory owners.

Increased safety and sustainability means Bangladesh's apparel products now have a better image among the brands and the retail customers.

Although these new investments are leading to increased production cost, cheap labour gives Bangladesh's RMG industry a comfortable competitive edge over other suppliers such as China, India and Vietnam.

In 2023, unit price of apparel imports in the EU increased by 5.89%, due to price hike of products from China, Turkey, Vietnam, Sri Lanka and Indonesia. During this period, Bangladesh was the only top supplier to offer a lower unit price.

Over the past decades, mass-market clothing brands and retailers from the US and Europe were eager to relocate production to Asia to gain cost advantages due to the dramatically lower labour costs there.

But it is no longer the case. The Far East has seen rising wages for factory workers, eroding its previous low cost advantage. China, for instance, has experienced a significant increase in labour costs, evolving from being one-tenth of those in the US in 2005 to approximately one-third in recent years.

While manufacturing labour costs remain higher in nearshore countries – serving the Western European market – than those in China, the gap is narrowing. For example, manufacturing labour costs in Turkey were more than five times higher than those in China in 2005, which came down to 1.6 times by 2017.

Still, nearshoring has become economically viable in some cases, driven by savings in freight and duties.

For instance, reshoring from China to Turkey is now economically viable, with landed cost prices for denim being 3% lower.

But unit costs remain significantly lower when sourcing from Bangladesh, which is why creating nearshoring options is not a direct threat to Bangladesh's apparel manufacturers when it comes to prices.

Moreover, in some nearshore countries, the gap in labour costs compared to offshore locations has disappeared, but capacity limitations hinder rapid shifts in production.

Drawing a comparison to an African 'alternative' supplier, a former German merchandiser, seeking anonymity, said that the amount of apparel manufactured in that whole country in a year is what a single factory in Bangladesh manufactures at the same time. He added that an alternative to Bangladesh is not yet there.

Mexico, another near-shore source, now boasts lower average manufacturing labour costs than China.

Still, Bangladesh outperformed Mexico and China to become the largest denim exporter to the United States in 2020. Bangladesh's clothing exports to the US grew by 36.4% to $9.75 billion year-on-year in 2022, before facing the aforementioned slump unrelated to competition.

Onshoring apparel production, on the other hand, is still out of question. According to the McKinsey report, while nearshoring reduces cost of transport, bringing the production 'home' is not attractive at all due to high labour cost.

In addition, due to compliance and ease of due diligence in Bangladesh in the wake of European due diligence legislations, the country remains a good sourcing hub, according to Heidi Furustøl, executive director of Ethical Trade Norway, an organisation that works with both brands and manufacturers.

Notwithstanding, some apparel makers say nearshoring concerns them, but for a different reason – the advent of new technology.

"Nearshoring is a reality, and not only for apparel. All European countries and Americans are trying to move away, mainly from China. In the short-term I'm not worried. But in the long run nearshoring or reshoring can happen due to technological advancement," said Navidul Huq, managing director of Mohammadi Group and a director at Bangladesh Garment Manufacturers & Exporters Association (BGMEA).

Navid said that technology is reaching such heights that it will be able to make clothes. Technology capable of doing so with minimal human touch is already here.

"This technological advancement scares me most. In 10 to 20 years, we have no idea where the technology will reach," Navid said.

The BGMEA director added that adapting such technology will not be feasible for Bangladesh because Bangladesh's comparative advantage rests in cheap labour. When the need for labour is gone, the country will lose its advantage.