Bangladesh, currently the world’s second-largest apparel supplier, faces potential challenges in meeting rising demand if orders surge due to a shift away from countries like China and Vietnam. Despite its significant existing capacity, Bangladesh exported garments worth $46.99 billion in the past fiscal year, showing a 10.27 % year-on-year growth, according to data from the Export Promotion Bureau.
For instance, China’s share in the global apparel business fell from 36.6 % in 2010 to 31.7 % in 2022 due to various factors, including a tariff war with the US, pandemic impacts, the Russia-Ukraine conflict, increased production costs, and a shortage of skilled workers.
While Bangladesh’s share in the global ready-made garment trade has tripled in the past 17 years, it could face challenges if a substantial percentage of orders divert from China to Bangladesh. The potential influx of orders worth billions of dollars could strain manufacturing capacity and cause raw material shortages, similar to what was witnessed in 2021-22 as the global supply chain rebounded from the pandemic’s impact.
The capacity expansion is crucial to ensure Bangladesh can meet growing demand, particularly as international retailers and brands aim to replenish their stocks of unsold apparel items. However, challenges such as gas and power supply issues, a dollar crisis in the banking sector, and political instability may hinder new investments and the full utilization of existing capacity.
While Bangladesh’s knitwear sector is well-equipped to meet the demand, the woven sector lags due to lower capacity. Additionally, the spinning sector faces constraints related to gas and power shortages, affecting its ability to expand. Denim production, on the other hand, is well-established in Bangladesh, capable of handling substantial order volumes.
Setting up new factories is time-consuming and costly, which may present challenges given the shorter lead times demanded by international buyers.
Mohammad Abdullah Zaber, managing director of Noman Group, said a lot of US-based orders for fabrics have come to his factory from China and India over the last one year. So, he has already expanded the capacity.
“There is a forecast that orders may see a strong rebound next year as international retailers and brands are running out of their stocks of unsold apparel items,” said Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA). He said Bangladesh has the capacity to supply goods against a large volume of orders, but many mills are running below capacity owing to an inadequate supply of gas and power and the dollar crisis in the banking sector.
Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, also said that the country may find it challenging to supply goods if orders climb suddenly. The lingering gas crisis, a shortage of adequate skilled workers, and higher prices of yarn are major bottlenecks that may prevent Bangladesh from attracting buyers looking to move away from other countries, he said. He thinks orders will pick up after December as the global supply chain is recovering and international buyers are coming up with an additional volume of work orders. Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development, a think-tank, said the capacity of the country needs to be strengthened as exports are bouncing back in line with the revival of the global supply chain.