Vietnam beat Bangladesh in apparel export in the last five months of 2019. During this period, the Southeast Asian country fetched around $2 bn more than Bangladesh ($12.7 bn). However, in the last calendar year, Bangladesh was marginally ahead of Vietnam in overall apparel export. From January to December last year, Bangladesh’s apparels earned $422 mn more than that of Vietnam, enabling Bangladesh to retain its second position. If the latest trend of decline in Bangladesh’s apparel export continues, the country may soon lose its position to Vietnam. Yet, businesspeople are upbeat about the country’s apparel sector. “Vietnam has clearly taken us over in recent months. But the fiscal year has not ended yet,” said Rubana Huq, President of Bangladesh Garment Manufacturers and Exporters Association.
At a time when the Vietnamese garment industry surpassed that of Bangladesh, the garment industry here was experiencing a negative growth in export. Overall exports in August fell by around 11.5 percent to $2.84 bn, led by sluggish apparel shipments. The decline persisted in the following three months before recovering a bit in December. Earnings fell $3.43 bn short of the overall export target of $26.34 bn during the first seven months of this fiscal year. Of the shortfall, the garments sector alone accounted for $3.05 bn. Apparel exports were expected to fetch $22.11 bn but real earnings amounted to $19.06 bn.
Bangladesh and Vietnam had been holding the second and third positions respectively in apparel export over the past decade with a close margin. The fast-paced growth of the two countries followed the “China Plus One” policy taken by brands when they considered manufacturing facilities outside China. It was the end of an era when China’s cheap land and labour, huge market and investment policies drew foreign investment in that country. However, China gradually lost its cost advantage and competitiveness in comparison to other Asian countries as its worker wages and operational costs increased significantly.
The business dynamics and environment are quite different in the two competing countries. While Bangladesh is a popular destination for manufacturing low-end items at the cheapest rate globally, Vietnam produces high-end apparels with a strong backward linkage industry and educated workforce. But the latest ease of doing business index reveals that Vietnam is still a better choice for investment than Bangladesh. The World Bank report published in October last year shows that Vietnam fell one notch down to 70th and Bangladesh moved eight notches up to 168th in the global ranking. Corruption, energy crisis, poor transportation and logistics are responsible for the low performance of Bangladesh in the index which is followed by investors worldwide.
The lead time is another key factor that the buyers are concerned about as fashion changes fast and so products have to reach market quickly. Although the shipping time to the EU and the USA are quite similar, Vietnam can end up with a quicker lead time as it is self-sufficient in textiles. On the other hand, Bangladesh is still dependent on imported cotton, yarn and fabrics (specially woven) which adds to its lead time. The average lead time from Bangladesh to the EU and the USA ranges between 90 and 120 days whereas from Vietnam it is 50 to 60 days. A free trade deal between Vietnam and the European Union signed in June last year and passed in the EU parliament on February 12 this year is likely to give a boost to the country’s apparel export. Earlier, it had to pay 12 percent tax for exporting apparels to Europe. Bangladesh is under pressure from the EU to meet its standards in labour rights for enjoying Generalised System of Preferences facilities – a preferential system that provides tariff reduction for least developed countries.
