Race for global apparel market pie
Devaluation plays role in Vietnam’s gain on Bangladesh
Good news. Bangladesh’s share in global apparel market grew by over 50 percent in the last seven years.
Bad news. Its main competitor Vietnam is also breathing down the neck as its market share grew twice as fast and they are closing the rank on Bangladesh.
And India, the fourth largest apparel exporter, is not sitting idle either. On the heels of its competitors, its share grew by 28pc.
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A clear advantage that both India and Vietnam along with the other major competitors - except china and Cambodia - have enjoyed is that they had all devalued their currencies significantly over Bangladesh.
Actually Bangladesh devalued the least, if China and Cambodia are excluded.
This has eroded Bangladesh's competitiveness on the single factor of exchange rate, necessitating the government to announce one percent cash incentive on export earnings from the segment of apparels that were previously not eligible for such benefits.
And all these apparel exporters in the race had made the gains at the cost of china' slip on the global pie.
China’s market share erosion may look slight in percentage terms but it commands such a big share of the global apparel market – about 35 percent or $158 billion - that even the small retreat is too lucrative for the others racing at a far lower level to jostle for.
And it is thought that China will lose more of its global market share because of rising labour cost - and of late, for the trade war with the US.
It is on such presumptions that global management consulting company Mckinsey had forecast Bangladesh’s apparel export will spiral to $50 billion by 2030, from today’s $30 billion.
However, it has one big problem and that is Vietnam.
With its high productivity at the level of 70, almost double of Bangladesh’s, Vietnam is revving up fast.
It is now just two billion dollars behind Bangladesh and already a darling for buyers.
And so economists now say a taka devaluation would make a big difference to Bangladesh to keep up its pace.
They argue, with reasonable evidence, that cash incentives are often abused with fake exports.
Rather, the market should dictate the exchange rate and save the day.
