New horizons to explore: Can RMG utilise the potential?

The ready-made garments (RMG) industry in Bangladesh has historically been a fundamental component of the nation's economy, contributing to more than 80% of its total exports. This sector has primarily depended on established markets such as the United States, the European Union, and Canada. 

In recent years, the European Union has accounted for over 60% of Bangladesh's total RMG exports, with significant importing nations including Germany, the United Kingdom (prior to Brexit), Spain, and France. 

The sector's growth within the EU is driven by robust demand for cost-effective clothing and well-established supply chain connections with European retailers. Nevertheless, the industry faces challenges, particularly in adhering to the stringent labour and environmental regulations imposed by the EU. The sustainability initiatives, especially under the EU's Green Deal, require Bangladeshi manufacturers to invest in environmentally friendly practices and technologies.

The United States remains another vital market, ranking as the second-largest destination for Bangladeshi RMG, with a market share of approximately 20%, indicating a consistent demand for affordable apparel. Growth in this region has been supported by competitive pricing and the quality of Bangladeshi garments. Key products in this market include knitwear and woven garments, which are essential in American fashion and retail. 

However, the US market is highly competitive, facing strong competition from other major garment-producing countries such as Vietnam and India. Additionally, trade policies and bilateral relations, including tariffs and trade agreements, significantly influence export dynamics. 

Moreover, in the US, there is a heightened focus on human rights, particularly following events such as the Rana Plaza collapse, leading to more scrutiny of working conditions in Bangladeshi factories. As a result, there is a growing demand for greater transparency in supply chains, which creates challenges for small and medium-sized Bangladeshi businesses. 

The rise of protectionist trade policies and the potential revocation of preferential trade agreements like the Generalised System of Preferences (GSP) in both regions also pose threats to the competitiveness of Bangladeshi RMG exports. These difficulties are further exacerbated by global supply chain disruptions and rising production costs, eroding Bangladesh's traditional advantage of low-cost labour.

The changing landscape of global trade, along with shifting consumer preferences and the need for diversification, compels the exploration of alternative export markets. To foster sustainable growth in this sector, Bangladesh must actively seek out new markets that present promising opportunities for the Ready-Made Garment (RMG) industry.

Exploring new export markets is essential for the RMG sector. The potential of Latin America remains largely untapped. This region, characterised by a burgeoning middle class and evolving consumer behaviours, offers a promising yet underutilised market for Bangladesh's RMG sector. Countries such as Brazil, Mexico, and Argentina have substantial populations with increasing purchasing power and rising demand for diverse fashion choices. 

Furthermore, the cultural appreciation for vibrant colours and distinctive styles aligns well with the diverse offerings of Bangladeshi garment manufacturers. To effectively enter these markets, Bangladesh could capitalise on trade agreements and negotiate favourable terms, especially given the region's current dependence on North American and European clothing suppliers. Additionally, implementing localised marketing strategies and participating in regional trade fairs could enhance the visibility and credibility of Bangladeshi brands.

Moreover, Africa represents a continent of burgeoning economies. The rapid urbanisation and economic advancement across Africa are transforming it into a significant consumer market. Countries such as Nigeria, South Africa, and Kenya are witnessing rising incomes and a growing middle class, leading to increased demand for affordable yet stylish apparel. 

Bangladeshi RMG exporters can seize this opportunity by providing competitively priced products tailored to local tastes. Establishing partnerships with local retailers and investing in brand development initiatives can strengthen market entry strategies. Africa's involvement in free trade areas, such as the African Continental Free Trade Area, further enhances these opportunities.

East Asia presents opportunities beyond its traditional centres. While China and Japan have solidified their positions as established markets, the wider East Asian region, which includes South Korea, Taiwan, and Brunei Darussalam, holds considerable promise. These countries exhibit high disposable incomes and a keen interest in fashion, particularly in streetwear and modern styles. 

For Bangladeshi garment exporters to thrive in East Asia, it is essential to prioritise quality, innovation, and effective branding. Given the competitive landscape, offering value-added services such as sustainable products or smart textiles could set Bangladeshi brands apart from both local and international rivals.

Additionally, the Middle Eastern markets are gaining prominence due to their high expenditure and specialised demands. The Middle East, particularly the Gulf Cooperation Council (GCC) nations, represents a lucrative opportunity for Bangladeshi RMG exports. This region is characterised by high per capita income and a substantial expatriate community that drives demand for a variety of apparel, ranging from luxury items to everyday clothing. 

Bangladeshi exporters should focus on the premium segment, offering bespoke clothing and exclusive collections tailored to the preferences of affluent Middle Eastern consumers. Additionally, forming partnerships with local distributors and engaging in regional fashion events can facilitate market entry and expansion.

Furthermore, Russia and Eastern Europe are emerging as promising fashion markets. These regions are witnessing a growing interest in fashion and lifestyle products as economic conditions improve and consumer confidence strengthens. This trend has led to increased demand for a variety of clothing options. 

For Bangladesh, penetrating these markets necessitates a focus on affordability, quality, and the ability to swiftly adapt to local fashion trends. The relatively lower level of competition compared to Western Europe also presents a favourable environment for establishing new market connections.

To achieve success in entering new markets, it is essential to draw insights from competitors, specifically India, Vietnam, and Cambodia. The Indian government, along with its trade organisations, has been proactive in establishing trade agreements with various nations. A notable example is the India-Mercosur Preferential Trade Agreement, which has simplified access to Latin American markets by lowering tariffs on significant RMG products. Additionally, Indian manufacturers are customising their offerings to align with the unique preferences of these emerging markets. For instance, there is an increasing demand for modest fashion in Africa and the Middle East, a niche that Indian designers are well-equipped to fulfil.

Vietnam has made substantial investments in developing a strong supply chain infrastructure, which has proven vital during disruptions such as the Covid-19 pandemic. This resilience has enhanced buyer confidence in new regions, including the Middle East and Africa. Additionally, Vietnam is actively engaged in trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Cambodia, on the other hand, is increasingly concentrating on niche markets, particularly in sportswear and high-end fashion, which are becoming popular among affluent consumers in the Middle East and Latin America.

RMG workers in a factory in the capital. File Photo: Mumit M/TBS

To capitalise on these opportunities, it is imperative to consider several strategic factors. Conducting a thorough market analysis is essential for understanding the distinct attributes of each new market. Tailoring product offerings to align with local preferences, dimensions, and cultural practices can greatly improve acceptance in these markets. Moreover, cultivating a robust brand identity and a reputation for excellence can enable Bangladeshi RMG products to differentiate themselves in competitive landscapes. This entails investing in marketing initiatives, enhancing online visibility, and adhering to international standards.

Additionally, negotiating trade agreements can help lower tariffs and trade barriers, enhancing the competitiveness of Bangladeshi garments. This is particularly relevant for markets where Bangladesh has yet to establish strong trade connections. 

Moreover, as global consumers increasingly prioritise sustainability, highlighting eco-friendly and ethical production methods can serve as a compelling selling proposition. Bangladesh can capitalise on its progress in green manufacturing to attract environmentally conscious consumers.

Diversifying export markets is vital for the sustainable advancement of Bangladesh's RMG sector. By strategically focusing on emerging regions such as Latin America, Africa, East Asia, the Middle East, and Eastern Europe, Bangladeshi exporters can lessen their reliance on traditional markets and access new consumer demographics. Through well-considered market entry strategies, effective branding, and a commitment to sustainability, Bangladesh can reinforce its status as a prominent global supplier of ready-made garments.

Dr Mohammad Kamrul Hasan is a Public Administration Researcher and Practitioner. mkhmiraz@gmail.com 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.