Vietnamese garment makers are strengthening their foothold in key markets, putting new pressure on the Bangladesh apparel sector.
Competition will further intensify if the United States awards Vietnam the generalised system of preferences (GSP), a trade privilege scheme, as negotiations are currently underway for garment products.
Bangladesh exported nearly $18 billion in the nine months to September, with Vietnam trailing behind. With its robust growth, the Southeast Asian nation exported about $13.15 billion of garments, registering an 18 percent rise year-on-year in the same period.
Vietnam’s garment exports grew 9.98 percent to $14.1 billion in 2012 from $12.82 billion in 2011, according to data from Bangladesh Garment Manufacturers and Exporters Associaiton.
Vietnam is surely a major competitor for Bangladesh in the global readymade garments business as its performance is going strong, said Sadiq Ahmed, vice-chairman of the Policy Research Institute.
“It will be worrisome for Bangladesh if the garment items are included in the GSP scheme for Vietnam,” Ahmed told The Daily Star.
Still, Bangladesh is in an advantageous position compared to Vietnam, thanks to lower labour costs.
Vietnam’s textiles and garments industry has developed rapidly in recent years and has become a vital activity within the country’s economy, Ahmed said. It could attract large sums of foreign direct investment, mainly from China and South Korea, as the nation has flexible policies and good infrastructure, he said.
Vietnam has been enjoying a lower tariff rate on apparel exports to the US since 2001 when the American government gave Vietnam the Most Favoured Nation status.
On the other hand, Bangladesh has been paying a 15.3 percent duty on apparel exports to the US as the country has been kept away from any duty-benefit.
In 2012, Bangladeshi garment makers paid $746 million to US customs as duty for exporting garment items worth a little over $5 billion.
Despite hectic negotiations, Bangladeshi garment items were not included in the US GSP scheme, which was suspended on June 27, citing poor labour rights and shortcomings in safety measures in the factories.
In addition, according to a recent survey by McKinsey & Company, a US-based consulting firm, Vietnam will continue as the second top sourcing country after Bangladesh to the international retailers for the next five years.
Garment exports from Bangladesh grew 12.69 percent to $21.51 billion in 2012-13 from the previous year, while it grew 6.97 percent to $19.9 billion in 2011-12 from 2010-11, according to BGMEA data.
Bangladesh exported garment items worth $17.91 billion in 2010-11 and $12.5 billion in the year before that.
At present, the number of garment factories in Bangladesh is 5,000 and 2,000 in Vietnam, according to the McKinsey report.
However, Tipu Munshi, a former BGMEA president, said: “Bangladesh will not be affected, even if Vietnam is awarded the GSP status by the US.”
“We should pay attention to solving domestic problems.”
Munshi is rather upbeat that Bangladesh is also receiving a significant portion of the orders that shifted from China. “Vietnam or Myanmar might go stronger in garment business in future, but Bangladesh will not be affected by this.”
Vietnam pays entry-level garment workers $80 in minimum wage a month, compared with $40 in Bangladesh.
Bangladesh will remain more competitive than Vietnam even if the salary is hiked, said Sirajul Islam Rony, workers’ representative on the wage board for garment workers formed in June. The board is likely to announce the fresh wage hike this month, Rony said.
“The living standards of garment workers are higher in Vietnam than in Bangladesh,” said Rony, who visited some garment factories in Vietnam to take decisions on the minimum wage.
Garment workers in Vietnam also get government subsidies in different forms, mainly on house rents, he said. The only relief for Bangladesh workers is that, the prices of basic commodities are lower here than in Vietnam, he said.
Source: The Daily Star
