How protests in Bangladesh are affecting the RMG industry
The quota movement in Bangladesh has severely impacted the manufacturing industries, particularly the readymade garments (RMG) sector. According to some industry insiders, RMG exports may decline by 15 to 20% during the next summer (January to March 2025) due to the recent disruptions. The garments exporters sought a recovery opportunity during the summer season. Still, they are expecting that the current unrest will not spoil their expectation and they will be able to get better at overcoming the situation.
Bangladesh’s textile and apparel industry could lose global market confidence due to the turbulent times, which would damage its reputation and lead to a large number of lost orders.
The textile and apparel industry is vital to Bangladesh’s economy, accounting for more than 84% of the country’s export earnings and employing millions of workers. If the industry faces prolonged difficulties, the country’s overall economy will be greatly affected. The industry has been grappling with multiple crises recently, including a global economic slowdown, rising production costs, an order crisis, fuel supply disruptions, and a domestic energy crisis. These factors have already put pressure on the industry.
Apparel exporters are facing a 25-40% drop in orders as the ongoing energy crisis, soaring business costs, and shipment delays force them to operate their factories well below capacity.
Reports indicate that despite a 20-33% increase in production costs, global buyers are offering price cuts of up to 20%, so many manufacturers are reluctant to take up such orders to avoid potential losses.
The student protests have added another layer of uncertainty. International buyers are sensitive to political and social unrest in their sourcing countries. Any perception of instability leads to hesitation in placing orders as buyers try to avoid possible supply chain disruptions. This is particularly concerning given that Bangladesh aims to increase its apparel exports to $100 billion by 2030.
For the industry to maintain its position and continue to grow, the government must quickly and effectively address the protests.
Industry insiders say ensuring political stability and showing a resolve to address protesters’ concerns will help restore the confidence of global buyers and protect Bangladesh’s hard-earned reputation in the textile and apparel industry.
As one of Asia’s most important RMG manufacturers and exporters, Bangladesh’s RMG industry has strong competitive advantages:
Cost Competitiveness: Bangladesh offers one of the most cost-effective production environments in the world, driven by low labor costs. This affordability attracts global brands looking to minimize production expenses without compromising on quality.
Large Workforce: The country has a vast and growing workforce skilled in garment production. This labor force is not only large but also experienced in various aspects of garment manufacturing, from basic stitching to intricate designs.
Strong Supply Chain: Over the years, Bangladesh has developed a robust supply chain, including local production of fabrics and accessories, reducing dependency on imports and enabling faster turnaround times.
Government Support: The Bangladeshi government has been supportive of the RMG sector, offering incentives such as tax breaks, subsidies, and export-oriented policies that enhance the industry’s competitiveness.
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Compliance and Standards: Many Bangladeshi garment factories have made significant improvements in safety, compliance, and sustainability standards, making them attractive partners for international brands that prioritize ethical sourcing.
Economic Impact: The RMG industry is a major contributor to Bangladesh’s GDP and export earnings, creating a substantial economic impact and providing employment to millions, particularly women, thereby playing a crucial role in socio-economic development.
Diverse Product Range: Bangladesh’s RMG industry has diversified its product range, catering to various market segments from budget to high-end fashion, allowing it to meet the demands of different consumer groups.
Resilience and Growth Potential: The industry has shown resilience in the face of global challenges such as economic downturns and the COVID-19 pandemic. Continuous investment in technology, infrastructure, and training ensures its future growth and adaptability to market changes.
SUNTECH Textile Machinery, a leading manufacturer of innovative textile machinery, is designed to help textile manufacturers optimize production processes, streamline operations, and enhance overall efficiency. With a strong commitment to quality, innovation, and customer satisfaction, SUNTECH has established a strong reputation in the textile industry by providing a wide range of cutting-edge solutions to meet the diverse needs of its clients in Bangladesh.
SUNTECH's premium Beam Stacker has successfully tackled customers' beam storage challenges, catering to the needs of their expanded production facilities. This innovative solution optimizes space utilization and management, effectively addressing their storage capacity requirements. By implementing this best-selling equipment, customers can get a significant increase in their storage capacity, along with streamlined storage and retrieval processes.
Moreover, the modern intelligent management features of the Beam Stacker have revolutionized the way Bangladesh customers manage their beams. The average time required to retrieve a single beam has been reduced by 20 minutes, marking a substantial improvement in operational efficiency.
Given the hyperinflation in Europe and the US, margins for major fashion brands have fallen by 2 to 5 percentage points. As a result, manufacturers are seeing smaller margins, with no signs of a rebound in sight any time soon. Given this, apparel manufacturers face the risk of pricing pressure and consolidation by fashion brands. For Bangladeshi RMG manufacturers looking to break through the geopolitical impact, there are also things to consider:
Speed and Flexibility
Supply chain and demand disruptions have increased the need for flexibility and agility among manufacturers, many of which are still operating according to traditional capacity planning methods. This has led some manufacturers to rely on expensive air freight to meet customer deadlines, further increasing costs. In addition, there is the risk of “nearshoring” for Asian companies, where poor delivery compliance could lead to disruptions at manufacturers in Central America, Europe, and Turkey. For example, some major European fashion brands have recently expressed their intention to withdraw from China and Southeast Asia due to supply chain risks and sustainability reasons.
Investment in Technology
Automation and technology investments can enhance productivity and reduce dependency on labor, making production less vulnerable to disruptions caused by protests.
Sustainability
Environmental, social, and governance (ESG) are top concerns for customers and end consumers, and the regulatory environment is evolving in line with ESG requirements. The apparel industry has been particularly hard hit, given that it accounts for 10% of global greenhouse gas emissions,8 and that less than 1% of clothing is currently recycled, leading to increased landfill waste and pollution.9 In addition, with 2030 set as the target year for the EU market to become fully circular, pressure from regulators is increasing. Given this, apparel manufacturers are under pressure on different fronts, including circularity, traceability, and decarbonization.
By adopting these strategies, textile manufacturers in Bangladesh can better navigate the challenges posed by protests and minimize their impact on the industry and global supply chains.
sales manager at Suntech Textile Machinery Manfacturing
4moRead the article below, and find strategies to adopt to minimize impact on the industry and global supply chains.