RMG sector of Bangladesh faces enormous challenges
Despite increasing orders following an end to the global recession, the Bangladesh readymade garment (RMG) sector faces enormous challenges in the short term and long term. Although a China shift to Bangladesh is welcome and is likely to benefit the RMG sector of Bangladesh in the medium term, the industry faces short term challenges due to some economic problems overseas.
Amongst the problems is the continuous job losses and sovereign debt in the USA, but austerity measures suggested in some countries of Europe are equally as concerning. The USA and Europe remain Bangladesh’s major markets and is thus a cause for worry and problems in these countries could affect the RMG sector adversely.
Meanwhile a raging controversy of a wage hike continues locally. Although wage hikes in China has offered an advantageous position, it is undoubtedly the cheap labour that has attracted business into Bangladesh. Coupled with the gloomy problems overseas including austerity measures in Europe, there is indeed a serious worry looming over the RMG sector. Further the government cannot simply brush off its responsibilities by enforcing a minimum wage because failure of successive governments to ensure adequate infrastructure and uninterrupted energy supply, has inevitably squeezed the advantages derived from low labour costs.
However, all is not all gloomy and doom for the RMG industry in Bangladesh. Following a gradual increase in its currency due to relentless pressure from the USA and Europe, China is increasingly moving to the high end market. Also a wage hike in China and a shift in orders from China to Bangladesh has caused enormous losses. Indeed a rising unit labour cost and upward adjustment in its currency mean that a plethora of low-end manufacturing jobs will eventually be moving out from China.
India, it appears does not fair much better. The openness of its economy prevents it apparel industry from taking advantage of a devalued currency. The high volatility of the rupee and the extreme rigidness of its labour market are major problems affecting the industrial sector.
So the spoils of the China shift remains largely to the advantage of the Bangladesh RMG sector, but Indonesia and Vietnam are also likely to make some gains.
?
