Business group AmCham advocates for a diversified approach and energy solutions to strengthen the future of Bangladesh's apparel manufacturing sector.
The American Chamber of Commerce in Bangladesh (AmCham) hosted a meeting on August 14, 2021, at the Sheraton Dhaka, where key industry and policy leaders discussed the challenges and potential solutions for the sustainable growth of Bangladesh's ready-made garment (RMG) sector.
The meeting, themed "Bangladesh's RMG Sector: The Way Forward," focused on the key challenges facing the sector, including high dependence on the US market, loss of preferential trade benefits post-LDC graduation, trade restrictions and logistical hurdles, labour and environmental vulnerabilities, and overdependence on the apparel sector.
One of the major concerns highlighted was the high dependence on the US market, with over 250 factories at risk if a proposed 35% additional US tariff takes effect. Many of these factories export 60-100% of their products to the US, and this tariff burden threatens factory survival and creates losses for exporters and concerns for US buyers.
Bangladesh's loss of duty-free, quota-free access and other international support measures, heightening competition and requiring new market diversification, was another challenge discussed. The imposition of export restrictions by India and the complications it brings to logistics for exports was also raised as a concern, though the sector has shown resilience in this area.
Labour and environmental vulnerabilities were also a significant topic of discussion, with heat stress exacerbating labour rights issues and posing health and safety risks. The need for government and corporate action to protect workers from climate threats was emphasised.
Potential solutions discussed included market diversification, product diversification and sustainability, infrastructure investment, policy reforms and institutional strengthening, heat action and labour protections, engagement with global brands, and leveraging new investment agreements.
EPB Vice Chairman Md Anwar Hossain proposed a bank-backed bond facility for partial exporters and the creation of a "$100 Billion RMG Export Cell" to coordinate energy, banking, and tax issues. BGMEA President Mahmud Hasan Khan urged for infrastructure expansion and renegotiation of cancelled investment commitments.
AmCham President Syed Ershad Ahmed emphasised that Bangladesh's economy is heavily dependent on the garment sector, contributing 81.5% to total exports and 11% to GDP. He warned that Bangladesh's heavy reliance on Western markets leaves the economy vulnerable to trade policy shifts.
The dialogue concluded with a call for more platforms to bridge gaps between government agencies and businesses, ensuring practical solutions for sustainable growth. EPB Vice Chairman Md Anwar Hossain expressed optimism about achieving $100 billion in RMG exports by 2027-28 through collaboration and diversification.
BGMEA President Mahmud Hasan Khan identified energy shortages, particularly for gas-reliant backward linkage industries, as a significant growth barrier. Participants in the meeting flagged energy insecurity, weak backward linkages, the absence of top global sportswear brands, and the need for green manufacturing, automation, and logistics upgrades.
In summary, leaders emphasised that Bangladesh's RMG sector must evolve by diversifying markets and products, strengthening domestic industry and infrastructure, improving labour protections, and embracing sustainability to maintain resilience in a shifting global trade landscape post-LDC graduation.
Finance plays a crucial role in ensuring the sustainability of Bangladesh's ready-made garment sector, as highlighted by the proposed bank-backed bond facility and the aim to achieve $100 billion in RMG exports by 2027-28. The business community and the government must collaborate to invest in infrastructure and implement policy reforms to foster sustainable growth.
The overdependence on the US market poses a significant risk to the industry, as demonstrated by the potential impact of a proposed 35% additional US tariff. To mitigate this risk and create a more stable financial environment, diversifying markets and products becomes essential for the future growth of the ready-made garment sector.
