RMG sector returning to positive export growth

After the student protests in July, on August 5, Sheikh Hasina left the country, and an interim government was formed under the leadership of Dr. Mohammad Yunus. Since then, there has been severe disruption across various sectors of business, including the garment industry. Garment workers went on strike throughout August and September demanding unpaid wages and other issues, disrupting production activities and negatively impacting exports. While exports increased in July and August, they declined in September. However, garment exports bounced back in October, showing positive growth.

According to the latest data from the Export Promotion Bureau (EPB), garment exports for the 2024-25 fiscal year started on a positive note. In July, garment exports amounted to $317.84 million, up from $308.91 million in the same month of the previous year, showing an increase of $8.93 million or 2.89%. This positive trend continued in August, with exports reaching $332.59 million. However, exports dropped in September, falling to $301 million, a decrease of $31.58 million or 9.5% from August. In October, exports recovered to $329.64 million, an increase of $28.63 million or 9.51%.

Industry insiders say that while political instability and workers' strikes had a negative impact on the garment sector, the situation is starting to improve. Particularly, due to the imposition of a 10% tariff on Chinese products by the United States, some businesses from China may shift to Bangladesh, creating new opportunities. As a result, there is optimism that garment exports will increase in the next two quarters.

According to EPB data, garment exports in July 2024 were $317.84 million, in August $332.59 million, in September $301 million, and in October $329.64 million. For the first four months of the fiscal year, garment exports totaled $1.281 billion, an increase of $123.85 million compared to the same period last year. October’s garment exports saw an increase of $61.19 million compared to the previous year.

Bangladesh exports more knitwear and woven garments. According to EPB data, woven garment exports in the 2024-25 fiscal year rose by 3.93% in July to $144.94 million, by 3.11% in August to $143.48 million, by 17.22% in September to $128.06 million, and by 20.54% in October to $143.87 million.

Knitwear garment exports increased by 2.04% in July, reaching $172.90 million; by 10.53% in August, reaching $189.11 million; by 12.74% in September, reaching $172.95 million; and by 24.60% in October, reaching $185.76 million.

Industry stakeholders are hopeful that this positive growth trend in garment exports will continue. They mention that during the August-September period, worker dissatisfaction led to strikes, vandalism, and factory closures, disrupting timely order completion. As a result, many exporters could not meet buyers' demands. However, much of the worker unrest has subsided, and the political situation in the country is stabilizing, which is expected to further boost exports in the future.

Khandaker Rafiqul Islam, former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), stated that the disruption caused by the workers' movement in September led to reduced exports. However, exports have risen again in October. He believes that a clearer picture of the sector will emerge after at least two quarters (six months). If positive growth continues until April-May, concerns about the garment sector may dissipate.

When asked whether he believes in the possibility of positive growth, Rafiqul Islam mentioned that US President Donald Trump’s decision to impose an additional 10% tariff on Chinese products could lead some businesses to shift from China to Bangladesh. However, this depends on the country's law and order situation. Improved law and order would increase buyers' confidence, which is crucial for the sector's growth. Despite these uncertainties, he remains optimistic that the law and order situation will improve in the coming months.

It has been reported that as soon as Donald Trump took office, he announced significant tariffs on China, Mexico, and Canada. He stated that a 25% tariff would be imposed on all goods from Mexico and Canada, and an additional 10% tariff would be imposed on Chinese products.

Garment industry leaders believe that if this decision is implemented, some US businesses may shift from China to Bangladesh, potentially increasing garment orders. As a result, exports may see further growth in the upcoming quarters.

A recent dialogue organized by the Center for Policy Dialogue (CPD) titled "Recent Wage Disputes in the Garment Sector: What Have We Learned?" highlighted that the main cause of worker dissatisfaction in the garment industry was the flawed process of setting the wage structure. The process followed before and after the announcement of the new wage structure led to unrest among workers. The lack of proper institutional procedures in determining wages and the creation of discrepancies in wage increases based on grades led to confusion among workers, especially in different regions and factories. In some factories, wages were not increased according to the new structure, creating further disparity. CPD believes that resolving this issue could lead to increased garment exports.