Vietnam gives run for the bucks to B’desh in RMG

Apparel, Footwear, Fashion

Vietnam gives run for the bucks to B’desh in RMG

Vietnam is closing in the gap in the export revenue it’s netting from RMG exports with the South East Asian forerunner Bangladesh. Tipping the scales in Vietnam’s favour is the likelihood of the United States awarding Vietnam the generalised system of preferences (GSP). GSP is a trade privilege scheme and currently negotiations are on between U.S. and Vietnam for garment products.

A brief look at the figures for the current year, till September, indicates that Vietnam exported US$ 13.15 billion of garments, trailing behind Bangladesh which netted US$ 18 billion. Though the margin of trail is significant, also significant is the growth in Vietnam’s exports as compared to the previous year. It stands at 18 percent.

According to data available with Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Vietnam’s garment exports grew at a rate of 9.98 percent to US$ 14.1 billion in 2012 from US$ 12.82 billion in 2011. Stressing this, Sadiq Ahmed, Vice-chairman of Policy Research Institute, stated, “In the forthcoming years, Vietnam will emerge as a tough competitor to Bangladesh in the global readymade markets business. This is bound to set the Bangladeshi exporters worrying.”

Right now, Bangladesh is enjoying a huge advantage owing to lower labour costs. Though it stays competitive internationally, in the U.S. markets, Bangladesh is forced to cough up 15.3 percent duty on apparel exports and has failed to secure duty benefits. The US cites poor labour rights and shortcomings in implementing safety measures in factories as the main reason for its intransigence in granting GSP to Bangladesh.

Besides, the textiles and garment industry in Vietnam has grown at a rapid pace in recent years and has turned into a vital economic activity in the country. This coupled with flexible policies and good infrastructure is bound to attract large sums of investments from China and South Korea, opined Ahmed.

The worrying aspect for Bangladesh has so far been the lower tariff rates Vietnam has been enjoying since 2001 for its exports to U.S. by virtue of being granted the most favoured nation status. In sharp contrast, the garment manufacturers from Bangladesh had to cough up a whopping US$ 746 million customs duty to the U.S. authorities to export RMG worth US$ 5 billion in the year 2012.

A recent survey by a US-based consulting firm, McKinsey & Company indicates that Vietnam will be second best after Bangladesh in sourcing garment exports to international retailers in the next five years. The figures in the study show that currently Bangladesh has 5,000 factories as against Vietnam’s 2000.

The Bangladesh textile honchos are upbeat about the current status quo however. Tipu Munshi, a former BGMEA president observed that Bangladesh textile exports will stay unaffected by the grant of GSP status to Vietnam by the U.S. Another reason for Munshi to sound confident is the fact that a significant part of the orders for textile RMG has shifted from China to Bangladesh.

To sum it up Vietnam is picking up on the textile front with higher wages for workers and higher living standards and government subsidies in the form of rents. Bangladesh is however, right on top with the only advantage for the workers being able to buy commodities at a cheaper price.