WELCOME to a Presentation

on[[[Exploring Newer destinations

for Knitwear products from Bangladesh

Presented By:

M. Abdur Rahman

Metropolitan Chamber of Commerce and Industry (MCCI)

&

Former Director, Export Promotion Bureau, Dhaka

Presentation structure

• World trade in 2010 and Bangladesh• Significance of the RMG sector in Bangladesh economy• Bangladesh Knitwear sector• Export of Bangladesh RMG sector• Major Importing Countries of Bangladeshi Knit products• New Market exploration Initiatives• Top 10 Clothing exporting countries in 2010

• Top 10 Clothing importing countries in 2010

• Trade profile of emerging Knit markets: Japan, Russia, South Africa, Brazil, Mexico, China and India

• Conclusions

World trade in 2010 & Bangladesh

Global economy size was US $ 75.0 trillion in 2010;

Gross World Product (GWP) was US $ 62.27 trillion and growth of GWP was 4.7% in 2010 ;

World trade in 2010 was US $ 29.68 trillion. Export trade was for US $ 14.95 trillion and import trade was US $ 14.73 trillion;

World RMG market size is US $ 351.46.0 billion & Knitwear market size estimated to be US $ 213.0 billion;

Major players in the world RMG markets are China, Bangladesh, Turkey, India, Vietnam, Indonesia, Hong Kong, Pakistan & Sri Lanka;

China as the biggest exporter of RMG products exported US $ 171.0 billion in the world market in 2010;

Global textile and Apparel industry analyst predicted that the RMG export sector will grow further and it would reach to US $ 805.0 billion by 2015;

Cont’d

According to World Trade Organization, Bangladesh is the 60th importer and 70th exporter in the world and 77th largest trading nation in 2010;

Bangladesh share in the world RMG market is around 4.47 per cent and we are the 3rd largest exporter of RMG following China & Turkey;

According to BKMEA, Bangladesh has recently emerged as the 2nd largest exporter of knit items in the world market;

Bangladesh export of RMG composed of basic shirts, Shorts, trousers & knit items are T-shirt, Polo shirt and sweater. Major export markets are USA & EU countries especially Germany, UK, France, Spain, Netherlands & Italy and Canada.

Cont’d

GSP facility in the form of Duty free & Quota free market access in the EU & recent relaxation of the Rules of Origin criteria by EU & a few developing countries augment export of RMG products. As a result we find a robust growth of our export in the last FY ;

Bangladesh’s total export during FY 2010-11 was US $ 23,924 million having a growth of 41.49 per cent. Share of RMG was around 80 percent & contribution of Knitwear sector was 42 percent in the same year.

Bangladesh apparel export to the largest economy the EU in FY 2010-11 was more than US$ 10,519.84 million, a sharp rise of 46 per cent growth over the previous year and exported about $ 4,625.16 million worth of RMG products to USA during FY 2010-11 registering a growth of 27 per cent compared to the same period of FY 2009-10.

Business community expects that within next five years ,export earning could be raise to US $ 50-60 billion in the world market.

Significance of the RMG Sector in Bangladesh Economy

Ready Made Garment industry dwells a unique position in the economy of Bangladesh;

RMG has evolved as the main export earning sector of the country. Over the decades of its journey, RMG industry has secured its position as the main source of growth of exports, employment and economic development as well as industrialization of the country;

Industry insiders say that apparel makers are now shifting their focus to more upscale products and markets, as demand for such products is on the rise globally. Besides, high-end RMG products add more value to the makers;

McKinsey and Company of Germany projected that export earning of Bangladeshi RMG would be double by 2015 & triple (US $ 42.0 billion) with in 2020.

Cont’d

Bangladesh is the 4th largest apparel exporting country to USA market trailing behind only China, Vietnam and Indonesia. Bangladesh is also in terms of volume is the 2nd biggest exporter of cotton trouser to the United states. Bangladesh do not enjoy any duty free facility for exporting apparel items to US under its GSP scheme;

Bangladesh is doing business with the US by paying a 17 per cent duty on an average and the highest duty of 32 per cent on man-made fiber clothes. In 2010, Bangladesh paid US $ 630.0 million duty for export goods to the USA which is higher than the the Aid received from USA.;

The European Union and the United States takes more than 90 per cent of Bangladesh apparel products; An export target of US$ 26,500 million has been sets for the current FY 2011-12 and target for RMG has been estimated to be US$ 20,359 million.

During July-December of current FY, export performance was US $ 11,775 million. woven garment grew by 22.56 per cent to US $ 4.46 billion while knit posted 11.12 per cent growth to US $ 4.79 billion; ;

Bangladesh Knit wear sector

Bangladesh is currently supplying knit garments to almost all renowned global brands. As a result, Bangladesh is now emerging as global hub for garment products;

A recent report stated that Bangladesh has surpasses Turkey & taking place as 2nd global exporter of Knitwear products in terms of quantity following China;

RMG products now a days producing by a few Bangladeshi exporters are for high-end consumers having a combination of good designs, flawless craftsmanship, high quality and meticulous in nature;

Some high-end fashion brands like Puma, Tommy Hilfiger, G-Star, Diesel, Ralph Lauren, Calvin Klein, DKNY, Nike, Benetton, Hugo Boss and Mango have been outsourcing garment products from Bangladesh over the last few years other than traditional buyers like H & M, Tesco & Wall-mart

Bangladesh is now the biggest exporter of cotton T-shirts and positioned 2nd in exporting pull over & jeans to EU countries.

Cont’d

More and more international buyers are choosing Bangladesh to manufacture such sophisticated items as the production costs in China, the world's largest apparel supplying country, are rising for higher wages and a shortage of workers in this sector;

China is no more a viable option for buyers and as a result, they are now shifting orders to Bangladesh. Bangladesh will have to go for high-end products as this is the demand from the buyers' end;

Exporters have to be competitive and to make goods for upscale markets & at the same time, they have to diversify the products and follow the fashion trends as well;

BKMEA aimed to export knitwear products worth US $ 20.0 billion by 2020 with shipments to new emerging markets.

Bangladesh’s export & Share of RMG products

FY Total export Export of Knit item

Export of Woven item

2011-12(July-Dec)

11,775 4,792(40.69)

4456(37.84)

2010-11 22,924 9482(41.36)

8432(36.78)

2009-10 16,204 6483(40.00)

6013(37.11)

2008-09 15,565 6429(41.30)

5918(38.02)

2008-07 14,111 5532(39.20)

5167(36.62)

(Value in Mln. US$)(Value in Mln. US$)

Major Importing Countries of Bangladesh

Knit products

Country 2007-2008 2008-09 2009-10 2010-2011

Germany 1245.07 1334.40 1282.77 2022.05

USA 807.28 959.42 891.61 1119.04

UK 616.91 720.58 725.74 990.98

France 639.55 705.69 692.00 999.71

Netherlands 359.13 513.98 528.57 591.07

Spain 410.78 404.23 384.55 595.92

Italy 320.42 368.86 379.04 525.17

Canada 232.40 292.05 283.86 432.92

((Value in Mln. US$)Value in Mln. US$)

Source: Export Promotion Bureau

Major Importing Countries of Bangladesh Knit products

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New market Exploration Initiatives

Considering Overwhelming dependents of our exports to EU, USA & Canada which is quite vulnerable for the future prospect of the apparel industry , the growth driver of export both public & private sector was thinking about exploration of new markets for the apparel items;

In order to face the challenge of financial crisis in FY 2008-2009 as well as to diversify export market of RMG products other than EU, USA & Canada, Ministry of Finance, Govt. of Bangladesh declared stimulus packages which also encourage exporters in exploring new market for the Apparel items;

In order to find new markets for Bangladeshi exportable items to emerging Latin American countries, under the leadership of the Foreign Secretary, a high powered eight member fact- finding mission visited Mexico, Argentina, Chile, Jamaica and Colombia to find markets for apparel & other products during August,2011. MOFA also considering to reestablish a few trade missions in the potential markets like Brazil, Mexico & South Africa.

Cont’d

Latin American region remains largely untapped though economies of those countries are booming rapidly. Retail sale of clothing is increasing impressively in those countries;

Asia habitat of 60 percent of world population, the buffer Asian economies like China, India & South Korea which have recently extended their duty free market access to LDC have also widened their markets;

For exploring new emerging markets Bangladesh Garment Manufacturers and Exporters Association (BGMEA) in the past sent a few marketing missions to the potential markets of Japan, Russia, Argentina, Columbia, Brazil & Peru. GIZ of Germany also assist in this venture for which we really appreciate their gesture;

Bangladesh Knitwear Manufacturer and Exporters Association (BKMEA) also sent a number scoping missions to Japan, South Africa and Russia & Australia.

Top 10 Clothing Exporting countries in 2010

129.84

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12.76 11.25 10.846.82 4.69 4.36 4.3

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Import

TRADE PROFILE OF EMERGING KNIT MARKETS

(Japan, Russia, South Africa, Brazil, Mexico, China and India)

JAPAN

Japan was the third largest economy in the world. The country is a very potential market which is the 12th largest export destination of Bangladesh in the global market and 1st in East-Asian countries;

Japan is the third largest knitwear importing country in the global market while total import of apparel market size of the country is US $ 25.0 billion in a year and it is a US $ 15.0 billion knitwear market which is 5.14 percent of global knitwear consumption;

According to apparel makers import into Japan has been maintaining higher growth since 2008 when Japanese government adopted trade policy of “China plus” to reduce its dependence on other country for outsourcing garment & other items;

Knitwear export to Japan is also increasing due to the relaxation of the Rules of Origin criteria of the Generalized System of Preference scheme by the Japanese government since April,2011 and it has opened up wider scope for raising export;

Cont’d

According to BKMEA, Knit wear makers are eyeing Japan as a potential market for US $ 2.0 billion with in next five years; Knit products exported to Japan till date have been mostly basic items like sweaters, T-shirts, polo shirts, ladies garments and so on;

Big Japanese businesses houses like NTT Docomo, UNIQLO, SEIYU, Ito Yokado, NITORI and Mitsubishi have started or in negotiation for doing business in Bangladesh;

Bangladesh total export to Japan during FY 2010-11 was US $ 434.12 million having a growth of 31.33 per cent over the FY 2009-10;

Export of Knitwear products to Japan during FY 2010-11 was US $ 93.83 million & woven garment export was US $ 153.68 million totaling to US $ 247.51 which is 57 per cent of total export;

Export of knitwear products to Japan during January-November period of 2011 worth US$ 138.0 million registering a growth of 116 percent compared to the same period of 2010;

Recent initiative

BKMEA in cooperation with EPB & Bangladesh mission in Tokyo participated in the International Fashion Fair in Tokyo, Japan during January 25-27,2012. A total 32 knitwear manufacturer cum exporters from Bangladesh participated in the Big Sight Exhibition venue.

After successful participation in the IFF, Tokyo, BKMEA decided to shift their annual knit exposition to Tokyo instead of holding it in Dhaka for exploring a strong market by showcasing the unique colour, design and texture of Bangladesh knitwear products;

EPB in Cooperation with JETRO & Bangladesh mission in Tokyo In the past organized Bangladesh Single country Exhibition and participation of the private sectors in a number of international fairs in Japan;

For further information on Japanese market JETRO ( www.jetro.go.jp) may please be contacted.

RUSSIA

Russia belongs to emerging economic bloc titled ‘BRICS’; Russia’s total import in 2010 was US $ 237.3 billion

Russia can be one of the important destination of Bangladeshi knit wear products which imported more than US $ 2.5 billion during last year;

China, bordering country of Russia was the largest supplier of knitwear products with exports worth US$ 0.95 billion in 2010. Fifty percent of the products has been imported from China;

Bangladesh had to pay 16 to 18 per cent duty in some knitwear items Which has also been raised subsequently;

According to BKMEA, if Russia provides duty free access for our apparel items, Knit wear export may touch US $ 600.0 million by next four to five years;

Cont’d

After accession to WTO, Russian Government now considering inclusion of some more products in the duty-free and quota-free list sometimes in this year which will certainly make boost to the country's export growth;

Bangladesh total export to Russia during 2010-11was worth US$ 96.95 million having a growth of 81.58 per cent over the same period of FY 2009-10;

knitwear product export to Russia during 2010-11 was worth US $ 42.32 million having a growth of 61% over the previous year and for woven it was US $9.53 million;;

As a part of product & market diversification initiative, EPB will organize a trade fair in Russia in May,2012.Interested exporters may contact Fair Division EPB in this regard.

South Africa entered into ‘BRICS’ economic bloc last year The country is also a member of the G-20, the club of world's twenty rich nations. South Africa’s per capita income is over US $ 5,000;

South Africa is Africa's biggest and fastest growing apparel market. The country is a US $1.20 billion clothing market. If Bangladeshi exporters make an aggressive foray into the fast-growing economy, Bangladeshi apparel export can grab a good share in this market;

Bangladesh's top apparel items have a close match to 20 top import items of South Africa like T-shirt, sweater, cotton trouser, basic shirt and jeans which are the most-favorable items in South Africa;

Bangladeshi apparel items face a stiff tariff barrier, making it difficult to compete with other nations who enjoy better trade access. According to BGMEA, our exports were slapped with 40 per cent customs duty, 51 per cent tariff and 14 per cent VAT which needs consultation with the South African government for reducing tariff bar;

South Africa

Cont’d

Bangladesh export to South Africa during 2010 -11worth US $56.20 million having a growth of 41.24 per cent over the FY 2009-10. Export of garments in FY 2010-11 worth US $ 48.42 million having a growth of 13 percent over the previous year. Knit item export amounted to US $20.34 million & woven item export was for US $ 28.09 million;

According to data of BGMEA, export from Bangladesh accounted for some four per cent of South Africa's US $1.20 billion apparel import in FY 2009-10. China dominates the market with a 70 per cent stake, followed by Indian Ocean island of Mauritius with 5.5 per cent and India 4.7 per cent;

RMG exporters are aware of the prospects of the South African market but they could not make much headway in export due to high duty on Bangladeshi apparel items; According to BGMEA, Still then some South African buyers have visited Dhaka and placed significant amount of orders for the apparel items;

In order to penetrate in to South African apparel market , we have to initiate immediate negotiation with the South African government on the tariff issues; As an export promotion measure, EPB organized a trade fair in South Africa last year.

Brazil

Brazil's economy Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors outweighs that of all other South American countries and the country is expanding its presence in world markets;

Brazil has overtaken Britain & France to become the 5th largest economy in the world & its strong growth and high interest rates make it an attractive destination for foreign investors. the country belongs to emerging economic bloc titled ‘BRICS’. Brazil is now South America's leading economic power and a regional leader;

Brazil’s GDP composed US $ 2.51 trillion on PPP basis in 2010 (est.) and US $ 2.19 trillion in 2010; GDP real growth rate was 2.8% in 2011 and per capita GDP was US $ 11,600 in 2011 on PPP basis;

Brazil’s total imports during 2011 was US $ 219.60 billion and it was US$ 187.7 billion in 2010. Brazil's readymade garment import amounted to US $ 767.07 million in 2010, of which US $ 303.63 million for knitwear and US $ 463.44 million woven garment;

Cont’d

Textile and garment products are included in the sensitive lists of Brazil for which high duties as 40 per cent has been imposed on import of apparel items; Brazil imports textiles and garment products valued at US $ 4.0 billion per year from China;

Bangladesh's total export to Brazil during FY 2010-11 was US $ 111.01 million having a growth of 55 per cent over previous year. In the FY 2010-11 knitwear export amounted to US $ 62.04 million and woven products amounted to US $ 32.59 million totaled to US $ 94.63 million having a growth of 110 per cent over 2009-2010;

Apparel exporters of the country urged to the government to take appropriate action for lowering the import duty on import of apparel items from Bangladesh into Brazil.

Mexico

Regionally Mexico is a member of the NAFTA bloc which composed of USA, Canada & Mexico, world biggest trading bloc; It’s total GDP composed of US$ 1.18 trillion in 2011 and per capita GDP is US $ 15,100;

Mexico is pursuing free market economy and has free trade agreement over 50 countries. Country’s total import was US $342.0 billion in 2011;

Mexico Textile and garment products are included in the sensitive lists for which imposes high duties as 40 per cent like Brazil;

Mexico's apparel import totaled to US $1,948 million in 2010 in which knitwear was for US $ 982.58 million and woven US $ 965.27 million;

Bangladesh’s total export to Mexico during 2010-11 was US $ 90.48 million having a growth of 25 percent over previous year. Export of apparel items was US $ 81.15 million in which knitwear amounted to $ 50.82 million and woven $.30.33 million in the same year. Apparel item growth in 2010 -11 was 32.16 per cent.

Cont’d Mexico’s major trading partners are USA & Canada; Ninety percent of her

trade covers through FTA;

In order to penetrate apparel export to this potential market, Manufacture & exporters demanded immediate consultation with the Mexican government for reducing the tariff on import of apparel items;

For further information on Mexican market PROMEXICO, a TPO of the Mexican government may please be contacted.

China

China is the 2nd biggest economy in the world surpassing Japan in 2010;

China occupies 37 per cent market share of total US $ 352.0 billion global garment product in 2010 positioning her number one supplier of apparel items in the globe;

Massive structural shift in the Chinese economy is creating huge opportunities for Bangladesh. China is increasingly focusing on the development of high-end manufacturing and services. This is largely due to the rising wage cost in the coastal regions of China and appreciation of its currency;

China's move towards a vertical economy has already created much room for Bangladesh, owing to its abundant supply of cheap labor;

Cont’d

China allows duty-free market access to 4,762 products or 70 per cent of its total imported items from developing countries which also includes Bangladesh. It has opened up a new avenue for Bangladeshi apparel maker to expand export of Apparel items;

According to traders, the latest initiative of China to expand duty free list to 8,194 products, supposed to be effective from January , 2012 will open further scope for Bangladesh to penetrate her export to the vast Chinese market;

According to Chinese statistics, China's imports from the LDCs under the DFQF scheme in 2010 reached to US $ 42.2 billion which accounted for 98.7 per cent of its total imports from them;

Cont’d

Bangladesh and China are signatory to Asia Pacific Trade Agreement (APTA). China is the 14th largest export destination of Bangladesh in the Asian region;

Bangladesh export to China during 2010-11 worth US $ 320.0 million having a growth of 79 percent over the previous FY. Export of Knit garment was for US $ 26.20 million & for woven garment was for US $ 26.60 million China proves to be a lucrative destination for Bangladesh's garment as apparel exports to that country saw an extraordinary 179 per cent growth in the fiscal year FY 2010-11 over that of FY 2009 10. During July-October period of the current FY 2011-12, country's shipment of knit products reached $ 16.55 million while of woven $ 17.67 million to China.

The RMG manufacturers and exporters said it is likely to take only five years to earn $ 4.0 to $5.0 billion from apparel export to China as Bangladesh RMG is now enjoying duty-free access to the market of China.

In order to penetrate into Chinese market, EPB is organizing participation of the private sector in a number of trade fairs in China every year.

EPB is maintaining close working relationship with the CCPIT, trade promotion organization of the Chinese government. For further information on Chinese market CCPIT ( www. ccpit.org) may please be contacted

India

Bangladesh & India are signatory to a number of regional trade agreements like APTA, SAPTA, SAFTA BIMSTEC & IOR. Among SAARC member countries, India is the 11th largest export destination of Bangladesh;

India’s recent grant of duty free quota free list of 46 items to Bangladesh under SAFTA ( 24 knitwear products, 21 woven garments and a silk fabrics item) includes shirts, trousers, blouses, children's clothes, nightwear, T-shirts and jeans covers nearly 81 percent of the eligible export items. One of the major objectives of giving such a facility in trade is to minimize the ever-growing trade gap between the two countries;

The DFQF declaration will facilitate 23 percent direct tax on export of garment items from Bangladesh to India. But exporters have to count 12 percent duty for having different para-tariff and non-tariff barriers;

Analyst apprehended that India could be the third largest destination of our garments after the European Union and the United States following recent duty-free market access provided to Bangladesh;

Cont’d

According to India's Clothing Manufacturing Association (CMA) and Federation of

Hosiery Manufacturers Association of India (FHMA), Bangladeshi clothes, cheaper by at least 20 per cent than India will bring respite to Indian consumers, especially for the middle class, reeling under steep hike of garment prices;

Bangladesh has the lowest border distance with India compared to other countries. If India eases the non-tariff barriers, doing business with India will be much easier for Bangladeshi exporters. Besides, it takes less lead-time to export India than the western countries;

Encouraged by the duty-free access to Indian apparel market, Bangladeshi RMG exporters are expecting to fetch about US $ 2.0 billion from the Indian apparel market of US $30.0 billion with in next few years;

Bangladesh’s apparel shipment to India stood at US $ 36.0 million in FY 2010-11, out of the total overseas sale of US $18.0 billion. The amount is .0013 per cent of India's US $ 30.0 billion clothing market;

Bangladesh's apparel exports to India never crossed $100 million. MOC expected that export of garment to pass the US $100.0 million mark in two years;

Cont’d

Bangladesh export to India during 2010-1 worth US $ 512.0 million having a growth of 68 percent from over 2009-10 which was US $ 304.0 million.; RMG export accounted for US $ 36.0 million in FY 2010-11 where share of woven garment was US $25.44 million and knit garment US $ 10.49 million.

In order to avail the DFQF facility offered by the Indian government as well as undertaking market exploration initiative for apparel items, BGMEA along with IBCC has already sent a marketing mission to India;

According to BGMEA, they has a plan to send a team to India for organizing single country fair in the different Cities of India at the end of this year;

As a market promotional drive, EPB also organizing private sector participation regularly in a number of trade fairs in India.

Conclusions

RMG sector is contributing plenty in the ongoing economic and social revolution of the country as well as to graduate Bangladesh into a middle income Country (MIC) by 2021 which is the present government’s vision;

Government of Bangladesh , Development partners, national and international organizations and NGO’s have been providing necessary support for boosting export of RMG products in the potential & new emerging markets;

Apparel exporters though passing a tough time at the moment due to EURO zone & USA crisis, active support & cooperation of all concerned we will be able to overcome situation;

Business community apprehended that export earnings of the RMG sector of the country are likely to cross US $ 46.0 billion mark by 2020. It would ultimately assist in our expectation to raise Bangladesh’s export earning to US $ 50-60 billion by next ten years, In that perspective, exploration of new potential markets other than EU,USA & Canada is of much importance to us.

Thank you all for your patience hearing