In one corner of South Asia, there is a country known as China's "strange but familiar neighbor" - Bangladesh.
With a territory of nearly 150,000 kilometers and a population of 161 million, this small South Asian country connects China, India and the world's three largest economies of ASEAN, and is the second largest garment exporter after China. It is one of the most economically dynamic countries in South Asia and even in the world, with an average GDP growth rate of more than 6% in the past ten years, and an economic growth rate of 7.86% in 2018, with the garment processing industry as its pillar industry. At the end of the 2017/18 fiscal year, Bangladesh's foreign exchange reserves amounted to US$32.943 billion, second only to India among South Asian countries.
According to data from the World Trade Organization, China, the 28 countries of the European Union, Bangladesh and Vietnam remained one of the world's top four exporters in 2018, accounting for 72.3% of the global garment market. Bangladesh's garment exports (up 11.1 percent) grew at an absolute rate, up 0.1 percentage points from 6.4 percent to 6.5 percent.
The world's top 10 garment exporters in 2018 (by value)
Bangladesh's garment industry is developing rapidly and is the world's second largest garment production base, with the textile industry accounting for more than 70% of total exports. Bangladesh's garment exports have nearly tripled in the past decade, and the government has even set a target of US$50 billion for garment exports in 2021.
Due to the rising demand for local textiles in the domestic and international markets, there is room for investment of Tk 500 billion in Bangladesh's textile industry. At present, local textile enterprises supply 85% of raw materials to the export-oriented knitting industry and 35% to 40% to the weaving industry. Over the next five years, local weavers in Bangladesh will be able to meet 60% of their demand for woven fabrics, which will reduce their dependence on imports, especially on China and India. Bangladeshi garment manufacturers use 12 billion meters of fabric every year, with the exception of 3 billion meters of fabric, which are imported from China and India. In the past year, Bangladeshi entrepreneurs have invested a total of 68.96 billion taka to set up 19 spinning mills, 23 textile mills and 2 printing and dyeing factories.
Bangladesh Establishes Export Processing Zones to Attract Foreign Investment
Currently, Bangladesh has more than 4,600 garment factories, most of which are concentrated in the country's two largest cities, the capital Dhaka and the port city of Chattogram.
Among them, Chittagong is the largest seaport in Bangladesh, handling about 90% of the country's international trade. Despite continuous improvement works at the port over the past few years, congestion is still an issue due to the rapid increase in cargo volumes. In 2018, the port handled a record 2.9 million TEUs, surpassing the 2.7 million in 2017 and far exceeding the original design of 1.7 million TEUs. According to a Hong Kong manufacturer in Bangladesh, it takes about 15 days to ship a batch of raw materials from Chinese mainland to Chittagong, and another seven days to clear customs. Inefficient border clearance is another major challenge for manufacturers and exporters. The lengthy process of checking, granting permits, and paying associated fees often leads to delays and increased costs for shipping and border compliance.
To promote industrialization and attract foreign investment, the Government of Bangladesh has established eight export processing zones since 1983. Due to the better infrastructure and business support services in these EPZs, many foreign manufacturers choose to set up production facilities in EPZs. EPZs also provide one-stop management services, including customs clearance and issuance of import and export licences, all of which can be handled in EPZs without the need for applicants to go to different government agencies. Since its launch, the EPZs have attracted about 500 companies to set up factories in the zone, including those from South Korea, Chinese mainland, Japan, Hong Kong and Taiwan. In addition to a large number of apparel and textile manufacturers, there are also manufacturers of footwear and leather goods, electronics, metal and plastic products. Together, their exports account for about 20 per cent of Bangladesh's total exports.
As the eight EPZs were established at different times, they are currently at different stages of development. Chittagong and Dhaka are the two oldest EPZs and the two largest with good public facilities. As of 2018, the two EPZs have attracted about 280 companies to set up factories, accounting for more than 60% of the total investment in EPZs and nearly 80% of total exports. In an effort to diversify industrial development, the government granted longer tax holidays to manufacturers located in Utra, Isuvadi and Mongla (the low-level development EPZs furthest from Chittagong and Dhaka).
While land rents and wages are lower in these low-development EPZs, investors must be aware that there is a shortage of skilled or experienced workers in these DLZs, and it is more time-consuming to transport goods to and from Chittagong.
Bangladesh has a strong advantage in low cost, and there is a huge room for investment The
large low-cost labor force makes the country an ideal production base for labor-intensive industries such as clothing and textiles. Since the 1980s, Bangladesh has been a popular location for international brands such as H&M, GAP and Adidas to source ready-to-wear garments.
The most immediate benefit of investing in Bangladesh is the low cost of labor. According to reports, Bangladesh's wages are very competitive (Bangladesh stipulates that the minimum wage standard for textile enterprises is 8,000 taka (about 664 yuan), which is not the same as the minimum wage standard of thousands of yuan in China. In addition to the advantages of low labor, Bangladeshi garment exports to the European Union, the United States, Japan, Australia, Canada and other countries enjoy preferential policies: Bangladesh enjoys quota-free and duty-free preferential treatment in the EU market, and these preferential treatment will remain even in the "post-quota era", which is the main advantage of Bangladesh's textile industry over other competitors. Bangladesh's textiles received preferential tariff-free and quota-free market access from Canada, Norway, Japan, New Zealand and Australia in 2004 and before. In the U.S. market, Bangladesh has 30 categories of ready-to-wear products subject to quotas, which is much smaller than China's restricted product categories.

The Sino-US trade war provides new opportunities for Bangladesh's development According to foreign media reports, Bangladeshi industry insiders said that in the context of the escalating Sino-US trade dispute, Bangladesh's clothing exports will achieve rapid growth in the current fiscal year (2018-2019 fiscal year). According to the Bangladesh Export Promotion Bureau (EPB), between July 2018 and February 2019, the country's garment export revenue increased by 14.17% year-on-year to US$23.12 billion. In addition, exports of woven garments increased by 14.84 percent year-on-year to US$11.63 billion, and exports of knitwear increased by 13.50 percent to US$11.49 billion.
"The growth of China's apparel exports is mainly affected by the Sino-US trade war, and due to the ongoing trade war between the United States and China, many factory orders are being transferred from China to Bangladesh." Chairman of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) M Siddiqur Rahman told the country's New Country newspaper yesterday.
According to the Bangladesh Export Promotion Board, in the last fiscal year, Bangladesh exported $30.61 billion worth of apparel products, up 8.76 percent year-on-year. In FY 2017-2018, apparel accounted for 83% of Bangladesh's total exports.
"The US-China trade war has created a very good opportunity for apparel exporters in Bangladesh. Bangladesh's garment export earnings will continue to soar amid the trade conflict. Abdus Salam Murshedy, former chairman of BGMEA, told The New Nation. Abdus Salam noted that the tariffs have led to higher costs for U.S. retailers to source and manufacture goods in China, and that many U.S. retailers are shifting their sourcing from China to more cost-effective manufacturing hubs like Bangladesh to control costs.
Bangladesh's exports in July this year reached US$3.89 billion, an increase of 8.66% year-on-year, exceeding the expected target of US$610 million and exceeding the record of US$3.31 billion in monthly exports in May this year. Garment exports reached US$3.31 billion in July, up 9.6%, exceeding the monthly target of US$98 million. Haq, chairman of the Bangladesh Garment Manufacturing and Export Association, said the July peak was due to the growth of Bangladesh's exports, while the trade war between China and the United States has also facilitated Bangladeshi exports.
The vice chairman of the Bangladesh Garment Manufacturers and Exporters Association also told the delegation of the Chinese Manufacturers' Association of Hong Kong (CMA) that in the context of the Sino-US trade war, some Chinese textile and garment owners expressed their desire to set up joint venture factories in Bangladesh, the main reasons for which are the lack of skilled workers in China's textile and garment industry, the rising production costs, and the transformation of industry to IT and other industries, in addition to the excessive investment in Vietnam and Cambodia in the past 20 years, More and more sunset industries are moving to Bangladesh and Myanmar. Compared with China, Vietnam and Cambodia, Bangladesh's garment industry has a strong competitive advantage due to its lower production costs and preferential trade treatment in major markets such as the European Union and China.
With the deepening of China's economic transformation and upgrading, it is the general trend for the low-end processing industry to move to lower-cost areas. Bangladesh, an emerging market full of business opportunities and challenges, deserves more attention!