China's garment shift could boost Bangladesh

China’s currency appreciation and its shift towards value-added garments may prompt retailers to locate in Bangladesh.

China’s shift towards manufacturing higher-end garments – combined with the recent appreciation of the yuan – could make Bangladesh an even more attractive option for garment buyers, experts say.

But recent political turbulence could ruin those dreams.

“If major retailers are not sure we can honor orders, it will be an opportunity missed,” says Mustafizur Rahman, executive director of Center for Policy Dialogue, a Bangladeshi think-tank.

The political strife surrounding the Jan. 5 election has disrupted the garment sector in a variety ways – and not just when it comes to transporting goods. Instead of meeting with buyers on factory premises, for instance, officials from Bangladeshi garment suppliers are meeting with buyers in Hong Kong, Bangkok, or Singapore.

“Buyers placing orders for summer are not coming to Bangladesh. The entrepreneurs are going to Hong Kong [for meetings]. If the political confrontation continues, this [trouble] will continue,” fears Mr. Rahman.

Meanwhile, experts say that Bangladesh is missing its chance to capitalize on changes in Beijing. China currently has the biggest share of the global garment export market, but has been moving to specialize in higher-end goods.

China now plans on producing more labor-intensive “value added” clothes for Western retailers, at higher prices. And textile worker wages are rising in China. With its low wages, a 4 million-strong workforce, and 3,500 garment factories, Bangladesh – currently the No. 2 garment exporter in the world – should be a key option for moving low-end orders such as denim jeans, shirts, and t-shirts,

Plus, China’s yuan has gradually appreciated from 6.7 to the dollar in 2010 to 6.05 in 2014, and it’s expected to rise more this year. That will make its exports more expensive compared to other garment-producing countries.