How diversification could redefine ‘Made in Bangladesh’

In the bustling factories of Dhaka and Gazipur, millions of workers stitch together the fabric of Bangladesh's economic miracle. The ready-made garment (RMG) sector, a cornerstone of the nation's growth, has made Bangladesh the world's second-largest apparel exporter, trailing only China. 

Yet, as global trade winds shift, questions loom: Is this success built on a fragile foundation?

With exports heavily concentrated on a few basic items, the industry risks stagnation unless it embraces diversification. 

The backbone of Bangladesh's economy

The RMG industry is nothing short of a national powerhouse. In the fiscal year 2023–24, it generated over $47 billion in export earnings, accounting for approximately 84% of Bangladesh's total exports and contributing around 11% to the country's GDP. 

The sector employs more than four million people, predominantly women, and has been instrumental in lifting millions out of poverty while driving social progress, including improved literacy rates and gender empowerment.

The growth trajectory has been remarkable. From humble beginnings in the 1980s, when exports were a mere fraction of today's figures, the industry has expanded at a compound annual growth rate of about 7% over the past decade. 

In 2021–22 alone, RMG exports surged by 35% year-on-year to $42.6 billion, fuelled by competitive labour costs, favourable trade agreements, and a reputation for reliability. 

Even amid global disruptions such as the Covid-19 pandemic, the sector rebounded strongly, with exports to key markets such as the European Union (around 50% of total RMG shipments) and the United States (about 18%) holding firm.

However, recent projections paint a more cautionary picture. 

Bloomberg Economics forecasts a potential decline in monthly exports to around $2 billion in 2025 due to economic headwinds, underscoring the need for resilience. While the sector has weathered storms — from factory safety scandals to supply chain disruptions — its overreliance on volume over variety threatens long-term sustainability.

The perils of concentration: Challenges in the RMG landscape

Bangladesh's RMG sector faces multifaceted challenges, including rising labour costs, geopolitical tensions, and sustainability demands from buyers. Yet product concentration stands out as a critical vulnerability. 

Export data reveals a stark imbalance: nearly 79% of RMG shipments are confined to just five basic cotton-based categories, such as T-shirts, trousers and sweaters. 

Cotton products dominate, comprising about 75% of exports, even as the global apparel market shifts towards man-made fibres (MMF), which now account for 70–75% of worldwide consumption.

This narrow focus traps manufacturers in a low-margin, high-volume model, where competition is fierce on price alone. It exposes the industry to risks such as fluctuating cotton prices, changing fashion trends, and trade barriers. 

For instance, Bangladesh's dependence on imported fabrics — often from China — creates supply chain bottlenecks and increases costs. 

Moreover, with three-quarters of exports concentrated in just nine countries, market-specific disruptions, such as economic slowdowns in the EU or US, could have devastating ripple effects. Without diversification, the sector risks losing ground to agile competitors like Vietnam, whose exports have grown rapidly through broader product offerings.

Unlocking growth: The power of product diversity

Increasing product diversity is not merely a defensive strategy — it is a catalyst for revenue growth and enhanced global positioning. By venturing into high-value segments, Bangladesh can command premium prices, boost profit margins, and reduce vulnerability to external shocks. Economic models suggest that diversifying into complex items could increase export values by 20–30% in targeted categories, fostering job creation and technological upgrades.

A diversified portfolio would also strengthen Bangladesh's bargaining power in international trade. Predictions indicate that embracing MMF and value-added products could help the country capture a larger share of the $400 billion global sportswear market by 2030, driving overall RMG exports towards $100 billion. 

This shift would not only elevate per-unit earnings but also position Bangladesh as a versatile supplier, attracting brands seeking ethical and innovative partners.

Lessons from the giant: China's edge and Bangladesh's path forward

China's RMG dominance — with exports exceeding $300 billion annually in recent years — dwarfs Bangladesh's $47 billion. While sheer volume plays a role, bolstered by massive scale and infrastructure, diversity remains a key differentiator. 

China's export basket spans thousands of categories, from basic apparel to high-tech textiles, including electronics-integrated fabrics and sustainable materials. 

This breadth allows China to serve diverse markets, from luxury brands to mass retailers, achieving higher average prices and resilience against downturns.

In contrast, Bangladesh's focus on low-end cotton goods limits its appeal. For example, in the US market, China's apparel exports reached $16.5 billion in recent data, compared with Bangladesh's $7.3 billion — partly due to China's wider range of offerings such as performance wear and accessories. 

Bangladesh can learn from China's integrated supply chains, investment in R&D, and policy support for MMF production. By emulating these, Bangladesh could bridge the gap, transitioning from a cost leader to a value innovator.

Global success stories: Inspiration from peers

Several countries have successfully diversified their RMG exports, offering blueprints for Bangladesh. Vietnam, once similar to Bangladesh with a basic export profile, has pivoted to high-complexity items such as sportswear, technical outerwear, and footwear. 

This strategy propelled its apparel exports from $20 billion in 2015 to over $40 billion today, attracting giants like Nike and Adidas through investments in technology and skills training.

Turkey provides another model, focusing on high-end fashion and quick-turnaround orders for Europe. 

By emphasising design, premium fabrics, and value-added products such as tailored suits, Turkey achieves unit prices double those of Bangladesh, with exports topping $20 billion annually. 

Broader examples include Mexico and Malaysia, which diversified from resource-dependent economies into manufacturing hubs — including textiles — by fostering innovation and trade pacts. 

These nations demonstrate that diversification can multiply revenues, create skilled jobs, and build economic buffers.

Expanding horizons: Opportunities and ongoing efforts in Bangladesh

Bangladesh has ample room to diversify. Promising areas include sportswear (projected to exceed $400 billion globally), formal and business wear such as suits and blazers, intimate apparel like lingerie and swimwear, outerwear including performance jackets, and technical textiles for uniforms, medical gear, and protective clothing. Shifting to MMF-based products could tap into growing demand for sustainable, durable fabrics.

Encouragingly, initiatives are already underway. Leading manufacturers are investing in MMF technology and worker training—for example, Youngone Corporation. 

These pioneers are demonstrating that Bangladesh has the potential to move up the value chain, but their efforts need to be scaled up across the industry. 

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has been proactive, launching a report titled Beyond Cotton: A Strategic Blueprint for Fibre Diversification to guide the shift away from cotton dependency. 

BGMEA has identified 51 high-potential products and partnered with firms like PwC to create recovery roadmaps emphasising diversification. These efforts aim to rebrand "Made in Bangladesh" as synonymous with quality and versatility.

Collaborative action: Roles of government and stakeholders

A successful pivot requires synergy. The government should lead with policies such as tax incentives for MMF investments, streamlined imports of specialised fabrics, and targeted trade negotiations for high-value categories. Enhancing infrastructure, such as ports and energy supply, would further support expansion. Recent policy notes from the World Bank emphasise enabling export diversification through regulatory reforms.

BGMEA and other stakeholders, including the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), must drive workforce upskilling via training centres and global marketing campaigns. They can foster collaborations with international brands to co-develop products, as seen in BGMEA's calls for increased sourcing from Bangladesh. Private sector involvement in R&D and sustainability initiatives will also be crucial.

The RMG sector remains Bangladesh's crowning achievement — a testament to ingenuity and hard work. Yet, to endure and excel in a dynamic world, it must evolve.

By weaving diversity into its core, Bangladesh can craft a resilient, prosperous narrative, solidifying its place as a global apparel powerhouse for generations to come.

Hussain Samad is a consultant at the World Bank in Washington, DC, and an independent researcher. He can be reached at hsamad2000@yahoo.com.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard