What happens to Bangladesh's famed textile industry, specifically its $47 billion ready-made garments (RMG) export industry, which accounts for nearly 85% of the country’s export revenues? Bangladesh exports RMG worth $3-$3.8 billion per month, making it the world's second-largest in RMG exports. The spate of protests and violence over the past two months have brought production and export activities to a grinding halt. Although an interim government headed by noted economist and Nobel prize winner Mohammad Yunus has taken charge, it could take a long time before normalcy is restored in the country. This disruption can spell doom for Bangladesh's apparel sector ahead of the Christmas season. Can this lead to Bangladesh losing its market to other countries, such as India, Vietnam, Sri Lanka, and Myanmar?

India’s position is fourth in global RMG exports, i.e., after China, Bangladesh, and Vietnam. However, Bangladesh is a big market for the Indian textile industry, especially textile yarn. Among the Bangladeshi RMG manufacturers and exporters, about 25% of companies are Indian. As these companies may have India offices to help meet exigencies, they may cope with the disruptions better than other companies. They may quickly partner with Indian apparel manufacturers to meet their short-term export commitments. Some of these companies may move part of their businesses to India.

However, the competitiveness of Bangladesh's apparel industry is a long-term attraction. Bangladesh-based RMG manufacturers and exporters may not enjoy the same level of competitiveness if they shift their base to India. In Bangladesh, both commercial spaces and labor are cheaper compared to India. This means that expanding existing units is more cost-efficient in Bangladesh. Another key benefit that textile and apparel industries enjoy in Bangladesh is proximity to the ports. It ensures timely receipt of raw materials and dispatch of ready goods. Easy and quick customs clearance with the least paperwork is another area where smaller countries like Bangladesh and Vietnam score better than India. Bangladesh has a 10-hour workday and a larger pool of trained apparel industry professionals.

So, while Bangladesh's current turmoil has dealt a heavy blow to its RMG export business, India is unlikely to gain much. The reason is that Bangladesh, not only enjoys preferential treatment from the buyer markets for being a least developed country but it also offers a more conducive environment for textile and apparel industries to thrive. However, a fraction of the business can shift to India because of their inherently Indian roots and links. Industry experts believe this could be 10% or around $300-$400 million worth of monthly business.

Another interesting development that came in the wake of the Bangladesh crisis is the jump in textile stocks in India. After hitting a record high recently, the BSE and Nifty indices were in a correction mode since the Union budget was presented on July 23. However, as Bangladesh Prime Minister Sheikh Hasina's sudden resignation and fleeing the country hint the political uncertainty in Bangladesh could linger on, textile stocks in India have started surging. A report by Mint on August 6 says stocks of Gokaldas Exports, KPR Mills, Vardhman Textiles, Welspun Living, S.P. Apparels, Nitin Spinners, Arvind, and Himatsingka Seide have witnessed rallies ranging between 5% and 17%.

Whether India’s textile and apparel industry benefits from the political turmoil in Bangladesh or not is still not clear. However, the setback that these industries in Bangladesh have received is profound. Vietnam and Sri Lanka which promise to provide a similar business environment will certainly gain from the instability in Bangladesh. In RMG exports, Vietnam is ahead of India and marginally behind Bangladesh. Vietnam can claim a large share of Bangladesh’s textile and apparel business lost due to recent upheavals. (IPA Service)