New data released by the World Trade Organization showed Vietnam as the world’s second largest exporter of ready-made garments (RMG), overtaking Bangladesh.
Vietnam sold $29 billion worth of apparel in 2020. Bangladesh’s RMG exports were valued at $28 billion.
Bangladesh, in South Asia, has been the world’s second largest exporter since 2010, next to China.
According to the World Trade Statistical Review 2021 released by WTO, Bangladesh’s share in the global apparel market dropped to 6.3% in 2020 from 6.7% a year earlier.
China remains the world’s largest exporter of apparel with 31.6% of the global total, amounting to at least $140 billion.
Amidst a global pandemic that gravely affected manufacturing and logistics industries, Vietnam posted a slight increase in its RMG exports. Last year’s export share stood at 6.4%, up from 6.2% in 2019.
Manufacturing experts and economists said that Bangladesh has lost its position to Vietnam amid the latest trend of decline in apparel export, as reported by Dhaka Tribune. Bangladesh’s RMG export has been declining significantly due to the closure of a number of small garment factories over the last few years after failing to comply with policies set by international retailers.
Vietnam, meanwhile, maintained a welcoming stance on foreign investments and deals into its growing garment manufacturing industry. Through its improving infrastructure, business-friendly environment, highly skilled workforce and competitive pricing, the Southeast Asian country was able to draw the attention of global retailers and brands.
Globally, Bangladesh is a popular destination for low-end manufacturing items at the cheapest rate while Vietnam produces high-end apparel with a strong backward linkage industry and educated workforce, reads the Dhaka Tribune report.
The differences in business dynamics and environment between the two countries played a huge role in this new RMG export ranking.
Diversification trend, FTAs benefiting Vietnam
The apparel industry is one of Vietnam’s key economic drivers. The country is considerably far ahead in terms of labor and capital productivity. It also helped that Vietnam was able to go through the year 2020 with less lockdowns, which meant manufacturing operations weren’t suspended or disrupted for long.
In fact, when major economies like the US and China bounced back from months-long lockdown, pent-up demands benefited Vietnam the most. As one of the most export-oriented economies, Vietnam saw a strong rise in exports in the first quarter of 2021. The textile industry recorded double-digit growth in demand for inspections from January to March this year, higher than 2020 and 2019.
What’s further driving Vietnam’s garment manufacturing industry is the growing diversification trend. The country is among the top alternative sourcing regions for companies wanting to take some of their operations away from China.
A report earlier this year by Qima revealed that Vietnam is a “traditional first choice for buyers diversifying away from China”, with its popularity growing among Western buyers over the past few years. The sourcing survey showed 43% of US-based respondents cited Vietnam among their top 3 buying geographies as of early 2021, twice the percentage in 2019.
Vietnam’s current free trade agreements with several countries and regions also allowed it to enjoy zero-duty benefits. Its FTA with the EU, which was signed in 2019, gave Vietnam an upper hand against countries like Bangladesh that produce the same kind of products.