By  on October 29, 2012

GENEVA — Bangladesh needs to diversify from its export-oriented textiles and apparel sector to a greater focus on design and local branding to help the industry move to a higher value chain, Ghulam Hussain, secretary of the ministry of commerce, told a global forum.

The poor South Asian nation also attaches “great importance” to taking advantage of market access opportunities, Hussain told a two-day World Trade Organization review session of Bangladesh’s trade regime.

Robust growth in exports of textiles and apparel, which in the year through June accounted for 87 percent of the nation’s total merchandise exports of $24.2 billion, up from $22.8 billion the prior year, has helped the country post an annual growth rate of more than 6 percent in the last few years, said a WTO report on Bangladesh. In apparel, which accounted for a 79.2 percent share of total exports, the biggest categories were T-shirts and vests; trousers, overalls and shorts, and jerseys, pullovers and cardigans.

The European Union was the top destination for Bangladesh’s merchandise exports with a 52.5 percent share, followed by the U.S. with 21 percent and Canada with 4.1 percent.

Michael Punke, U.S. ambassador to the WTO, told delegates that bilateral goods trade is increasing “at an annual rate of 20 percent.”

“We see this most clearly in the strong partnerships created by Bangladeshi apparel producers and many leading U.S. retailers, meeting the growing demands of the U.S. market for such apparel,” Punke said.

The WTO notes that exports from Bangladesh have been spurred by duty-free access to the European Union, China, Canada, Australia and Norway, but added that the U.S. does not provide the same preferential access terms.

“At present, 96 percent of Bangladesh’s exports to the United States consist of ready-made garments and textile products, which are bought by retail groups such as Wal-Mart, Gap and Target,” the WTO said.

It added that although Bangladesh can apply for preferential tariffs under the U.S. General System of Preferences, “currently only 0.62 percent of the country’s goods exported “to the U.S. qualify under the [GSP] system.”

As a result, import duties on Bangladesh exports to the U.S. “amount to more than $500 million per year.”

The report said, “As a reputable low-cost producer of garments, Bangladesh has gained market share in recent years. This trend is expected to continue over the medium term.”

Trade analysts attribute the success of the garments sector in part to trade policies that boosted “credit flows and the availability [through bonded warehouse facilities] of inputs at world prices for garment exports.” Other factors cited for the favorable outlook include labor costs the WTO estimates “are 50 percent below the nearest competitor and only about one-third of those of China.”

“The country’s textile sector stands to be the main beneficiary of labor shortages, rising wages and capacity constraints in China,” it said.

In addition, production capacity “has continued to expand and there are signs that Japanese retailers, which hitherto mostly sourced from China and Vietnam, are starting to source more of their textiles and garments from Bangladesh.”

On the production side, the report said, foreign investors are showing interest “in large-scale relocation of labor intensive industries, particularly garments and related textile manufacturing.” In the previous year, textiles and apparel accounted for a 28.9 percent share of foreign direct investment inflows, up from 17.3 percent the year before.

The WTO said Bangladesh boasts 5,000 garment factories, employing 3.6 million people, mainly women, while by comparison, Indonesia has 2,450 garment factories, Vietnam has 2,000 and Cambodia just 260.

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