The Bangladesh Clothing Manufacturing Industry has earned reputation of having the lowest apparel production costs in the global wholesale scene. Which is why the apparel manufacturing industry here in Bangladesh is growing at a staggering rate; $25 billion last year and expected to exceed $50 billion by 2020.
A lot of the credit goes to various parties who have contributed to keeping costs low while making sure Bangladesh competes in quality and technicality with countries like Vietnam & Philippines.
We have listed some of the major factors that lead to Bangladesh’s incompatible cost advantage:
With a minimum wage of just BDT 5300 or USD 65.7 a month compared to China’s RMB 1,000 or USD 146 per month, Bangladesh out competes all other counties in wages. Even though the sacrifice is by the workers, Bangladesh’s low cost of living combined with a thriving industry made it possible for millions of workers to come out of poverty.
Low Property Rent
It’s common in Bangladesh to see apparel factories of t-shirts, denim, woven shirts, sweaters etc. spring up in any given neighbourhood. The low rent and lack of industrial location regulations made it possible to keep fixed costs such as rent very low.
LDC Free Trade Benefits
Being a developing country, Bangladesh receives LDC trade benefits from 52 countries. Benefits include tariff and quota free exports. With no tax to be paid to the governments, markets in North America and Europe have taken advantage of the opportunities in Bangladesh’s apparel industry.
With the help of the government and ambitious entrepreneurs, a diverse ecology has developed in the industry that compliments the apparel manufacturers and helps keep costs low. These include complementary goods manufacturers such as zippers, buttons, fabrics, packaging and all other accessories to financial institutes such as banks who not only provide low interest loans to clothing manufacturers but also help transact with foreign buyers.
Even though inflation rates till late 2012 pushed the wages up than what it was, in recent years Bangladesh managed to keep stable rates of inflation and keep costs low. Furthermore, an undervalued currency of Bangladesh Taka has made it possible to manufacturers to export cheaper in dollars, euros and pounds.
Bangladesh’s government is determined to lead the global apparel market with not only costs but volume as well, within the next 5 years. Fast and radical legislative changes are being made to ensure that this happens. Examples include requirements to push for certifications and quality standards, subsidies for market growth and R&D investments.