Bangladesh fetches price up to 83% lower than rivals

According to the International Trade Center (ITC), international buyers consistently pay less than the global average price to clothing suppliers in Bangladesh, but more to some competitors in the country.

In fact, local garment manufacturers receive prices that are 32-83% lower than the highest prices paid to suppliers in other countries.

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This validates, for the first time, claims by Bangladeshi garment manufacturers of lower prices from global buyers and underscores the importance of moving up the value chain.

In a research report – The Garment Costing Guide for small enterprises in value chains – published in August, the ITC said there is a growing argument that customers – retailers and brands – should pay their suppliers a fair carriage paid (FOB price) as they often pay prices below factory cost.

“The data is clear and many factories have been forced to close due to falling FOB prices.”

“The conclusion is that the fault lies with the customers and therefore they should be forced to pay a higher FOB price,”

The free on board price of exports and imports of goods is the market value of the goods at the point of uniform valuation (the customs border of the economy from which they are exported).

Bangladesh is the world’s second-largest clothing supplier, behind China, bringing in $42.61 billion in the last fiscal year.

ITC, based in Geneva, is a multilateral agency and has a joint mandate with the World Trade Organization and the United Nations through the United Nations Conference on Trade and Development.

The ITC said it looked at the problem using cost-value analysis and saw a different picture.

“The problem is not that customers pay these factories less, but rather that customers pay more to others.”

“The data is equally clear: customers are paying a lower price because the value provided by failing factories is worthless,” he said.

ITC conducted the study using data from the US Office of Textiles and Apparel.

It analyzed data for Bangladesh’s top 10 export items for 2020, comparing their FOB prices with those of their top 10 competitors for each product.

In each case, supplier countries such as Bangladesh, Pakistan and Cambodia are consistently paid below average world prices, while Vietnam, Indonesia, Turkey and Mexico receive rates above average prices.

“They are willing to pay higher prices to some countries but rather less to supplier countries that are unable to meet their needs,” the ITC said.

For example, men’s woven cotton pants made in Bangladesh sold for $7.01 apiece in 2020, 9.20% below the global average of $7.72.

Vietnam received $10.76 per piece while Sri Lankan and Indian exporters received $8 and $8.41 respectively for the same product.

Similarly, locally made men’s cotton jeans were sold at $7.81 each, again 7.20% below the global average of $8.41. Vietnam received $11.55 by selling a similar item.

Only two products – women’s cotton trousers and men’s cotton t-shirts – made in Bangladesh fetched a price slightly above the world average.

Women’s cotton pants made in Bangladesh were sold at $6.43 apiece, up 23.30% from the global average of $5.22.

Turkey won the highest price at $15.84, 203.60% higher than the world average.

Men’s cotton t-shirts fetched $1.47 a piece in Bangladesh, 23.10% above the global average of $1. Peru brought in $8.46, the highest among vendors worldwide.

Woven cotton jackets fetched $10.10 a piece, 0.70% less than the global average. Thailand received $48.86 and Mexico $34.11, according to the ITC study.

A bra made in Bangladesh from synthetic fibers sold for $3.19 each, 18% less than the international average. Vietnam got $6.06.

According to the study report, apparel manufacturing has evolved from a simple manufacturing operation to a complex service industry.

The actual cutting and sewing operations are the simplest and least paid tasks.

First-generation apparel producers in Asian cities such as Hong Kong, Singapore and Seoul have grown from simple product manufacturers to multinational corporations. They operate globally and invest in engineering, advanced information technology, and cutting-edge technologies.

Yet most small and medium sized garment manufacturers in developing countries, and especially least developed countries, have not adapted to this changing industry and they remain focused on simple cutting and sewing operations. sewing, provide few services and produce basic clothing.

“They may not know how to develop their services and doubt that their customers will pay for them,” the ITC said.

The multilateral agency urged companies to expand their services to stay in business.

“All-inclusive costing is an essential step in this expansion. Accurate costing and valuation is the first step in moving up the value chain. Without it, the most important business case cannot be made. »

“It is true that the prices of clothing items made in Bangladesh are a bit lower than other countries and the average world price because local manufacturers are still strong in basic clothing items,” a major European retailer told Dhaka.

For example, Bangladesh’s 80 percent garments are still limited to five cotton items and have the problem of overcapacity.

“So hidden unhealthy competition also kept item prices lower,” he said.

The retailer noted that there is excess capacity in the denim segment, so the price is down.

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, partly blamed the large share of commodities in the export basket on the fall in prices paid in Bangladesh.

Other obstacles, listed by the entrepreneur, include poor infrastructure and longer lead times.

“Bangladesh has improved a lot in quality, product diversity and compliance in recent years,” he said, however.

Michael O. Stutler