From volume to value: Bangladesh's garment strategy amid trade turmoil

Bangladesh’s garment industry seeks to shed its low-cost, large quantity image as it aims to capture higher-value business. At Best of Bangladesh, a fair and conference in the heart of Amsterdam, manufacturers and government officials advertised the world’s second largest garment producer’s transition, hoping to gain more business amid global trade turmoil.

Beyond basics

It looked like a typical sourcing fair at first glance: Exhibitors waited for buyers in small booths separated by white walls that were lined with garments. Yet, the exhibition floor wasn’t hectic. Soft, jazzy music created a lounge feeling amidst the old-world allure of the historic red-brick walls of Amsterdam’s former stock exchange.

The choice of the elegant venue for “Best of Bangladesh” at the beginning of April and the talks held at the event sought to convey a feeling of progress. Bangladesh, traditionally focused on basic apparel like knits, shirts, and denim, is currently aiming to level up its textile industry and expand beyond these simpler garments.

A textbook example of these ambitions is Centro Ltd, which had its stand right at the entrance to the exhibition. The apparel manufacturer, based in the capital city of Dhaka, was founded in 2006 and started with knitwear and later wovens before expanding its offering to outerwear, activewear and footwear, Sohel Samim, head of design and product development at Centro, said in an interview. The newer categories represent roughly 12 percent of the offering, according to Centro.

The company generates 70 percent of its 220-million-dollar revenue from Europe, selling ten million garments per month to fashion companies such as River Island, Primark and Peek & Cloppenburg. Centro has sourcing offices in Hong Kong and the UK, operates three factories with 3,000 workers in Bangladesh and sources from 50 partner factories.

In Amsterdam, the focus is to showcase newer product categories such as wool coats, leather jackets and sneakers. Centro further highlights that 70 percent of its sourced fabrics are either sustainably produced or recycled, bearing certifications such as Global Organic Textile Standard or Recycled 100.

“Our main aim is to show our strength, not only Centro’s, but our Bangladeshi strength,” said Samim, who considers Centro as one of the leading apparel companies from its home country. “We are representing the Best of Bangladesh.”

100 billion dollar goal

The garment sector remains a cornerstone of the South-East Asian country’s economy, with exports of 38,5 billion US dollars in 2024 accounting for more than 80 percent of the country’s overall exports, data by Bangladesh’s Garment Manufacturers and Exporters Association (BGMEA) shows. The industry organisation even announced a goal some years ago to more than double its exports to 100 billion US dollars by 2030.

Bangladesh has a long-standing tradition of producing cotton garments, but manufacturing apparel from man-made fibers, such as activewear and outerwear, could help the country achieve its ambitious export targets, said Abdullah Hil Rakib, managing director of Dhaka-based Team Group, during a panel discussion.

Garment companies also need to improve their environmental and social governance while tackling inefficiencies with data-driven decision making, for example on the production floor and in their management systems, he added.

“Chapter One was about volume, chapter Two is about value,” said Rakib about ways to increase the country’s competitiveness as Bangladesh is facing a graduation from its status as “Least Developed Country” by the United Nations on 24 November 2026. The country enjoys a favorable tariff regime under its current classification, such as duty-free and quota-free access to the EU which will likely end in 2029 after a transition period of three years.

Trade turmoil

Bangladesh’s garment industry has profited from rising production costs in China over the past decade as clothing brands looked for lower-priced alternatives. Many garment industry executives believe that the country might benefit from a likely continuation of trade tensions between China and the US.

US President Donald Trump has escalated the trade conflict with China by increasing tariffs on imports from China to the US to 145 percent before reducing them to 30 percent in May. While the reductions will be in place for at least 90 days while negotiations take place, it remains to be seen how the relationship between the two countries will develop as Trump seeks to reduce its trade deficit with China.

“There's hundreds of billions of dollars of business that will have to move out of China,” Pallak Seth, executive vice chairman of PDS Limited said in an interview before the reduction of US-China tariffs in May. The Mumbai-listed sourcing and trading company generates a revenue of more than 1.2 billion dollars by supplying apparel and other consumer products to about 300 retailers and brands worldwide.

PDS sources from major apparel manufacturing destinations across the world with 40 percent of volumes coming from Bangladesh. The company’s second biggest sourcing market is China but business there is bound for Europe more so than the US, according to Seth.

While some of the business from China might move to Central America or Africa, the South Asian country with “a large capacity and ability to expand fast is Bangladesh”, Seth added. “Bangladesh will be a net beneficiary, not only for apparel, but for general merchandise, home, electronics, pharmaceuticals and many other things.”

PDS will continue to invest in Bangladesh, with Seth estimating that the company could source as much as 2.5 billion dollars in goods from the region in the next five years.

Looking to Europe

The relatively young country is also still in its own trade talks with the US after increased tariffs of 37 percent were put on hold during a 90-day negotiation period. As a sign of goodwill, interim head of government Muhammed Yunus had already pledged to increase imports of products such as soybeans or cotton from the US to Bangladesh.

The initial impact of raised tariffs could be felt immediately in the textile sector as some Bangladeshi manufacturers reported halts on orders requested by US buyers. Dhaka-based garment supplier Knit Asia Ltd temporarily halted production on behalf of clients after the announcement of additional US tariffs, said its director Amer Salim in an interview. Now, after the suspension of tariffs, manufacturers are rushing to finish orders destined for the US within the three-month window as uncertainties over the outcome of the negotiations between the two countries remain, he added.

The surprise tariffs have also prompted some apparel manufacturers to look for ways to increase their business in Europe. “I think everyone is de-risking. Everyone's seen that [the US] is not a reliable partner, to be honest,” said Seth, adding that even US focused companies are now looking to increase their share of the European market.

The continent has traditionally been their most important export destination. About half of Bangladesh’s garments are exported to the European Union and 11.6 percent to the UK, while the US accounted for 18 percent, as figures by trade organization BGMEA show.

Most of the woven factories in Bangladesh, producing items like shirts, or jackets, have more customers from North America while manufacturers of knits, such as t-shirts or flat-knit sweaters, generally have more European customers, said Salim. His company generates 40 percent of its revenue from the US but now he is looking to expand in Europe due to risks related to the US market.

The big picture

Bangladesh's textile sector's future is intertwined with global dynamics, particularly its ability to draw foreign investment during its current political changes. Nobel Laureate Muhammad Yunus is leading an interim government after his long-term predecessor Sheikh Hasina was forced to flee the country amid protests in August.

The interim government is now using their temporary mandate to push for political and economical reforms before calling for elections, for which no date has yet been set. The government has to boost the flailing economy and improve infrastructure as high inflation and persistent income inequality lead to discontent and unrest in the population.

“We have a generational moonshot to change Bangladesh for the better,” Ashik Chowdhury said in Amsterdam, describing the ambitions of an interim government “made of technocrats and geeks”. The banker turned government official, has been heading Bangladesh’s Investment Development Authority and the Economic Zones Authority for six months.

Chowdhury admitted that Bangladesh is not yet a perfect place to do business and that the government tries to improve the investment climate before calling for elections. “The ambition is to convert Bangladesh into a global manufacturing hub” like a mini China, connecting West and East, he added.

Attracting foreign investment is essential for fulfilling these goals. The government intends to attract such investment through initiatives like green channels, designed as a one-stop-service within the government to help businesses. Another goal is triple port capacity within five years, according to Chowdhury. He also promoted his country as young and dynamic, in line with the message of the event, in front of an audience which also included investors, Dutch government officials and NGO workers.

The country’s manufacturing industry is still facing transportation bottlenecks and power outages. Rising energy prices worldwide contributed to spiraling inflation and have put a strain on power supply amid slowing economic growth over the past years.

Upskilling

Foreign investment is also welcomed in the garment sector to create a more complete supply chain. Bangladeshi garment manufacturers are still importing ingredients like certain yarns and fabrics from countries such as China. Investments introducing technology and expertise, such as for producing these ingredients, would allow apparel producers to "offer much better things," said Salim in an interview.

His company Knit Asia Ltd works with brands such as Ralph Lauren or Gymshark and generates close to half a billion of US dollars in revenue. The company, which currently employs 23,000 people at its 13 units in Bangladesh, has also heavily invested in newer machinery in the past decade.

Previously, producing 10,000 sweaters required 3,000 workers, of which 2,000 operated the manual knitting machines, said Salim. With increasing automation, only 1,100 workers are currently needed to produce the same amount.

Despite some remaining simple, manual jobs, the latest machinery doesn't only require less but higher-qualified employees who might even need academic credentials. Salim offers employees continuing education and recruits talent at universities in order to be prepared for the coming digital transformation.

“You need to attract new skills,” he said. “Things that I cannot do, maybe a talented young kid can do, which I can't even think of right now. So I need to have him or her in my pool.”

The technological transition that is already underway also highlights the need for the upskilling of the country’s garment industry which is employing more than 4.5 million workers.

Workers are losing their jobs because of automation but there are only a few initiatives for workers to get training, said Kalpona Akter, founder of the Bangladesh Centre for Worker Solidarity. They also lack understanding of the industry transition that is happening to realize which greener or sector-specific jobs they could move to and need to be included to participate in the transition, she added during a panel.

Due diligence points

“Bangladesh's unique selling point cannot be to produce large quantities at low prices,” said Alexander Kohnstamm, executive director of Fair Wear Foundation during a panel. “Skilling up your workers and equipping your factories through higher margin business, that is really what needs to be done.”

More than 12 years after the collapse of the Rana Plaza building, killing at least 1138 people, NGOs such as Fair Wear agree that working conditions have generally improved in Bangladesh’s garment sector.

Almost 90 percent of all the safety hazards identified have been remediated, but there is still a lot that needs to be done in the remaining 10 percent, according to Joris Oldenziel, the executive director of the International Accord. During a panel discussion, he noted that only 60 percent of the 1,600 factories under the Accord have a completely operational certified fire alarm and protection system.

The Amsterdam-based organisation is the successor of the Bangladesh Accord, which was set up in 2013 by apparel brands, unions and manufacturers to improve working conditions in the immediate aftermath of the Rana Plaza tragedy.

Health and safety conditions have improved significantly over the years but not the wages, said Paul Roeland, an activist from the Clean Clothes Campaign in an interview. The NGO is still supporting demands for a minimum wage of 23.000 Taka (188.42 US dollars) as the last adjustment of the minimum wage wasn’t sufficient given the inflation last year. People still have to work overtime, some as much as 80 hours, to sustain themselves, Roeland added. He further demanded that dialogue with workers needs to be included in the minimum wage settings.

Workers should also receive better guarantees for freedom of association, said the activist. Another increasing area of concern is the impact of climate change on workers who have become more prone to suffering from floods blocking their way to the work place or the impact of heat stress at work and in the home, added Akter.

Next generation

The legacy of Rana Plaza and stricter legislation about sustainability and human rights violations in the supply chain have prompted fashion companies to keep a closer eye on their suppliers. Frequent compliance audits have helped to improve working conditions and raise consciousness for more sustainable production methods.

However, factories complain about the rise of repetitive audits in a short period of time which put a strain on human and financial resources. “There is no sharing of audit results or recognition of other independent programmes that emerge shortly thereafter, as such factories that work with multiple buyers and data undergo multiple audits, each pretty much the same as the other,” said Sohel Sadat, chairman of garment maker Shin Shin Group during a panel. He estimated that his company spends more than 100,000 dollars on audits, certifications and traceability.

While there is acknowledgement from brands and NGOs that the overlap of audits should be reduced, no single solution is in sight yet. Facing stricter future sustainable legislation, especially as part of the Green Deal by the EU, the question remains who will foot the bill for a greener future.

“Here we need financial support, policy support and of course our own commitments,” Abdullah Hil Rakib, managing director of Team Group said. Many also hope that attracting higher-margin business will provide more room to pay workers better and to be more responsible to the environment. Therefore, the garment industry also needs to shed its current image.

“We're kind of stuck in this loop where the consumers, the retailers, the buyers are so used to getting inexpensive things from Bangladesh,” said Mustafain Munir, the director of Cyclo Fibers based in Dhaka. “People should stop having that negative association that because it's made in Bangladesh, it's made with forced labour or bad environmental practices.”

“The practices were not good before,” admits the second-generation textile entrepreneur. But progress has been made in terms of safety, health and the environment, especially in the last ten years. His company in particular is one that is making people rethink their image of garments from Bangladesh.

Back in 2009, even before circularity became a buzzword in the fashion industry, he and his father had the foresight to buy a bankrupt Spanish company and to bring its mechanical recycling machine to Bangladesh. After years of research, Cyclo Fibers has achieved a breakthrough, developing an in-house process to manufacture recycled fibers at a lower cost than virgin fibers. Hardly anyone in the fashion industry is currently able to do so. From this perspective, Cyclo offers a pioneering example of the possibilities of the local industry.

“So everything is better, at the same price,” said Munir. “It's a tough challenge but we're doing it.”