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High exports, infrastructure, and extra. Be taught the important thing issues to contemplate earlier than shifting your manufacturing operations to Bangladesh. Learn the article.
Editor’s Word: What You Ought to Take into account Earlier than Manufacturing In Bangladesh was initially printed in October 2019 and has been up to date for accuracy.
In recent times, China’s minimal wage will increase are a big motive why importers are regularly bringing their manufacturing to neighboring nations in Southeast Asia. In response to China Briefing, town of Shanghai has the very best month-to-month minimal wage out of 31 provinces (equal to USD 400/month), and Beijing has the very best hourly minimal wage (USD 3.90/hour).[1]
Consequently, nations changing into prime sourcing options now embody Vietnam, Indonesia, Malaysia, and, Thailand. Right now, we’ll look at yet one more nation on the shortlist: Bangladesh.
Bangladesh is thought for being extraordinarily aggressive as a result of have among the lowest labor prices in Asia and worldwide. For instance, the JETRO 2020 Survey on Enterprise Situations signifies that as of August 2020, a manufacturing employee’s annual wage was equal to $1,848 USD a yr.
In the meantime, regardless of the setbacks of a world pandemic, the opening of Matarbari Port in 2025 (a brand new deep-sea port) is predicted to improve Bangladesh’s GDP by 2–3%.[1]
Nevertheless, Bangladesh’s Rana Plaza manufacturing unit collapse in 2013 nonetheless stays the worst garment manufacturing unit accident in historical past, bringing international scrutiny to the subject of human rights compliance in factories. Nonetheless, this hasn’t dissuaded the rising variety of ready-made garment (RMG) producers from shifting their operations to Bangladesh. Even Chinese language-owned firms are establishing retailers in Bangladesh.
Actually, McKinsey & Firm lately described Bangladesh’s manufacturing sector as a “frontrunner in transparency relating to manufacturing unit security and value-chain duty, due to initiatives launched within the aftermath of the disasters.”[2] The Prepared-made Garment Sustainability Council (RSC) was established in 2020 and the Monetary Categorical stories that 147 international manufacturers have signed the worldwide accord.[3]
BANGLADESH’S TOP EXPORTS
Bangladesh’s low manufacturing wages proceed to make it a sizzling spot for labor-intensive industries. So, it’s no shock that garment and textile manufacturing makes up the biggest export {industry} within the nation by far. Nevertheless, it might be a historic shift that 9 personal companies have lately invested $55M to construct eight expertise parks the place every part from semiconductors to medical gadgets is to be made.
Clothes and textiles
In 2020, the export worth of ready-made clothes in Bangladesh was valued at $27.95B USD[1] making it the fourth-largest attire exporter on this planet — exceeded solely by Vietnam, the European Union, and China.[2]
Footwear and headwear
The footwear and headwear export {industry} is Bangladesh’s second-largest sector. In 2020 the nation manufactured 423 million pairs of sneakers, rating because the world’s eighth-largest producer of footwear.[3] A number of multinational footwear manufacturers, equivalent to Bata Bata and Youngone Company have manufacturing bases in Bangladesh.
BANGLADESH’S LOGISTICS AND INFRASTRUCTURE
Final assessed in 2018, Bangladesh fared poorly within the World Financial institution’s 2018 Logistics Efficiency Index (LPI), a benchmarking instrument created to establish a rustic’s strengths and weaknesses on the subject of commerce logistics. Out of 160 nations, Bangladesh positioned #100 general. Within the Customs class — which appears at clearance efficiency of a rustic’s border companies like customs and immigration — Bangladesh positioned a mere #121. They carried out higher on Monitoring & Tracing, rating #79.
Total, Bangladesh’s logistics efficiency is far decrease than that of main buying and selling nations like China, India, or Vietnam. Nevertheless, Bangladesh did outperform their neighboring nations Nepal, Bhutan, and Myanmar. Nonetheless, with the intention to develop into extra aggressive globally, Bangladesh must allocate important assets to growing its native infrastructure.
Rana Plaza Catastrophe
Dhaka’s Rana Plaza tragedy in Might 2013 is a stark instance of Bangladesh’s underdeveloped infrastructure. The manufacturing unit collapse resulted in 1,134 deaths and over 2,500 accidents. To this present day, it’s the worst industrial catastrophe within the nation’s historical past.[1] The catastrophe was brought on by a collection of preventable errors stemming from re-zoning, including unlawful tales to the constructing, and utilizing substandard constructing supplies. In a extreme miscalculation an order to evacuate was even revoked and staff had been ordered again to work the subsequent day — the identical because the deadly day that the manufacturing unit collapsed.
EASE OF DOING BUSINESS IN BANGLADESH
The Ease of Doing Enterprise index is a world rating of the regulatory setting and enterprise local weather of 190 nations around the globe. The rating is set by the common rating obtained throughout ten associated metrics. In 2019, Bangladesh achieved an ease-of-doing-business rating of #168. They positioned final amongst all South Asian nations—behind Bhutan, Nepal, Myanmar, and Afghanistan.
Bangladesh carried out considerably higher by way of defending minority traders, with a world rank of #89. One in all Bangladesh’s largest areas for enhancements in accordance with the index is implementing contracts — on which they ranked second from final (#189). The report revealed that contract enforcement takes a mean of 1,442 days to be accomplished.[2] The report additionally charges the nation’s high quality of judicial processes a lowly 7.5 out of 18 factors.
In response to a lead economist with World Financial institution Dhaka, the Bangladesh authorities goals to enhance the nation’s rating to 100.
[Note: At the time of publishing this post, the World Bank has paused the next Doing Business report to audit its methodology].
SOURCING AND EXPORTING REFORMS IN BANGLADESH
As of 2020–21, many sourcing and exporting reforms have both been made (or are pending) that promise to enhance the feasibility of producing and doing enterprise in Bangladesh. These enhancements embody:
- Decrease beginning prices: It’s now inexpensive to register a enterprise than previously, due to diminished identify clearance and registration charges. There is no such thing as a longer a payment for certifying digital certificates. The system can be absolutely automated now.
- Sooner, inexpensive utility hookups: Connecting a brand new electrical energy account is now sooner and the price of a safety deposit has been lowered.
- Credit score: Bangladesh’s credit score data bureau has reportedly expanded its protection, which can enhance entry to credit score data.
- Decrease Company Taxes
In June of 2021, Bangladesh’s Finance Minister proposed decreasing company taxes by 2.5% to be extra investor-friendly.
Different notable changes made all through 2016–2018 embody:
- Automated Customs Clearance: A completely computerized customs clearance system, the Automated System for Customs Knowledge (ASYCUDA) is now applied.
- Sooner Buying and selling and Tax License Registration
- Sooner utility turnaround time for a buying and selling license in addition to VAT/ tax registrations.
CONCLUSION
Bangladesh has notable strengths as a sourcing choice. Its monumental inhabitants density provides a big workforce. Coupled with its low labor price, Bangladesh is well-positioned to serve as a substitute manufacturing hub for labor-intensive industries.
Moreover, Bangladesh’s standing as a least-developed nation qualifies them to be included within the European Union’s Generalised Scheme of Preferences (GSP). This can be a huge in-built benefit for producers primarily based in Bangladesh as GSP grants Bangladesh a responsibility and quota-free entry to the European market.
However manufacturing in Bangladesh shouldn’t be with out its obstacles. The nation lags behind a lot of its neighbors in ease of doing enterprise, logistics and infrastructure, and different related metrics. In the event you at present import clothes from China and are on the lookout for a cost-competitive various, Bangladesh may be a brand new sourcing choice.
Concerned about studying extra?
Learn 5 Issues You Must Know About Bangladesh Manufacturing.
[1] https://www.china-briefing.com/information/minimum-wages-china-2021/
[2] https://right now.thefinancialexpress.com.bd/Twenty eighth-anniversary-issue-3/deep-sea-port-to-improve-maritime-connectivity-trade-capacity-in-bd-1638871824
[3] https://www.mckinsey.com/industries/retail/our-insights/whats-next-for-bangladeshs-garment-industry-after-a-decade-of-growth
[4] https://thefinancialexpress.com.bd/commerce/147-brands-retailers-join-international-accord-so-far-1639363659
[5] https://www.statista.com/statistics/987707/bangladesh-export-value-garments/
[6] https://shenglufashion.com/2021/08/04/wto-reports-world-textiles-and-apparel-trade-in-2020/
[7] https://www.worldfootwear.com/information/bangladesh-leather-industry-sets-new-target-for-its-exports/6910.html
[8] https://www.ilo.org/international/matters/geip/WCMS_614394/lang–en/index.htm
[9] https://www.doingbusiness.org/en/rankings
Sources (Accessed on December twenty seventh, 2021)
Minimal Wages in China 2021: A Full Information
2020 JETRO Survey on Enterprise Situations of Japanese Corporations Working Abroad
Deep-sea port to enhance maritime connectivity, commerce capability in BD
China to develop Bangladesh industrial zone as a part of South Asia push | Reuters
What’s subsequent for Bangladesh’s garment {industry}, after a decade of development? | McKinsey
147 manufacturers, retailers be a part of worldwide Accord up to now
9 companies to speculate $55m in hi-tech parks
Bangladesh: export worth of ready-made clothes 2020 | Statista
WTO Reviews World Textiles and Attire Commerce in 2020
Bangladesh leather-based {industry} units new goal for its exports
World Rankings 2018 | Logistics Efficiency Index
The Rana Plaza Accident and its aftermath
Rankings – Enterprise
Ease of Doing Enterprise: Bangladesh lowest in South Asia | Dhaka Tribune
Enterprise reforms in Bangladesh – Doing Enterprise – World Financial institution Group
Generalized Scheme of Preferences (GSP) – Commerce – European Fee
Welcome to Access2Markets to Commerce Helpdesk customers
Price range FY22: Massive tax minimize for companies | Dhaka Tribune
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