Bangladesh鈥檚 readymade garment exports to the European Union could decline by 20 per cent due to the combined impact of EU-Vietnam free trade agreement, or EVFTA, and Bangladesh鈥檚 transition from a least developed country to a developing nation, according to a study.
According to the study, jointly conducted by the Research and Policy Integration for Development and Friedrich-Ebert-Stiftung, Bangladesh鈥檚 overall exports to the EU could decline by 21 per cent, primarily due to the loss of duty-free access following its LDC graduation, with additional impact, depending on the stringency of rules of origin.
The findings and observations of the study were presented at an event titled 鈥楾he EU-Vietnam Free Trade Agreement: Implications for Bangladesh鈥檚 Export Competitiveness,鈥� held at the Hotel Sheraton in the city on Wednesday.
It also said that Vietnam had made significant investments in its garment industry鈥檚 backward linkages, while Bangladesh was yet to implement visible policies, thereby failing to fully capitalise on the opportunity.
Vietnam鈥檚 garment exports, currently subject to EU duties, are set to benefit from zero-duty access by 2027. In contrast, Bangladesh, due to its graduation, will likely face up to 12 per cent duty after 2029, the study mentioned.
Currently, Bangladesh鈥檚 exports enjoy duty-free access to the EU under the Everything But Arms programme.
聽鈥業f Bangladesh wants to remain competitive, especially as global trade rules evolve, it must prioritise investments in backward integration and infrastructure development,鈥� said RAPID chairman MA Razzaque while presenting the study report.
He said that Vietnam was making substantial investments in backward integration, leading to a notable increase in value addition within its textile industry, a significant shift for a country historically known for low domestic value retention in exports.
The study recommended that Bangladesh should engage with the EU to negotiate an extended transition period for its LDC graduation.
Furthermore, the country should explore relaxing the stringent rules of origin under the Generalised Scheme of Preferences Plus orGSP+, particularly the requirements for double transformation in garment exports and 50 per cent value addition for other exports, it said.
The study also recommended that pursuing a FTA with the EU should be explored, capitalising on the country鈥檚 young, growing population and its strategic importance in global trade, the report mentioned.
To enhance competitiveness, the report suggested that Bangladesh should invest in backward integration, especially in the production of man-made fibres.
Policy Exchange Bangladesh chairman M Masrur Reaz said that FTAs and trade agreements, such as those Bangladesh was pursuing with Japan and Singapore, were vital for the country鈥檚 economic future.聽
He explained that these agreements would offer opportunities to diversify exports, improve competitiveness, adapt to evolving global regulations and secure market access after LDC graduation.
Masrur said that Bangladesh鈥檚 growth vision, including a $100 billion RMG industry, depended on diversifying exports, as the majority of the country鈥檚 exports were concentrated in traditional markets.
The evolving global landscape, including sustainability standards and shifting trade relations, poses both challenges and opportunities, he said.
FES Bangladesh representative Felix Gerdes emphasised that Bangladesh鈥檚 role as a major cotton producer was an advantage, especially with Europe鈥檚 stricter circular economy regulations making single-fibre garments more recyclable.
Gerdes said that Bangladesh had made notable strides in improving workplace safety, although there remained areas requiring further progress.
Challenges with unions persist, with approximately 17 complaints, many concerning the blacklisting of union members, he said.
Tackling these issues will not only boost Bangladesh鈥檚 reputation but also help address the concerns raised by European and German procurement regulations, Gerdes added.
Bangladesh Knitwear Manufacturers and Exporters Association executive president Fazlee Shamim Ehsan said that Bangladesh鈥檚 export growth might slow on the EU market after the LDC graduation, but the total export volume was unlikely to decrease.聽
He said that labour shortages in China and Vietnam, along with a growing reluctance among their workers to view RMG jobs as prestigious, could lead to a shift in orders from those countries to Bangladesh.
However, he mentioned that that Bangladesh had been facing substantial challenges in creating a business-friendly environment due to inadequate banking facilities, inconsistent gas and electricity supplies.
Economic Relations Division secretary Md Shahriar Kader Siddiky said that the government was working on FTAs, investment opportunities and policy reforms to foster economic growth in Bangladesh.
He said that the government remained actively engaged with countries like Korea and China to attract diversified investments.
Commerce ministry additional secretary Ayesha Akter, Export Promotion Bureau vice-chairman Md Anwar Hossain, EU delegation to Bangladesh trade counsellor Abu Syed Belal and RAPID executive director M Abu Eusuf, among others, spoke at the event.