RMG: A closer look at the reports
Back in 2011, McKinsey & Company conducted a survey among leading apparel buyers in Europe and the US regarding their sourcing strategies. Respondents indicated that due to rising costs in China, Bangladesh was targeted as the next likely sourcing destination.
Recent news depicts McKinsey & Company's analysis where it still places Bangladesh at the top of the list of the sourcing countries expected to grow in the next five years. The report is based on a survey which was done in the summer of 2013. It was conducted with 29 chief purchasing officers (CPOs) in Europe and the US who are responsible for an annual outsourcing of US$ 39 billion.
The recent survey has been done after the Rana Plaza tragedy in April 2013; so does this mean that this enormous tragedy had no effect on the respondents since Bangladesh still remains at the top of the list of sourcing countries?
Let us quickly take a look at the numbers: after the Rana Plaza tragedy, RMG exports for the month of May was $2 billion. In July 2013, this increased to $2.5 billion. However, August and September registered lower numbers of $1.66 billion and $2.04 billion respectively. This is still higher than the numbers in 2012, as RMG exports were $1.56 billion and $1.44 billion for August and September of 2012 respectively.
However the Rana Plaza effect can be seen when we take a closer look at the McKinsey reports. In the 2011 survey, over 80 percent of the respondents ranked Bangladesh within the top 3 hotspots over the next five years. However the 2013 report shows that this has declined to 52 percent.
As far as new destinations for RMG is concerned, the respondents have implied that there are no solid alternatives in sight. The survey however indicates that CPOs are looking toward Sub-Saharan Africa and Asian locations such as Cambodia, Vietnam and Myanmar. In order for a destination to be promising, it has to be able to take on large volumes, deliver against expectations and provide the long-term investments necessary to secure success.
Even though things may appear to be going well for the RMG industry in Bangladesh, it should be remembered that disasters do take a toll and have an effect on the buyers. If disasters continue to taint the image of the RMG industry of Bangladesh, then it will not be able to reach its full potential.
The writer is the head of research at The Daily Star.
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