Vietnam to replace Bangladesh as the second-largest apparel exporter?

Recently, media reports indicated that Bangladesh, currently the world's second-largest apparel exporter after China, may soon be surpassed by Vietnam. This is one of the clearest signs that Bangladesh's economic difficulties over the past year have caused significant losses.

Cao Huu Hieu, CEO of the Vietnam National Textile and Garment Group (Vinatex), stated at a press conference in Hanoi that Vietnam is expected to achieve $44 billion in apparel export revenue in 2024, an 11% increase from the previous year, nearly $4 billion higher than Bangladesh's target of $40.5 billion.

Mr. Cao noted that although Vietnam started the year weakly due to sluggish global economic growth, the economic momentum in Vietnam improved in the second half of 2024. This is in light of Bangladesh facing protests and an uncertain outlook, prompting brands and retailers to readjust orders. He referred to this shift as a "windfall" for suppliers benefiting from the change. However, Miran Ali, a temporary board member of the Bangladesh Garment Manufacturers and Exporters Association, believes that the South Asian country will overcome its labor and financial crises in the coming year.

Last month, a U.S. delegation composed of government, brand, and civil society representatives met with Bangladeshi leadership to confirm what they called a mutual commitment. The delegation included executives from Gap Inc., PVH Corp. (owner of Calvin Klein), and VF Corp. (operator of The North Face), which collectively purchase around $1.8 billion worth of garments made in Bangladesh. "We welcome the friendly competition between Vietnam and Bangladesh," he told Sourcing Journal. "We firmly believe that by 2025, we will continue to be the world's second-largest apparel exporter."

Cao pointed out that Bangladesh's minimum wage is lower than Vietnam's, suggesting that the calculations could change-similar to adjustments seen post-pandemic-potentially favoring Bangladesh again. Another significant reason for this argument is that orders from Bangladesh tend to be simpler and lower-priced, benefiting from cheap labor rather than "value-added" skills. He mentioned that not all Vietnamese suppliers can leverage these advantages.

"These orders will definitely decrease in 2025, and Bangladesh will regain these orders," Cao added. "In fact, there was a month when their exports fell to $1.6-1.7 billion, but now they've increased to $3 billion per month, proving they are attracting orders again."

Meanwhile, he anticipates that overall market conditions will improve as economies in major regions like the U.S. and Europe recover. However, for Vietnam to continue its success, it needs to invest in raw materials primarily imported from China. The incoming Trump administration may impose high tariffs on China, which could become a potential burden for Vietnam, depending on how the situation evolves.

"For many years, we have been constrained by fabric raw materials," Cao said. "It's not that we don't care about investment, but development is very difficult, especially as environmental regulations tighten, requiring significant investment, and the workforce for weaving and dyeing becomes increasingly scarce."

Bangladesh is a major export market for ordinary orders, so when orders shift to Vietnam, the unit price does not see a significant increase. However, the volume of orders is much larger. From Jul to Dec 2024, orders for the entire Vietnamese clothing industry, particularly for the group, are nearly full. So far, many units have orders extending into the first quarter of 2025, with some even extending to the end of Apr and May 2025.

In 2024, the comprehensive revenue of the Vietnam Textile and Garment Group is expected to reach approximately 181 trillion VND (about 52 billion RMB), representing a growth of 2.8%. The comprehensive profit is expected to reach about 740 biillion VND (approximately 210 million RMB), an increase of 37.5% from 2023. The average monthly income for employees is projected to be 10.3 million VND, an increase of 8.9%.

Regarding the overall situation of textile and garment exports next year, the Vietnam Textile and Garment Group expects global textile and garment demand to reach $850 billion by 2025, with Bangladesh's textile and garment exports potentially recovering starting in July 2025. Vietnam's textile and garment export value is expected to reach $45.5-46 billion next year, an increase of 5-6% compared to this year.