This piece offers a complementary perspective on the Financial Express July 7 report, “RMG exports to US fall 5.58 pc as regional rivals gain,” which presents a sobering picture of Bangladesh’s position in the American apparel market. During the first half of 2026, Bangladesh’s readymade garment exports to the United States declined by 5.58 per cent to about $4.01 billion. At first glance, the decline might appear to be largely the consequence of weakening demand in the United States (US), especially since overall American apparel imports also fell during the period.
That explanation, however, is only part of the story.
Vietnam, Cambodia and Indonesia managed to increase their apparel exports to the US even while the overall market was contracting. Vietnam exported about $7.85 billion, Cambodia $2.13 billion and Indonesia $2.33 billion during the same six-month period. Cambodia’s exports reportedly grew by more than 12 percent, while Vietnam and Indonesia also recorded positive growth. Bangladesh, by contrast, lost ground.
The contrasting performance raises a more important question than whether US demand weakened: why were some competing exporters able to grow in a shrinking market while Bangladesh was not? The answer points toward a structural competitiveness problem that Bangladesh has postponed confronting for too long.
For several decades, the country’s RMG success has rested on a remarkably effective but relatively narrow formula: abundant labor, competitive wages, large-scale production of basic garments and preferential access to major markets. That model transformed Bangladesh into one of the world’s largest apparel exporters and created millions of jobs, especially for women. It remains one of the most consequential economic achievements in the country’s history. But yesterday’s comparative advantage does not automatically become tomorrow’s competitive advantage.
The global apparel industry is changing. Buyers increasingly demand shorter delivery times, diversified fabrics, synthetic and man-made fibers, sophisticated design capability, environmental compliance, supply-chain transparency and greater flexibility in responding to fashion cycles. Price remains important, but price alone is no longer sufficient.
Vietnam illustrates the transition particularly well. Its apparel industry benefits from deeper integration with regional supply chains, substantial foreign investment and easier access to textile and manufacturing inputs from China and other East Asian economies. Cambodia has also become increasingly integrated into regional production networks. Indonesia possesses stronger capabilities in synthetic and man-made-fiber garments, an area in which global demand has been expanding. Bangladesh remains heavily concentrated in cotton-based and relatively basic garment products. Such specialization was once a source of strength. Increasingly, it risks becoming a constraint. The scale of this structural shift is striking: synthetic fibers accounted for 69 percent of global fiber production in 2024, with polyester alone representing 59 percent, compared with only 19 percent for cotton, according to Textile Exchange. This is where the Dynamic Smile Curve becomes relevant.
As the accompanying curve illustrates, garment assembly occupies the relatively low-value middle of the global value chain (manufacturing segment of the curve), while greater value tends to be captured at the two ends: before production through research, textile development, design and product innovation, and after production through branding, marketing, logistics and distribution. Bangladesh entered the global apparel industry primarily through the middle of this curve and became extraordinarily successful there. The challenge now is to move progressively toward its higher value ends without abandoning the manufacturing base that created that success.
Bangladesh must continue producing garments efficiently while simultaneously building capabilities in textiles, synthetic fibers, design, product development, logistics, branding and other higher-value activities. Without such movement, increases in wages, energy prices, financing costs and compliance — inevitably squeeze manufacturers because productivity and value addition fail to rise sufficiently to compensate.
The recent US export figures should therefore be interpreted as more than a temporary fluctuation. They may be an early warning about the limits of an export strategy built overwhelmingly around volume rather than value.
The problem becomes clearer when viewed through the broader, all-encompassing Matrix Paradigm perspective rather than through export statistics alone. Competitiveness is produced by the interaction of energy, finance, logistics, infrastructure, technology, investment policy, workforce capability, and institutional reliability. Weakness in one dimension can affect every other dimension.
Viewed through the lens of the Matrix Paradigm, these interconnections become clear: An unreliable gas supply raises production costs. Electricity disruptions delay shipments. High interest rates increase working-capital expenses. Port congestion lengthens delivery times. Slow customs procedures weaken supply-chain responsiveness. Policy uncertainty discourages foreign investment. Limited domestic production of man-made fibers restricts product diversification. These are not separate problems; they are interconnected components of a single competitiveness system.
For that reason, simply asking garment manufacturers to become more productive cannot solve the problem. Productivity depends partly on decisions made inside factories, but competitiveness also depends heavily on the environment surrounding those factories. A highly efficient manufacturer cannot fully compensate for unreliable energy, inefficient ports or expensive financing.
Bangladesh also faces a strategic investment challenge. One reason Vietnam has moved rapidly into more sophisticated manufacturing is that foreign investment has helped connect the country with regional supply chains, technology and production networks. Bangladesh has repeatedly expressed an ambition to attract comparable investment, yet investors evaluate more than labor costs. They examine infrastructure, energy reliability, policy predictability, customs procedures, logistics and the ability to repatriate profits. Foreign investment therefore cannot be attracted sustainably through promotional conferences alone. The domestic economic environment itself must become the advertisement.
There is another lesson in the US figures. The dramatic decline of Chinese apparel exports creates opportunities, but opportunities do not automatically migrate to Bangladesh. When buyers diversify away from China, competing countries simultaneously seek those orders. Vietnam, Cambodia, Indonesia, India and others are not passive observers. The relevant question is therefore not whether orders are leaving China. It is where those orders are going and why.
If buyers prioritise short lead times, synthetic fabrics, supply-chain integration and production flexibility, Bangladesh must compete on those dimensions. Otherwise, the relocation of global sourcing may benefit neighbouring Asian economies more than Bangladesh.
None of this diminishes the extraordinary achievements of the country’s garment industry. On the contrary, the sector has repeatedly demonstrated its capacity to adapt—from the elimination of textile quotas to factory-safety reforms and increasingly demanding environmental standards. Bangladesh now hosts some of the world’s most highly rated green garment factories. That adaptability offers grounds for confidence.
But the next stage requires a different kind of transformation. The first generation of RMG growth was driven largely by labour-cost advantage and production scale. The next generation must increasingly depend on productivity, technology, skills, product diversification and higher value addition.
The distinction matters because Bangladesh is approaching a stage of development in which wages should rise. Attempting indefinitely to preserve competitiveness through low wages would be neither economically sustainable nor socially desirable. The objective should instead be to make workers sufficiently productive that higher wages coexist with competitive production costs. The Financial Express report should therefore be read not simply as bad news about six months of exports, but as a useful diagnostic signal.
Bangladesh remains a formidable apparel producer. Its scale, entrepreneurial experience, workforce and established relationships with global buyers constitute substantial advantages. Yet those advantages should not create complacency. Competitors are improving, supply chains are shifting, product composition is changing and buyers are becoming more demanding. The strategic choice is consequently not between garments and diversification. Bangladesh needs both: diversification beyond garments and diversification within garments.
Within the RMG industry, that means moving toward man-made fibres, technical textiles, higher-value fashion products, faster production cycles, stronger backward linkages and greater participation in design and product development. Beyond RMG, it means creating additional export engines so that the economy is not excessively dependent on a single sector. Two immediate priorities could be streamlining and digitising customs and bonded-warehouse procedures, while providing time-bound, performance-linked fiscal incentives for investment in domestic MMF spinning and fabric production.
Bangladesh’s garment industry once demonstrated how a country with limited capital and industrial experience could enter global manufacturing and transform its economy. The challenge now is different but no less consequential: transforming an enormously successful export industry before the foundations of its earlier success begins to erode.
The 5.58 per cent decline in exports to the US is therefore not the most important number in the Financial Express report. The more revealing fact is that several competitors grew while Bangladesh declined.
That divergence is the message policymakers should not ignore. The future of Bangladesh’s RMG industry will depend less on producing more of what it already produces and increasingly on moving from comparative advantage to dynamic competitive advantage—and from the middle of the global value chain toward its higher-value frontiers.
Dr Abdullah A Dewan is a former physicist and nuclear engineer at the BAEC and professor emeritus of economics at Eastern Michigan University, USA. [email protected]
