Dhaka, February 26

Bangladesh’s clothing exports are booming, defying fears that recent killings by Islamist militants might prompt western brands to go elsewhere to source their garments.

Along with relief among manufacturers, who are the mainstay of the South Asian nation’s economy, comes the reality that already slim profit margins are being eroded further, as pressure for cost savings and improved safety intensifies.

“It’s fast becoming a business where only the fittest can survive,” said Atiqul Islam, one of Bangladesh’s biggest garment exporters, whose clients include H&M.

It could have been worse.

For months, executives from western retailers who source cheap clothes from Bangladesh avoided visiting the country, worried by rising violence, including murder of two foreigners. Meetings with suppliers were held in Dubai, New Delhi and Singapore. M Shafiqul Azim, general manager at an apparel exporter, had to hire private guards to convince an Italian technician to travel to Dhaka last year for a plant inspection.

The World Bank warned militancy could derail Bangladesh’s path to becoming a middle-income country.

For now, though, the concerns appear to be easing, and recent figures show the $26 billion garment export sector is growing faster than many had dared predict.

“It was a temporary setback,” Islam told Reuters. “After two to three months, the visits resumed.”

A western diplomat in the capital Dhaka attributed the change to a swift response from the government and the support provided by the local police.

After the killings last year, Dhaka deployed paramilitary soldiers on night-time patrols in the diplomatic quarter and issued a nationwide ban on people riding pillion after two attacks were carried out by masked men riding motorbikes.

Between October and January, Bangladeshi factories exported garments worth $9.3 billion, up about 14 per cent from a year ago, government data showed. Exports to the United States saw a 16 per cent annual jump in December.

Azim, who supplies to Wal-Mart, says his order book is up 15 per cent. Buoyed by strong demand, his firm — r-pac — is investing $10 million to set up a new factory.

Bangladesh’s resilience boils down to a combination of the world’s lowest wages after Myanmar and Sri Lanka, the right skills and the fact that China has become less competitive in recent years.

The minimum monthly wage for garment workers in Bangladesh is $68, compared with about $280 in mainland China, which nevertheless remains the world’s biggest garment exporter. In a global survey of leading apparel producers last year, consultant McKinsey predicted seven-nine per cent annual growth for the sector over the next five years.

Still, garment exporters worry about profit margins being squeezed due to increased compliance costs in the wake of the 2013 Rana Plaza factory collapse and a push from buyers to further reduce costs.