Apparel industry faces daunting tasks ahead
Sunday, 9 September 2007
Shahiduzzaman Khan
THE president of International Chamber of Commerce-Bangladesh (ICC-B) Mahbubur Rahman said Bangladesh with a narrow export basket is likely to face tough competition as the EU and US restrictions on RMG export from China will be withdrawn from January 1, 2008. In this new emerging scenario, sustaining the current high export growth will be an uphill task for Bangladesh in the coming years.
As such, Rahman told a recent ICC workshop that all concerned should make all-out efforts for not only exploring new markets for apparel export but also diversifying export products. The country must create an industrial base as a long-term strategy in order to remain competitive. It will help not only export diversification, but also establish a smooth supply chain and control the present price spiral that is seriously affecting the low and middle income groups.
It is a matter of utmost concern that FDI (foreign direct investment) inflow to Bangladesh declined in the past year and the country was falling behind other developing countries in terms of attracting FDI. Diversifying the FDI basket is also emerging as a major challenge. Bangladesh needs to explore new markets to increase productivity as well as to sustain its export growth in the competitive world market.
Bangladesh's garment sector has earned a place on the global export market map as a strong and matured industry as its apparels are known for their quality and price competitiveness. As such, any wrong strategy of the government may trigger setback in the country's international textile market. The country's apparels are now being exported to 90 different countries with the USA being its single largest buyer.
Reports prepared by the United Nations Development Programme (UNDP) and the International Monetary Fund (IMF) pointed out that there was serious possibility that uneven competition from China would suffocate demand from Bangladesh. As such, the government should back the BGMEA initiative to persuade the US Congress to accord duty-free access to Bangladeshi products (as has been provided to 33 other sub-Saharan and Caribbean LDCs). Intense lobbying needs to be undertaken to point out that the USA cannot discriminate between LDCs. Bangladesh agreed with US demand to allow trade union activities in the EPZs. Now it is the turn of the US to give Bangladeshi entrepreneurs a helping hand in the post-MFA era.
The country, by maintaining its current pace in exporting garments products, hopefully will earn $10 billion by 2010, revealed a study conducted by a Switzerland-based organisation. The study gives detailed data that includes yearly enhanced figure of exporting garments from imported fabrics as yarns, and knitting and woven materials from locally produced fabrics.
As the GSP facilities have been ensured by the EU for the country, there is a scope of investment for establishing 150 to 200 composite textile mills. Bangladesh is the only non-cotton producing country which is the most organised among the developing nations both in the field of woven and non-woven fabrics. Country's apparel manufacturers injected a fresh investment of nearly Tk 30 billion in the textile sector in just two years. Such investment was made to cope with enhanced demand from buyers and pressure from the importing countries to improve labour and environment standard in their factories. Most of the investment went to the knitwear sub-sector that witnessed more than 30 per cent growth in business during the last few years.
In fact, country's readymade garments (RMG) sector has flourished since two decades without any notable cooperation and support from the official side. Basing exclusively on its entrepreneurs' own thoughts and limitations, the industry has thrived offering jobs to hundreds and thousands of people -- mainly female workers. The sector is now country's number one foreign exchange earner -- generating maximum revenue for the nation's public exchequer.
Starting from a paltry one million US dollar two decades ago, the volume of business has reached upto $5.0 billion. The country made its first apparel export in 1978 but the progress since early 1980 has been simply phenomenal. It has by now become the colossus in industry, earning the country's lion's share of foreign exchange and providing the nation's women with the highest level of formal sector employment. Thus, the role of the RMG sector in the national economy is onerous.
Investment in backward linkage industry for greater supplies of raw materials for RMG sector, particularly in composite textile mills, has been quite phenomenal. Country's private sector has come up in a large number. Quite a number of composite textile mills for knitwear and woven fabrics were set by a group of enthusiastic entrepreneurs. However, such entrepreneurs need more equity capital from financial institutions.
The lead time on delivery issues matters most in the RMG export trade. In the beginning, the lead time was 120-150 days but in 2007, this has been reduced to 30 to 50 days. China requires only 30 days due to their textile and other backward linkage facilities as well as export-friendly policy. In order to address the lead time issue properly, production at the RMG units needs to be increased considerably. The government should also go for importing raw materials against contact letters or without letters of credit.
There is a need to set up a central bonded warehouse for woven and gray fabrics in order to help the manufacturers collect the fabrics within seven days from the issuance of LCs and thus reduce lead time. Garments manufacturers see this issue as the most important although the textile mill owners oppose it saying this will lead to 'massive fabrics stealing'. Such stealings exist now as a section of dishonest entrepreneurs import 'excess' fabrics in connivance with a section of corrupt bonded commissionarate officials. Textile manufacturers, however, agreed to create a central bonded warehouse if all individual bonded warehouses -- now in existence -- are closed down.
Chittagong being the largest sea port of the country is contributing to 80 per cent of import and 75 per cent of export of the total international trade. As the normal activities in export and import sectors are hampered due to the complexity created by various reasons like dock workers' unionism, go-slow policies, strike etc., the uses of seaport by the traders are highly disturbed. However, after takeover of the operations and supervision by joint forces at the Chittagong Port, things have improved dramatically. Spectacular improvements occurred in the cargo handling activities, lead time and turnaround time.
There is a need to set up a separate Apparel Board for the RMG industry. For several years, the garments factory owners have been pressing for setting up of a separate Apparel Board to free the industry from time wasting bureaucratic shackles and make it more dynamic. This has become more necessary as the day-to-day operation of the industry needs to get prompt service from the government in every phase -- from policy making to implementation.
If the government and the BGMEA take good care of this sector and implement the suggested measures for the purpose, experts expect the country will be able to attain the status of a major exporter to the extent of $ 25 billion in the next 20 years.
THE president of International Chamber of Commerce-Bangladesh (ICC-B) Mahbubur Rahman said Bangladesh with a narrow export basket is likely to face tough competition as the EU and US restrictions on RMG export from China will be withdrawn from January 1, 2008. In this new emerging scenario, sustaining the current high export growth will be an uphill task for Bangladesh in the coming years.
As such, Rahman told a recent ICC workshop that all concerned should make all-out efforts for not only exploring new markets for apparel export but also diversifying export products. The country must create an industrial base as a long-term strategy in order to remain competitive. It will help not only export diversification, but also establish a smooth supply chain and control the present price spiral that is seriously affecting the low and middle income groups.
It is a matter of utmost concern that FDI (foreign direct investment) inflow to Bangladesh declined in the past year and the country was falling behind other developing countries in terms of attracting FDI. Diversifying the FDI basket is also emerging as a major challenge. Bangladesh needs to explore new markets to increase productivity as well as to sustain its export growth in the competitive world market.
Bangladesh's garment sector has earned a place on the global export market map as a strong and matured industry as its apparels are known for their quality and price competitiveness. As such, any wrong strategy of the government may trigger setback in the country's international textile market. The country's apparels are now being exported to 90 different countries with the USA being its single largest buyer.
Reports prepared by the United Nations Development Programme (UNDP) and the International Monetary Fund (IMF) pointed out that there was serious possibility that uneven competition from China would suffocate demand from Bangladesh. As such, the government should back the BGMEA initiative to persuade the US Congress to accord duty-free access to Bangladeshi products (as has been provided to 33 other sub-Saharan and Caribbean LDCs). Intense lobbying needs to be undertaken to point out that the USA cannot discriminate between LDCs. Bangladesh agreed with US demand to allow trade union activities in the EPZs. Now it is the turn of the US to give Bangladeshi entrepreneurs a helping hand in the post-MFA era.
The country, by maintaining its current pace in exporting garments products, hopefully will earn $10 billion by 2010, revealed a study conducted by a Switzerland-based organisation. The study gives detailed data that includes yearly enhanced figure of exporting garments from imported fabrics as yarns, and knitting and woven materials from locally produced fabrics.
As the GSP facilities have been ensured by the EU for the country, there is a scope of investment for establishing 150 to 200 composite textile mills. Bangladesh is the only non-cotton producing country which is the most organised among the developing nations both in the field of woven and non-woven fabrics. Country's apparel manufacturers injected a fresh investment of nearly Tk 30 billion in the textile sector in just two years. Such investment was made to cope with enhanced demand from buyers and pressure from the importing countries to improve labour and environment standard in their factories. Most of the investment went to the knitwear sub-sector that witnessed more than 30 per cent growth in business during the last few years.
In fact, country's readymade garments (RMG) sector has flourished since two decades without any notable cooperation and support from the official side. Basing exclusively on its entrepreneurs' own thoughts and limitations, the industry has thrived offering jobs to hundreds and thousands of people -- mainly female workers. The sector is now country's number one foreign exchange earner -- generating maximum revenue for the nation's public exchequer.
Starting from a paltry one million US dollar two decades ago, the volume of business has reached upto $5.0 billion. The country made its first apparel export in 1978 but the progress since early 1980 has been simply phenomenal. It has by now become the colossus in industry, earning the country's lion's share of foreign exchange and providing the nation's women with the highest level of formal sector employment. Thus, the role of the RMG sector in the national economy is onerous.
Investment in backward linkage industry for greater supplies of raw materials for RMG sector, particularly in composite textile mills, has been quite phenomenal. Country's private sector has come up in a large number. Quite a number of composite textile mills for knitwear and woven fabrics were set by a group of enthusiastic entrepreneurs. However, such entrepreneurs need more equity capital from financial institutions.
The lead time on delivery issues matters most in the RMG export trade. In the beginning, the lead time was 120-150 days but in 2007, this has been reduced to 30 to 50 days. China requires only 30 days due to their textile and other backward linkage facilities as well as export-friendly policy. In order to address the lead time issue properly, production at the RMG units needs to be increased considerably. The government should also go for importing raw materials against contact letters or without letters of credit.
There is a need to set up a central bonded warehouse for woven and gray fabrics in order to help the manufacturers collect the fabrics within seven days from the issuance of LCs and thus reduce lead time. Garments manufacturers see this issue as the most important although the textile mill owners oppose it saying this will lead to 'massive fabrics stealing'. Such stealings exist now as a section of dishonest entrepreneurs import 'excess' fabrics in connivance with a section of corrupt bonded commissionarate officials. Textile manufacturers, however, agreed to create a central bonded warehouse if all individual bonded warehouses -- now in existence -- are closed down.
Chittagong being the largest sea port of the country is contributing to 80 per cent of import and 75 per cent of export of the total international trade. As the normal activities in export and import sectors are hampered due to the complexity created by various reasons like dock workers' unionism, go-slow policies, strike etc., the uses of seaport by the traders are highly disturbed. However, after takeover of the operations and supervision by joint forces at the Chittagong Port, things have improved dramatically. Spectacular improvements occurred in the cargo handling activities, lead time and turnaround time.
There is a need to set up a separate Apparel Board for the RMG industry. For several years, the garments factory owners have been pressing for setting up of a separate Apparel Board to free the industry from time wasting bureaucratic shackles and make it more dynamic. This has become more necessary as the day-to-day operation of the industry needs to get prompt service from the government in every phase -- from policy making to implementation.
If the government and the BGMEA take good care of this sector and implement the suggested measures for the purpose, experts expect the country will be able to attain the status of a major exporter to the extent of $ 25 billion in the next 20 years.