Bailout plan misses out its most deserving recipient
Saturday, 25 April 2009
Enayet Rasul Bhuiyan
It is a huge surprise that the top foreign currency earner that earns annually on average 75 per cent of the country's hard currencies from exports and employs the greatest number of workers in the organized industrial sectors, such a monolith should be shown no concern when the government's long awaited package programme for the recession hit export-oriented industries was unveiled last week. It is, as if, the policy planners are obsessed about molehills while the mountain remains ignored. It is a Don Quixote type of a policy response to the unfolding global economic crisis which is slowly but convincingly starting to cast its shadow on the Bangladesh economy.
A faster policy response was recommended by experts. But that was brushed aside. Finally, when it came, it seemed to address the stakeholders who are but tiny ones compared to the readymade garments sector. The garments sector that deserved the most focused attention of the government for its pivotal great importance to the economy, was not even mentioned in the bailout programme. It was completely silent about the needs of this all too important sector while generous supportive policies were declared for the peripheral sectors in the export trade.
The way things are, the Bangladesh economy can still hold up even after setbacks in the shrimp industry, the jute industry and others which have declined over the years and for which financial and various supports have been extended through the bailout programme. The contribution of these industries to new job creation or job retention, actual export earnings and value-addition, are far smaller today compared to the garments industries. But while benefits declared were all concentrated on these, the only world class export-oriented industry that Bangladesh could develop in all these years that would now directly have to absorb the brunt of the recession in the importing countries, was completely ignored while declaring the governmental assistance programme.
The finance minister is now saying, perhaps stung by criticisms, that the garments sector would also get supports from the government eventually. But this is like dangling the carrot not knowing when it can be bitten off. For even common sense indicated that the garments sector would be in the very first line in getting such assistance considering its very great significance to the national economy in every sense. The garments sector operators were also in the forefront in drawing the attention of the governmental authorities to their conditions and dire need for urgent help. Thus, everybody expected the announcement of a substantial package for the garments sector followed by down the line such packages for other sectors in proportion to their current importance and contribution to the national economy. But when the supports programme was finally known, it defied all sensibilities and expectations in a very astonishing manner.
Unless the government is resolved to preside over the death of the garments sector and surely this cannot be the motive or calculation of the government, then it needs to become very serious with no further loss of precious time, to come to its rescue immediately. Every day matters in doing so because with each passing day the predicaments of this sector are growing alarmingly. A point could be reached sooner rather than later when even a generous package of assistance would be of no use. It could be like flogging a dead horse in a bid to make it run. Already the prospects of the garments sector have been put under a threat from non action and the casual approach on the part of the government. A continuation of this lethargy and unconcern will drive the nails into the coffins of the garments sector.
The competitors of Bangladesh in garments exports -- China, India, Pakistan and Vietnam--made a head start in extending generous governmental assistance to their garments sectors that coincided with the first signs of the recession and economic crisis in the buying countries. The packages they gave to their garments industries included substantial cash subsidies, exchange rate adjustment or devaluation of national currencies, significant lowering of bank charges, port charges, etc. Thus, these countries have already stolen a march over Bangladesh in making their garments exports more competitive vis-a-vis Bangladesh. They have been enjoying this greater competitiveness for some months now and in this period Bangladesh's market shares declined as orders went to its competitors. Bangladeshi garments exporters were holding steady in the first weeks after the full blown recession in the buying countries was noted. But gradually orders received by Bangladeshi garments exporters started falling worryingly as their competitors gained an edge over them from receiving early governmental assistance.
Denying the expected assistance to the garments sector, therefore, will only launch it into a path of no return in the form of very probable irreversible market losses. Bangladeshi is still doing business on the basis of goodwill earned over many years as a production base for good quality but cheapest garments. Buyers will likely stay with Bangladesh for a while. But a drift is already noted as, reportedly, a record number of garments buyers have rejected Bangladesh as their favourite destination . In their calculation, Bangladesh is no more the cheapest supplier of good quality low end garments products. So, they are taking their orders to India, China, Pakistan and Vietnam where they are getting a better bargain. If this trend continues for some more time, then the garments sector in Bangladesh could come crashing down on a long lasting business because a business on pulling out from a place from loss of long established goodwill takes an awful lot of time and persuasion to return there even if better policies are adopted after the pullout. It is the nature of international business usually to wash off hands from a place which had been abandoned for a more preferred one for different reasons.
Garments industry operators in Bangladesh are fearing from the present situation that some 25 per cent of garments industries could close in the next six months throwing some 0.7 million workers into unemployment. The only way to try and reverse this fatal trend is to reestablish the competitiveness that the local garments industries have lost in relation to their main regional rivals.
The regaining of this competitiveness involves the government extending an adequate package programme of assistance to the garments sector at the soonest. Much harms have been already caused to this sector from not extending such assistance to it a lot earlier. But there is still opportunity for government to limit damages in this sector by the earliest announcement of a package programme that should include at least ten per cent cash assistance, withdrawl of value added tax (VAT), reduction of port charges, supply of diesel at subsidized prices to run generators, decreasing interest rate on credits to a single digit, allowing the rescheduling of classified loans on longer terms basis, etc.
It is a huge surprise that the top foreign currency earner that earns annually on average 75 per cent of the country's hard currencies from exports and employs the greatest number of workers in the organized industrial sectors, such a monolith should be shown no concern when the government's long awaited package programme for the recession hit export-oriented industries was unveiled last week. It is, as if, the policy planners are obsessed about molehills while the mountain remains ignored. It is a Don Quixote type of a policy response to the unfolding global economic crisis which is slowly but convincingly starting to cast its shadow on the Bangladesh economy.
A faster policy response was recommended by experts. But that was brushed aside. Finally, when it came, it seemed to address the stakeholders who are but tiny ones compared to the readymade garments sector. The garments sector that deserved the most focused attention of the government for its pivotal great importance to the economy, was not even mentioned in the bailout programme. It was completely silent about the needs of this all too important sector while generous supportive policies were declared for the peripheral sectors in the export trade.
The way things are, the Bangladesh economy can still hold up even after setbacks in the shrimp industry, the jute industry and others which have declined over the years and for which financial and various supports have been extended through the bailout programme. The contribution of these industries to new job creation or job retention, actual export earnings and value-addition, are far smaller today compared to the garments industries. But while benefits declared were all concentrated on these, the only world class export-oriented industry that Bangladesh could develop in all these years that would now directly have to absorb the brunt of the recession in the importing countries, was completely ignored while declaring the governmental assistance programme.
The finance minister is now saying, perhaps stung by criticisms, that the garments sector would also get supports from the government eventually. But this is like dangling the carrot not knowing when it can be bitten off. For even common sense indicated that the garments sector would be in the very first line in getting such assistance considering its very great significance to the national economy in every sense. The garments sector operators were also in the forefront in drawing the attention of the governmental authorities to their conditions and dire need for urgent help. Thus, everybody expected the announcement of a substantial package for the garments sector followed by down the line such packages for other sectors in proportion to their current importance and contribution to the national economy. But when the supports programme was finally known, it defied all sensibilities and expectations in a very astonishing manner.
Unless the government is resolved to preside over the death of the garments sector and surely this cannot be the motive or calculation of the government, then it needs to become very serious with no further loss of precious time, to come to its rescue immediately. Every day matters in doing so because with each passing day the predicaments of this sector are growing alarmingly. A point could be reached sooner rather than later when even a generous package of assistance would be of no use. It could be like flogging a dead horse in a bid to make it run. Already the prospects of the garments sector have been put under a threat from non action and the casual approach on the part of the government. A continuation of this lethargy and unconcern will drive the nails into the coffins of the garments sector.
The competitors of Bangladesh in garments exports -- China, India, Pakistan and Vietnam--made a head start in extending generous governmental assistance to their garments sectors that coincided with the first signs of the recession and economic crisis in the buying countries. The packages they gave to their garments industries included substantial cash subsidies, exchange rate adjustment or devaluation of national currencies, significant lowering of bank charges, port charges, etc. Thus, these countries have already stolen a march over Bangladesh in making their garments exports more competitive vis-a-vis Bangladesh. They have been enjoying this greater competitiveness for some months now and in this period Bangladesh's market shares declined as orders went to its competitors. Bangladeshi garments exporters were holding steady in the first weeks after the full blown recession in the buying countries was noted. But gradually orders received by Bangladeshi garments exporters started falling worryingly as their competitors gained an edge over them from receiving early governmental assistance.
Denying the expected assistance to the garments sector, therefore, will only launch it into a path of no return in the form of very probable irreversible market losses. Bangladeshi is still doing business on the basis of goodwill earned over many years as a production base for good quality but cheapest garments. Buyers will likely stay with Bangladesh for a while. But a drift is already noted as, reportedly, a record number of garments buyers have rejected Bangladesh as their favourite destination . In their calculation, Bangladesh is no more the cheapest supplier of good quality low end garments products. So, they are taking their orders to India, China, Pakistan and Vietnam where they are getting a better bargain. If this trend continues for some more time, then the garments sector in Bangladesh could come crashing down on a long lasting business because a business on pulling out from a place from loss of long established goodwill takes an awful lot of time and persuasion to return there even if better policies are adopted after the pullout. It is the nature of international business usually to wash off hands from a place which had been abandoned for a more preferred one for different reasons.
Garments industry operators in Bangladesh are fearing from the present situation that some 25 per cent of garments industries could close in the next six months throwing some 0.7 million workers into unemployment. The only way to try and reverse this fatal trend is to reestablish the competitiveness that the local garments industries have lost in relation to their main regional rivals.
The regaining of this competitiveness involves the government extending an adequate package programme of assistance to the garments sector at the soonest. Much harms have been already caused to this sector from not extending such assistance to it a lot earlier. But there is still opportunity for government to limit damages in this sector by the earliest announcement of a package programme that should include at least ten per cent cash assistance, withdrawl of value added tax (VAT), reduction of port charges, supply of diesel at subsidized prices to run generators, decreasing interest rate on credits to a single digit, allowing the rescheduling of classified loans on longer terms basis, etc.