BGMEA roadmap for 2021 - and looking beyond

Bangladesh Garments Manufacturers and Exporters Association (BGMEA) has recently set a goal to increase annual export of readymade garments to US$50 billion by 2021. There is also a roadmap chalked out by experts who were assigned by BGMEA to achieve that target. A recent roundtable discussion on that in Dhaka outlined the conditions to be fulfilled to attain that 'ambitious but possible' goal. Among the conditions, pointed out by the participants in the roundtable discussion, infrastructural bottlenecks, boosting productivity, skills development, attracting foreign direct investment (FDI), fast tracking safety efforts in the factories and ensuring rights of the workers came up prominently.
The BGMEA roadmap gets special importance for achieving a near double-digit export growth in the calendar year, 2015, on the one hand, and increasing global focus on the working conditions in the readymade garment (RMG) factories in Bangladesh, on the other. Quite clearly these essential conditions are to be addressed for the 2021 roadmap. Nevertheless, certain enabling conditions are to be addressed even for sustaining the present trend of success in export.
SUSTAINABILITY COMPACT: STAYING ENGAGED: At the beginning of this year, readymade garments exports sector witnessed some exposure in media of which the second review of Sustainability Compact, held in Dhaka on January 29, was the most important event. Senior officials of the ministry of commerce, ministry of labour and employment and ministry of foreign affairs and senior officials from the European Union (EU), USA and International Labour Organisation (ILO), along with representation from the governments of Canada, the Netherlands and UK participated in the meeting.  
In the aftermath of Rana Plaza disaster, it may be recalled, the EU, USA and Bangladesh issued a joint declaration in July 2013 to improve the working conditions in the RMG sector of Bangladesh. The declaration stated that the actions envisaged in the compact will be supervised and monitored by the ILO. Canada joined the Compact in 2016.  The second review meeting made a stock-taking of the progress made in three areas of Compact signed by the signatories. These are: a) respect for labour rights, in particular, freedom of expression and rights to collective bargaining; b) structural integrity of the buildings and occupational safety and health; and c) responsible business conduct by all stakeholders engaged in the RMG and knitwear industry in Bangladesh.
A joint press statement issued at the end of the Second Compact review recognised the need for further improvement in six areas of which four are on the rights of workers and two on inspection and remediation of RMG factories identified with different degrees of fault in their structural integrity. Clearly this statement stressed more on improvement in the legal regime protecting the rights of the workers. With 85 per cent share of total RMG export from Bangladesh (woven and knit with equal share) going to the EU, USA and Canada, the Compact mechanism deserves highest importance to plan any ambitious target.
All our exporters, not just RMG exporters, should keep in mind that the preferential access or duty-free entry of Bangladeshi products under Generalised System of Preference (GSP), Everything But Arms (EBA) in the EU has been subject to adherence to certain UN and ILO Conventions since January 2014 even though we are a least development country (LDC). Interestingly two of these ILO Conventions (Rights of Association and Rights of Collective Bargaining) are included in the original Compact Declaration signed by Bangladesh and reiterated in the joint press release issued at the end of the Second Compact review.
GRADUATING FROM LDC: As for graduating from the LDC status, though unlikely to happen before 2021, our exports to the EU will face new challenges. First, Bangladesh will lose unilateral duty-free access and come to be within the general GSP. Secondly, Bangladesh will miss relaxed rules of origin enjoyed as an LDC. For the RMG sector, it means, importers will pay most part of the standard duty when importing from Bangladesh. Again, GSP is given for RMG products, only if the fabric is produced in Bangladesh. Even if Bangladesh applies for GSP+ and starts receiving duty-free access, the rules of origin for general GSP will be applicable, unlike the relaxed rules for the LDCs. Bangladesh will also be required to comply 27 UN/ILO Conventions instead of 15 for the LDCs.  
NEW SYSTEM FOR GSP: Another immediate challenge that Bangladesh RMG exports will face is the new GSP administration in export to the EU. Presently, Export Promotion Bureau (EPB) is the only competent authority to issue GSP certificate for the RMG factories. From 2017 or 2020, depending on the decision of Bangladesh, all the GSP certificates for the EU will be issued by the exporters. EPB (Export Promotion Bureau) will only work as the overseeing body for the registered exporters whenever verification on an export deal is asked by the customs authority of the importing country of the EU. The new system of GSP certification will require appropriate preparation for individual exporters as well as for BGMEA and BKMEA. This is a vital requirement as about 90 per cent of Bangladesh export to the EU is composed of knit and woven products. This export in its entirety is using GSP for duty-free access.
IMPACT OF THE FTAS AROUND US: RMG sector is concerned that its competitors like India and Vietnam will benefit more with free trade agreement (FTA) with the EU. The Trans-Pacific Partnership (TPP) is also causing apprehension that RMG exports to the USA will be negatively affected. Bangladesh does not enjoy any preferential access under GSP or any other system in the USA for apparel products. But losing out to Vietnam in export to the USA and EU under FTA is unlikely to happen in the short term. The "Yarn forward Rules of Origin" in the TPP will be a major impediment for Vietnam to enjoying duty-free access for its apparel products. It means all products in a garment factory from the yarn stage forward must be made in one of the countries that is party to the TPP agreement. With an inadequate backward linkage in the textile and clothing, Vietnam is also not going to adhere to the stringent rules of origin for duty-free export of textile and clothing products in the EU. Vietnam's only solace is the cumulation allowed with South Korea. As for India, the protracted FTA negotiations which started eight years ago, does not show any remarkable progress to see its application in the immediate future.
FDI IN RMG: Foreign direct investment (FDI) in RMG sector has been identified, at the BGMEA Roundtable, as a condition to boost exports to reach the envisaged target by 2021. However, BGMEA and BKMEA have been lukewarm towards encouraging FDI in the RMG sector. During the Multi-Fibre Arrangement (MFA) trade regime under the World Trade Organisation (WTO), Bangladesh discouraged FDI in RMG sector to prevent its competitors to use the quota enjoyed by Bangladesh. Now that MFA regime is over, there is still reluctance to encourage FDI in RMG sector. The RMG sector in Bangladesh is overwhelmingly dependent on cotton-based items. The relaxation of EU GSP rules has not changed that scenario. Graduating from the LDC status and missing the 'one-stage transformation' of the RMG products in the EU will result in increased dependence on inputs originating from Primary Textile Sector (PTS). Avoiding FDI, particularly in RMG factories producing non-cotton products and in PTS, will not help the roadmap to make the quantum jump in export as expected.
IMPORTANCE OF BEING EARNEST: The challenges faced by the country’s RMG sector have many dimensions ranging from infrastructural issues to impact of changes in the global trade regime for Bangladesh. There is no doubt that the most immediate challenge is to convince our global partners that there is a sincere commitment to remaining engaged with them in improving the working conditions in the RMG factories, in terms of occupational safety and rights of the workers. It will be prudent to remember that international trade union bodies are also signatories with the European and North American brands working in Bangladesh in the areas of their contractual obligations to improve occupational safety and workers' rights.
The sooner Bangladesh takes over its exclusive responsibility in monitoring, coordinating and enforcing the 'National Tripartite Plan of Action on Fire safety and Structural Integrity in RMG sector', it will be easier to withstand pressure which are perceived now as unfair. As for issues beyond infrastructural impediments, a coordinated approach by different stakeholders within the government and the private sector requires to start working immediately. Of course, this includes the relocation of industries beyond effective remediation.
The contributor is a writer
on trade policy issues.
He can be contacted at hye. [email protected]