Experts favour unity among RMG sector players

Formal contracts between buyers, exporters must to save RMG industry, BIAC discussion told

Wednesday, 1 July 2020

Experts in a webinar on Monday urged garments owners and entrepreneurs in the ready-made garment (RMG) sector to forge unity among themselves at this hard time of the fast spread of Covid-19 pandemic throughout the globe.
The webinar on Problems in Trade and Supply Chain was organised by Bangladesh International Arbitration Centre (BIAC).
The webinar was aimed to discuss the possible impacts of Covid-19 on the ongoing Alternative Dispute Resolution (ADR) proceedings, risk factors and how to manage risks in Trade and Supply Chain.
The purpose of the webinar was also to explore available ADR mechanisms to avoid and resolve disputes arising from the impacts of the Covid-19 crisis in the most efficient way.
Speaking on the occasion BIAC Chairman Mahbubur Rahman opined that formal contracts between the buyers and exporters must be enforced to save the RMG industry. He emphasised the need of government intervention in this regard.
The largely attended Webinar through Zoom transcription was moderated by CEO of BIAC Muhammad A. (Rumee) Ali who in his opening remarks said that BIAC as the country's only licensed ADR institution and also recognized by the Permanent Court of Arbitration, the Hague, has been relentlessly trying to resolve business disputes through Arbitration, Mediation and other methods of ADR.
In the wake of Covid-19, international trade is suffering a lot with the disruption of supply chain, he said. Bangladesh's RMG sector is the worst hit area during the ongoing pandemic, none knows when it will be over, he added.
Ali said that as power imbalance between the parties arises, contracts between them are un-implementable, hence mediation is needed for fairer outcome for the Bangladeshi exporters.
He offered BIAC's facilities to explore how contracts between the parties can be dealt with, given the current crisis lasts long.
Business leaders, bankers, lawyers, ADR experts, academicians, corporate representatives and students of law and business participated in the webinar.
Six outstanding panelist discussants took part in the discussion and viewed the issues of problems in trade and supply chain from their own perspectives.
Anwar-Ul Alam Chowdhury (Parvez), Managing Director, Evince Group and a former President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) in his deliberation said, "Though we have 'civilized rule of law', we cannot abide by those during this COVID catastrophe."
He stressed the need of adhering to a more comprehensive Letter of Credit which should be supported by a mutual contractual Pro Forma Invoice.
Taking part in the discussion, Md. Fazlul Hoque, Managing Director, Plummy Fashions Ltd. and former President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), emphasized forging unity among the exporters and owners of the garment industry, especially at this critical juncture when the existence of the industry is already at stake where orders involving 3.0 billion USD have been cancelled by the buyers.
"We must be organized and ensure enforcement of minimum standard of rules," Hoque said and opined that BIAC may come up to guide all the parties to arrive at a consensus to effectuate contracts.
Dr. Khaled Hamid Chowdhury, Senior Partner, Chowdhury and Ullah, law firm and Head of Laws, London College of Legal Studies (South), said that in the next 5 years the global economy is projected to sustain a loss of over 82 trillion USD.
"We have huge supply chain disruption and we are set to suffer colossal loss in garments, manpower and education sectors, among others," Dr. Chowdhury opined.
The 'force majeure', issue an event which is outside the reasonable control of a party and which prevents that party from performing its obligations under a contract, has surfaced as a specific consequence of Covid, he added.
He urged upon businesses, bankers and lawyers to be united to combat the crisis and help regain boost of the RMG sector of the country which earns 80% of the foreign exchange.
He said that BIAC has time-tested Rules of Arbitration and Mediation and mandatory insertion of ADR clause in all business contracts will help implement rational performance to the benefit of the garments industry.
Shafayat Ullah, EVP and Head of Group Legal Affairs, Mutual Trust Bank Ltd., took part in the discussion.
He said that with courts being overburdened with case dockets, "let us divert to institutional dispute resolution mechanism where BIAC can play a pivotal role."
He stressed the need for heralding a wakeup call to be united to save garments industry giving lawyers a scope to renegotiate disputing issues between the parties.
He also favoured change in mindset to bargain with the mighty buyers and overcome the current crisis the industry is facing with mammoth disruption in the supply chain.
Mohammed Forrukh Rahman, Head of Chamber, Rahman's Chambers law firm, in his deliberation cited cases arising out of the ongoing Covid-19 pandemic and emphasized arriving at mutual understanding between the contracting parties and a synchronized mechanism of rights and liabilities of parties in terms of Letter of Credit and contractual obligations under Pro Forma Invoice.
He stressed the need for training for creating awareness and appreciating the importance of contracts by bankers. BGMEA and BIAC may take the lead in this regard, Mr Rahman opined.
Ahmed Shaheen, Deputy Managing Director and Head of Corporate Banking, Eastern Bank Ltd., took part in the discussion and said that in the RMG sector bankers are sandwiched between faulty contracts and irregular LCs.
He urged upon leaders of the garment industry to concentrate more on fighting back with the buyers in a more concerted manner than competing with one another. "We must restructure and enforce contracts at this hard time of pandemic," Shaheen said.
A question and answer session followed the discussion and Muhammad A. (Rumee) Ali summed up the deliberations by saying that non-performance of contract has become a menacing factor in the investment sector, especially in FDIs, which is reflected in the World Bank Global Index of Doing Business 2020 where in the Enforcing Contract index Bangladesh stands 189th among 190 global economies.
He stressed the need for asking buyers to opt for mediation to achieve a win-win conclusion by Bangladeshi exporters and foreign buyers with a view to overcoming the current crisis engulfing the RMG sector in particular.