Garment industry has to stay competitive
Thursday, 10 September 2009
Shahiduzzaman Khan
After Bangladesh Garment Manufacturers and Exporters Association (BGMEA) regretted its statement over the stimulus package made at a recent press conference, a simmering row between the garment manufacturers and the government could be averted. Last week, the association demanded Tk 30 billion from the government's bailout programme to pay salaries and bonuses to the garment workers. It issued an ultimatum to the effect that the government would be held responsible for any unrest in the garment sector if the money in question was not given in four days.
After this 'surprise' statement made by the BGMEA, the government was visibly annoyed. According to reports, Finance Minister AMA Muhith asserted that such demand could not be accepted under any circumstances. Many political stalwarts attached to the ruling party termed the move as 'blackmail'. It is not a healthy sign that the garment owners would press for the bailout money by making their workers as hostages, they said.
Backtracking from its previous demand, the BGMEA has, of late, requested the owners to pay salaries and bonuses to the workers from their own fund before the Eid-ul Fitr. It, in fact, has been urging the government for giving stimulus package to the garment sector over the last one year to tackle the fallout from global recession. It claimed that the RMG sector had been hit hard with many units having been closed down and many others were on the verge of closure. Amid a decline in work orders from international buyers due to global economic recession, some owners are fighting the battle for survival. The government did not respond to the owners' demands despite having several meetings with it and its departments concerned.
Agitation for arrears and bonuses before Eid is not a new phenomenon in Bangladesh. Garment employees bring out such rallies before Eid every year. It is not understood as to why the garment owners have brought this issue to the forefront this time with all seriousness and that too, tagging workers unrest? If any particular industry is affected by the global recession, the government is otherwise to provide some kind of supports to it after examining pros and cons of its claim. How could an association give ultimatum to the government citing the workers' unrest? Can the government be held responsible for not being able to pay their employees?
On its part, the government could not also convene a single meeting of the taskforce formed to tackle the effects of global recession since March 24. It announced first stimulus package of Tk 35 billion during the first meeting of the taskforce where RMG sector was left out. In the budget, the finance minister announced a further Tk 50 billion incentives for the recession-hit industries. But as there was no meeting of the taskforce, the government could not allocate this additional money to bail out the sick industries. However, the finance minister told the media that he would convene a meeting of the taskforce next week to fix the sectoral allocation of the stimulus package. Had this meeting convened earlier, the controversy over the incentive could, perhaps, be avoided.
The BGMEA leaders have often been pressing the government for incentives, stating that their business suffered losses due to global economic meltdown. The export figures, however, do not reflect much of any negative impact of the recession. According to Export Promotion Bureau (EPB) statistics, Bangladesh exported woven products worth $ 5.9 billion in fiscal year (FY) 2008-9, which surpassed the export target, set for the sector, by 4.13 per cent and 14.54 per cent more compared with that of FY 2007-8. Bangladesh exported knitwear worth $ 6.4 billion in FY 2008-9, which fell short of its target by 2.35 per cent, but compared with the preceding year, it was 16.21 per cent up.
Successive governments have since the early 1990s doled out some Tk 74.24 billion as cash incentive to exporters to help them earn more foreign exchange for the country. But allegations have it that unscrupulous business houses abused much of this hefty sum. Reports say the readymade garment sector, the top foreign exchange earner, was the prime beneficiary of such generous government largesse. About 70 per cent of the total amount disbursed since fiscal year 1993-1994 when the scheme was introduced went to the RMG sector, which was initially the sole beneficiary of the scheme. Later, other sectors like frozen food, jute and jute goods, leather and footwear etc., were included in the scheme. Officials alleged that many business houses in the RMG sector, which did not qualify for getting such incentives, resorted to unscrupulous means to avail themselves of the easy cash.
Finance adviser to the prime minister, Mashiur Rahman, told a recently-held seminar that providing incentives to the RMG sector would actually help the developed nations more than the exporters. He pointed out that even a part of the subsidy would go into the pocket of the foreign suppliers as most of the export sector players imported raw materials for their industry.
But some industry analysts and businessmen did not agree with this view. They said the country's export witnessed a double-digit growth in the last one-and-a-half decades because of the growing competitive strength of the local exporters, mainly the RMG exporters, against their rivals from countries like India, China, Vietnam and Pakistan. Among other factors, provision of cash incentive alone played a significant role in export growth, they said. Cash incentives also helped to build up many backward linkage industries and generated employment.
The garment industry has now emerged as a prime industrial sector in the country. More than three million people are directly employed in the sector and most banks and financial institutions are involved in the business-related transactions of the thriving garment business. If garment units are forced by external circumstances to retrench workers due to fund shortage or are in serious financial troubles under the impact of global recession, the government should consider giving financial support within its affordable means to the deserving units in the sector. However, before providing any support, a thorough scrutiny has to be made whether the units are really affected or not.
szkhan@thefinancialexpress-bd.com
After Bangladesh Garment Manufacturers and Exporters Association (BGMEA) regretted its statement over the stimulus package made at a recent press conference, a simmering row between the garment manufacturers and the government could be averted. Last week, the association demanded Tk 30 billion from the government's bailout programme to pay salaries and bonuses to the garment workers. It issued an ultimatum to the effect that the government would be held responsible for any unrest in the garment sector if the money in question was not given in four days.
After this 'surprise' statement made by the BGMEA, the government was visibly annoyed. According to reports, Finance Minister AMA Muhith asserted that such demand could not be accepted under any circumstances. Many political stalwarts attached to the ruling party termed the move as 'blackmail'. It is not a healthy sign that the garment owners would press for the bailout money by making their workers as hostages, they said.
Backtracking from its previous demand, the BGMEA has, of late, requested the owners to pay salaries and bonuses to the workers from their own fund before the Eid-ul Fitr. It, in fact, has been urging the government for giving stimulus package to the garment sector over the last one year to tackle the fallout from global recession. It claimed that the RMG sector had been hit hard with many units having been closed down and many others were on the verge of closure. Amid a decline in work orders from international buyers due to global economic recession, some owners are fighting the battle for survival. The government did not respond to the owners' demands despite having several meetings with it and its departments concerned.
Agitation for arrears and bonuses before Eid is not a new phenomenon in Bangladesh. Garment employees bring out such rallies before Eid every year. It is not understood as to why the garment owners have brought this issue to the forefront this time with all seriousness and that too, tagging workers unrest? If any particular industry is affected by the global recession, the government is otherwise to provide some kind of supports to it after examining pros and cons of its claim. How could an association give ultimatum to the government citing the workers' unrest? Can the government be held responsible for not being able to pay their employees?
On its part, the government could not also convene a single meeting of the taskforce formed to tackle the effects of global recession since March 24. It announced first stimulus package of Tk 35 billion during the first meeting of the taskforce where RMG sector was left out. In the budget, the finance minister announced a further Tk 50 billion incentives for the recession-hit industries. But as there was no meeting of the taskforce, the government could not allocate this additional money to bail out the sick industries. However, the finance minister told the media that he would convene a meeting of the taskforce next week to fix the sectoral allocation of the stimulus package. Had this meeting convened earlier, the controversy over the incentive could, perhaps, be avoided.
The BGMEA leaders have often been pressing the government for incentives, stating that their business suffered losses due to global economic meltdown. The export figures, however, do not reflect much of any negative impact of the recession. According to Export Promotion Bureau (EPB) statistics, Bangladesh exported woven products worth $ 5.9 billion in fiscal year (FY) 2008-9, which surpassed the export target, set for the sector, by 4.13 per cent and 14.54 per cent more compared with that of FY 2007-8. Bangladesh exported knitwear worth $ 6.4 billion in FY 2008-9, which fell short of its target by 2.35 per cent, but compared with the preceding year, it was 16.21 per cent up.
Successive governments have since the early 1990s doled out some Tk 74.24 billion as cash incentive to exporters to help them earn more foreign exchange for the country. But allegations have it that unscrupulous business houses abused much of this hefty sum. Reports say the readymade garment sector, the top foreign exchange earner, was the prime beneficiary of such generous government largesse. About 70 per cent of the total amount disbursed since fiscal year 1993-1994 when the scheme was introduced went to the RMG sector, which was initially the sole beneficiary of the scheme. Later, other sectors like frozen food, jute and jute goods, leather and footwear etc., were included in the scheme. Officials alleged that many business houses in the RMG sector, which did not qualify for getting such incentives, resorted to unscrupulous means to avail themselves of the easy cash.
Finance adviser to the prime minister, Mashiur Rahman, told a recently-held seminar that providing incentives to the RMG sector would actually help the developed nations more than the exporters. He pointed out that even a part of the subsidy would go into the pocket of the foreign suppliers as most of the export sector players imported raw materials for their industry.
But some industry analysts and businessmen did not agree with this view. They said the country's export witnessed a double-digit growth in the last one-and-a-half decades because of the growing competitive strength of the local exporters, mainly the RMG exporters, against their rivals from countries like India, China, Vietnam and Pakistan. Among other factors, provision of cash incentive alone played a significant role in export growth, they said. Cash incentives also helped to build up many backward linkage industries and generated employment.
The garment industry has now emerged as a prime industrial sector in the country. More than three million people are directly employed in the sector and most banks and financial institutions are involved in the business-related transactions of the thriving garment business. If garment units are forced by external circumstances to retrench workers due to fund shortage or are in serious financial troubles under the impact of global recession, the government should consider giving financial support within its affordable means to the deserving units in the sector. However, before providing any support, a thorough scrutiny has to be made whether the units are really affected or not.
szkhan@thefinancialexpress-bd.com