Helping the competitiveness of garments industries
Monday, 3 November 2008
Tareque Afzal
THE banks in Bangladesh do need to be persuaded to support the readymade garments (RMG) sector in its specially bad patch --caused by the global financial turmoil -- by lowering interest rate on loans and working capital. They will have to lower other service charges also for their RMG customers. The banks will have to look at their longer term interest of keeping alive the RMG industries in these difficult times. If the banks may decide not to adopt such a helpful role they would be undermining their own longer term interest opting for shorter term gains.
To make the RMG exports more competitive, the government needs to further improve port conditions to facilitate faster handling of garment cargoes, both raw materials and finished products. It would stop the loss of precious time in garment manufacture and export. The loss of time caused by red-tape also needs to come to an end for the same objective.
Meeting shipment schedules is essential for the success of RMG business. As buyers want, RMG products at lower and lower prices is one side to retaining competitiveness by the sellers. To retain their competitiveness, the Bangladeshi exporters have to cut down delays in shipment to the buyers. The government of Bangladesh ought to do everything possible to support the exporters in this regard. It should also take a firm stand on countering the menace of any unwelcome labour unrest in the sector while the legitimate interests of the workers do need to be promoted, any recourse to acts of vandalism, at the instigation of extraneous forces, must not be tolerated.
The proposal for maintaining two different exchange rates -- one for the garment sector and the other for the rest of the economy - may deserve some consideration here, though such a proposal, if accepted, may lead to distortions in exchange rate management and also create scope for many irregularities. As such, it is not clearly known how the dual system of exchange rate under which Taka will depreciate against dollar for the garment sector to make garments export more competitive unlike the case with any other economic activities involving the use of foreign exchange, will ultimately benefit the economy. However, the Indian rupee has already depreciated notably against US dollar and this will help the Indian exporters. Similarly, in Pakistan and Vietnam, competitors of Bangladesh in garments export, their currencies have also depreciated against the US dollar. In this context, the competitiveness of our RMG exports may suffer.
Meanwhile, the government of Bangladesh should also take steps immediately to ensure steady supply gas and power to RMG industries - and if possible, at some concessional rates. The competitiveness of this pivotal sector of the national economy in these difficult times will then be promoted.
THE banks in Bangladesh do need to be persuaded to support the readymade garments (RMG) sector in its specially bad patch --caused by the global financial turmoil -- by lowering interest rate on loans and working capital. They will have to lower other service charges also for their RMG customers. The banks will have to look at their longer term interest of keeping alive the RMG industries in these difficult times. If the banks may decide not to adopt such a helpful role they would be undermining their own longer term interest opting for shorter term gains.
To make the RMG exports more competitive, the government needs to further improve port conditions to facilitate faster handling of garment cargoes, both raw materials and finished products. It would stop the loss of precious time in garment manufacture and export. The loss of time caused by red-tape also needs to come to an end for the same objective.
Meeting shipment schedules is essential for the success of RMG business. As buyers want, RMG products at lower and lower prices is one side to retaining competitiveness by the sellers. To retain their competitiveness, the Bangladeshi exporters have to cut down delays in shipment to the buyers. The government of Bangladesh ought to do everything possible to support the exporters in this regard. It should also take a firm stand on countering the menace of any unwelcome labour unrest in the sector while the legitimate interests of the workers do need to be promoted, any recourse to acts of vandalism, at the instigation of extraneous forces, must not be tolerated.
The proposal for maintaining two different exchange rates -- one for the garment sector and the other for the rest of the economy - may deserve some consideration here, though such a proposal, if accepted, may lead to distortions in exchange rate management and also create scope for many irregularities. As such, it is not clearly known how the dual system of exchange rate under which Taka will depreciate against dollar for the garment sector to make garments export more competitive unlike the case with any other economic activities involving the use of foreign exchange, will ultimately benefit the economy. However, the Indian rupee has already depreciated notably against US dollar and this will help the Indian exporters. Similarly, in Pakistan and Vietnam, competitors of Bangladesh in garments export, their currencies have also depreciated against the US dollar. In this context, the competitiveness of our RMG exports may suffer.
Meanwhile, the government of Bangladesh should also take steps immediately to ensure steady supply gas and power to RMG industries - and if possible, at some concessional rates. The competitiveness of this pivotal sector of the national economy in these difficult times will then be promoted.