New investments in RMG sector drop sharply in first half of FY\\\'14

New investments in the country's readymade garment (RMG) sector dropped sharply in the first half of the current financial year following some tragic incidents and ongoing political unrest, sources said.
High interest on bank loans, a protracted energy crisis during the period and international conspiracy against the industry are also responsible for the poor interest of the investors, they added.
Only three RMG units have been listed with the Registrar, Joint Stock Companies and Firms till December 15  of FY-2013-14 against twelve in the corresponding period last year, reflecting the uncertainty that has gripped the industry, which accounts for 80 per cent of Bangladesh's exports worth US$ 27 billion.
The number of applications for setting up new factories to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has also declined to 48 during the period, from 69 a year ago.
Besides, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) approved around 38 new memberships, down from 51 in the corresponding period.
"These are ominous signs for the garment sector. These grim figures suggest that the sector is heading for a sluggish future," former president of BGMEA Shafiul Islam Mohiuddin told the FE Tuesday.
"We were expecting a further boost in investment in RMG sector, but the scenario started to change for the worse mainly from November 2012, after the Tazreen fire incident. Later, the Rana Plaza collapse added to the decline in the investment," he added.
"The latest fire incident in Standard Group's factory would also leave adverse impact on our industry," he noted.    
According to the president of the Exporters' Association of Bangladesh (EAB), Abdus Salam Murshedy, export orders for RMG dropped by around 30 to 40 per cent in the first half of the current FY, which would be reflected in the export scenario of next two to three months.
"In addition to the tragic incidents, a protracted energy crisis during the period and international conspiracy against the industry also dampened the interest of new entrepreneurs from  investing in the industry," he added.
"After Tazreen and Rana Plaza disasters, situation in some major European nations and in the USA has turned extremely depressing concerning Bangladesh. Many buyers have either cancelled or put off orders," former vice president of BGMEA, Siddiqur Rahman said.
"The recent tragic incidents have weighed on the investment climate," he added.
"Along with the accidents, infrastructural problems, including high cost of land and dearth of skilled workers, and political volatility have also discouraged fresh investment in the garment sector," he said adding its impact would be felt in the second half of this FY.
"Many potential orders have been redirected to Latin America and other Asian countries," he said noting that in the long run retailers may head to Myanmar thanks to its 'normalising initiatives' over ties with the West."
However, a senior entrepreneur of the industry preferring anonymity said strictness over compliance issues by the foreign buyers also discouraged many prospective investors to invest in the sector.
"New entrepreneurs are afraid of the strictness over compliance issue as most of them cannot maintain compliance in their factories in the beginning. If they fail to comply with compliance issues they might face dearth of orders," he added.  
However, leading exporters have urged the government to set up a taskforce to face the latest threats to the garment industry.
"The industry needs government intervention to cope with the new challenges. Some of these problems are so complex that they require a multi-pronged approach," they added.
"If the government does not take strict measures right now, then many running industries might also face closure both due to our failures and international conspiracy," they further said.