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DISPROVING earlier gloomy predictions about impending threats to the export-oriented readymade garments (RMG) sector of Bangladesh after the withdrawl of the quota system from January 01, the industry appears not so stressed in the light of existing conditions. No instant fall-out on the RMG sector is noted with reduction in orders or even likely decreases in such orders in the near future. Reportedly, the RMG industries, on the whole, are rather comfortable with advance orders to keep them fully engaged not only in 2005 but also until the middle of 2006. There could be no better news than this for the country's premier industry that employs a record number of people who would be thrown into great hardships with worse times descending on it.
But the current short- or medium-term outlook for the garments industries ought not to create any complacence about securing them over the longer term. This depends very much on their attaining greater competitiveness under the quota-free conditions. Acquiring of far greater competitiveness is going to be the main quality for Bangladesh to hold on to the position it has in world apparel exports and also to increase its market shares. For the end of quotas offers both difficulties as well as opportunities for a garment exporting country like Bangladesh. If it can further streamline its RMG sector to compete in the international market, it can not only retain its present market shares but also expand the same substantially.
The government can play a part in helping the competitiveness of the sector. It has already taken some measures to this end such as reduction in charges for energy use by garments industries, decrease in their value added tax (VAT) and steps to improve handling time of cargoes of garments industries at the ports and to shorten customs procedure. While these actions are helpful, it needs to do more in crucial areas like creating at the fastest a special fund which intending entrepreneurs can utilize to set up backward and forward linkage industries for the garments sector.
A report in this paper last Wednesday drew attention to the fact that RMG industry owners and others have taken a keen interest in establishing linkage industries. This is reflected in substantial such investments being actually made during the last two years. No doubt, the investments have a link to the owners or operators of industries in the overall textile sector realising the acute necessity of having linkages in order to hedge the country's RMG exports in the quota free world. But there are limitations probably in such self-initiated investments. The process can be much accelerated with official initiative taken and sustained to that end. A special fund was pledged by the government to promote linkage industries but that has not yet become operational.
While the creation of such a fund would be a positive move, more important would be the terms and conditions for the entrepreneurs to borrow from it. The lending rates from it will need to be specially attractive for the entrepreneurs. The present lending rates by banks and other financial institutions in Bangladesh are high and discourage enterprising in many cases. Therefore, this special fund for RMG's linkage industries will be expected to provide loans to potential entrepreneurs in linkage industries at significantly lower rates than the current market rates for the fullest utilsation of its resources at an early date. The government also should play a part in encouraging large scale cultivation of cotton in the country to add significantly to value-addition in the RMG sector.
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