Restoring discipline in the apparel industry
COUNTRY'S apparel entrepreneurs are considering the year 2006 as very much important for the ready-made garments (RMG) industry in terms of expanding and exploring its markets worldwide. All concerned are expected to pay proper attention to the legitimate requirements of the RMG industry in the greater interest of the nation. If the garments industry falls sick, the social and political consequences will be so severe that it would shake the foundation of the country.
The importers are eyeing the 2006 as the election year. The prospects or problems of the RMG sector will largely depend on domestic political situation. The political parties need to keep in mind how much the apparel sector is contributing to the national economy. The year 2006 should be the year of restoring discipline in the country's politics and the whole industry, keeping in mind that China is going to emerge stronger with the withdrawal of EU embargo in 2008.
However, belying all speculations, the country's apparel manufacturers injected a fresh investment of nearly Tk 20 billion in the textile sector in just a year. Such investment was made to cope with enhanced demand from buyers and pressure from the importing countries to improve labour and environment standard in their factories.
However, most of the investment went to the knitwear sub-sector that witnessed more than 30 per cent growth in business during the last fiscal (2004-05). A few of the exporters of woven fabrics have also invested a substantial amount in new factories and expansion of the existing ones.
The exporters said though the price offered by the buyers registered a fall in recent months, the flow of orders increased, especially after the quota was withdrawn from January 01 last.
Some 300 new factories were established in the period and a good number of old factories have expanded their production capacity. The apparel industry in Bangladesh expanded following imposition of the safeguard measures under WTO World Trade Organisation (WTO) rules by the USA and the European Union (EU) on certain categories of apparel exported by China. Many buyers have started coming to Bangladesh to inspect opportunities. Bangladesh's bargaining power has also gained some strength and the exporters could ask for a 5.0 to 8.0 per cent hike in prices.
In fact, country's readymade garments (RMG) sector has flourished since two decades without any notable cooperation and support from the official side. Basing exclusively on its entrepreneurs' own thoughts and limitations, the industry has thrived offering jobs to hundreds and thousands of people -- mainly female workers. The sector is now country's number one foreign exchange earner -- generating maximum revenue for the nation's public exchequer.
Starting from a paltry US $ one million two decades ago, the volume of business has reached upto $ five billion. The country made its first apparel export in 1978 but the progress since early 1980 has been simply phenomenal. It has by now become the colossus in industry, earning the country's lion's share of foreign exchange and providing the nation's women with the highest level of formal sector employment. Thus, the role of the RMG sector in the national economy is onerous.
Investment in backward linkage industry for greater supplies of raw materials for RMG sector, particularly in composite textile mills, has been quite phenomenal. Country's private sector has come up in a large number. Quite slowly, but steadily, nearly Tk 100 billion has already been invested over the years. Quite a number of composite textile mills for knitwear and woven fabrics were set by a group of enthusiastic entrepreneurs. However, such entrepreneurs need more equity capital from financial institutions.
At present garment factories are located in every nook and corner of the major cities. This causes environmental pollution, traffic jam and seriously impedes compliance issue. Moreover, the political unrest adversely affects the export promotion and goodwill. Such problem can be overcome gradually if the government comes forward to build a garments village both in Dhaka and Chittagong. Such a village can be developed as an exporters' plaza providing them the space for factory outlets plus residential quarter for the employees too.
The lead time on delivery issues matters most in the RMG export trade. In the beginning, the lead time was 120-150 days but now in 2006, this has been reduced to 40 to 60 days. China requires only 30 days due to their textile and other backward linkage facilities as well as export-friendly policy.
In order to address the lead time issue properly, production at the RMG units needs to be increased considerably. The government should also go for importing raw materials against contact letters or without letters of credit. In order to mobilise fund from the international buyers, each and every entrepreneur should invest their money for a short period for marketing purpose.
There is a need to set up a central bonded warehouse for woven and gray fabrics in order to help the manufacturers collect the fabrics within seven days from the issuance of LCs and thus reduce lead time.
Garments manufacturers see this issue as the most important although the textile mill owners oppose it saying this will lead to 'massive fabrics stealing'. Such stealings exist now as a section of dishonest entrepreneurs import 'excess' fabrics in connivance with a section of corrupt bonded commissionerate officials. Textile manufacturers, however, agreed to create a central bonded warehouse if all individual bonded warehouses -- now in existence -- are closed down. The government is reported to have been drafting a policy in this connection.
Chittagong being the largest sea port of the country is handling 80 per cent of import and 75 per cent of export cargoes. As the normal activities in export and import sectors are hampered due to the complexity created by various reasons like dock workers' unionism, go-slow policies, strike etc., the uses of seaport by the traders are highly disturbed. It is definitely leaving a negative impact on the national economy. The RMG owners have been facing problems in export and import for years. A large number of state-owned factories are classified as sick ones as they could not recover from the stock-lot problem which is also one of the causes of the bottlenecks in the port area.
The standard of customs service has improved a lot, still there is a scope for its further development up to the international level. Responding to the demand of the time, the customs service to the RMG owners should be relaxed and related officials must do their job with honesty and sincerity.
In order to expand the market share and survive the upcoming free global competition in the international market, product diversification appears to be an indispensable strategy. Technical experts should be brought in from abroad in this connection.
There is a need to set up a separate Apparel Board for the RMG industry. For several years, the garments factory owners have been pressing for setting up of a separate Apparel Board to free the industry from time wasting bureaucratic shackles and make it more dynamic. This has become more necessary as the day-to-day operation of the industry needs to get prompt service from the government in every phase -- from policy making to implementation.
If the government and the BGMEA take good care of this sector and implement the suggested measures for the purpose, experts expect the country will be able to attain the status of a major exporter to the extent of $ 25 billion in the next 20 years.k