[🇧🇩] Textile & RMG Industry of Bangladesh

[Bilal9]

He said that China had desperately decreased the prices of products to gain the lion share of the increased demand for apparel on the global market.

Desperately decreasing prices is not a long term strategy and cannot be sustained.

Ultimately China will need to seek lower-cost production sources (like Bangladesh) to produce and market average price-sensitive apparel globally.

They will however be able to hold on to the higher-end apparel premium product market needing higher skill level value-addition which is not as price-sensitive as lower level apparel products are.

Examples of premium and higher-end apparel products include designer-wear, formal-wear, higher-end winter-wear and constructed apparel like suits and jackets.

Also - apparel made with locally-sourced (and therefore - cheaper) hollow fiber and microfiber based textiles in China which mimic insulation, heat retention, 'hand feel' and luxurious texture properties of material such as wool, cotton and silk which command more premium prices.

The newest specialized commercial polyester fibers are hollow and here is an image of one PET fiber cross section as seen with an electron microscope.

The hollow spaces in the fibers can hold water vapor and moisture which when wicked will provide cooling - like cotton naturally does.

Japanese companies have perfected these hollow fibers for the last two decades, now its China's turn to produce them (as well as the Textiles) economically.

These cotton, wool and silk textiles made from specialized hollow fibers will get more popular as time passes.

One good example of these synthetic cotton yarns (mimic'ing cotton) is Hygro Cotton from Wellspun Fibers USA. Hygro cotton is used extensively in Home textiles such high-thread-count bedsheets and luxurious upmarket towels.

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[Bilal9]

By the way - this is hollow-fiber synthetic fiber batting (artificial soft cotton) made in China which can be spun into yarn. These fibers are significantly better than polyester and rayon in mimic'ing the "feel" and texture of cotton.

 

[Saif]

RMG exporters fed up with harassment by tax officials

Garment exporters are fed up with being harassed by VAT and customs officials, who have been imposing abnormal fines alleging a lack of documents, said an exporter yesterday.

www.thedailystar.net

RMG exporters fed up with harassment by tax officials
A business leader says

Photo: Amran Hossain

Garment exporters are fed up with being harassed by VAT and customs officials, who have been imposing abnormal fines alleging a lack of documents, said an exporter yesterday.

The VAT and customs officials are imposing fines up to 400 percent, said Mohammad Hatem, executive president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

He added that in places like Sanarpar and Rupganj upzila in Narayanganj, officials are levying fines of Tk 2 lakh to Tk 5 lakh due to an alleged lack of documents.

He further said that officials often detain goods-laden trucks and it takes a few days to release them. But by then it is too late to take the goods to the factories.

As a result, exporters either face a cancellation of work orders or send goods through air, which is very expensive.

Hatem was speaking at a pre-budget discussion on "highlighting income tax, VAT, customs duty, sector-wise allocation of budget, external debt, etc" organised by the Institute of Chartered Accountants of Bangladesh (ICAB) in collaboration with the Economic Reporters' Forum (ERF).

Former ICAB President Md Humayun Kabir moderated the discussion, featuring economists, businessmen, accountants, and journalists.

Ashikur Rahman, senior economist at the Policy Research Institute (PRI), highlighted the need to address inflation, the foreign currency reserve situation, the deficit in development allocation, and the problematic banking sector while preparing the next budget.

He also suggested merging a number of ministries.

PRI Executive Director Ahsan H Mansur reminded to keep internal and external economic shocks in mind while preparing the next budget.

The government should also aim to ensure macroeconomic stability by reducing inflation, Mansur added.

He suggested imposing more tax on land as many are not cultivating their land, which is unproductive.

Mansur said if customs duty, supplementary duty, and customs procedures are not reformed, Bangladesh will face difficulties signing Free Trade Agreements (FTAs) with other countries. Other nations will not show interest because of high duties, he said.

Md Saiful Islam, former president of the Metropolitan Chamber of Commerce and Industry, suggested tightening the belt by not approving unnecessary projects in the next budget.

Abdul Haque, former president of Japan Bangladesh Chamber of Commerce and Industry, stressed the need to provide more facilities for cottage, micro, small and medium enterprises so they can develop and contribute more to the economy.

ICAB President Mohammad Forkan Uddin said VAT and taxes are often exempted to control the market when prices of specific goods increase in the local market. As a result, the government loses revenue. Instead of doing this, they should go for market management, he said.

Former State Minister for Planning Shamsul Alam said no major reforms to the National Board of Revenue and Internal Resources Division have been made so far, due to which complaints of harassment persist.

The tax-GDP ratio in Bangladesh is still lower than its South Asian peers like Nepal, Pakistan, India, and Sri Lanka, he said.​

 

[Saif]

RMG workers continue to face a climate of fear, repression: Amnesty

Breaking News, International News & Multimedia

thedailynewnation.com

RMG workers continue to face a climate of fear, repression: Amnesty
3 May 2024, 12:00 am

Staff Reporter :

Amnesty International recently stated on 'International Workers' Day about the ongoing struggles faced by garment workers in Bangladesh.

They highlighted how workers in the country are still experiencing fear and repression, while companies are getting away with human rights abuses without consequences.

They pointed out the tragic incidents at Rana Plaza and Tazreen Fashions Factory, where many workers lost their lives due to unsafe working conditions.

These disasters, according to Amnesty, happened because of negligent monitoring of workplaces, revealing a lack of regulation and safety standards.

Despite efforts by organisations like the Bangladesh Legal Aid and Services Trust (BLAST) to seek compensation for the victims of these disasters, the cases have remained unresolved for over a decade.

Nadia Rahman from Amnesty International emphasised the need for accountability for these incidents, stating, "Workers' rights to fair compensation and safe working conditions are still not being met."

She called attention to the flaws in labour laws and the lack of compliance, stating that true compensation for occupational injuries remains elusive.

Amnesty International is advocating for significant changes to address these issues and ensure the safety and well-being of garment workers in Bangladesh.

"In addition to the lack of justice, most workers today are still fighting for decent wages in an industry that brings the most revenue to Bangladesh and paying a heavy price for fighting for their rights," she said.

According to Amnesty International, garment workers in Bangladesh are facing dire conditions, including being paid poverty wages and encountering numerous obstacles such as harassment, intimidation, and violence when they try to speak up for their rights.

Since the protests in 2023, there have been at least 35 criminal cases filed against garment workers, with reports estimating that tens of thousands of workers have been accused of participating in protests.

Amnesty noted that a significant portion of these cases were filed by factories supplying major global fashion brands and retailers.

Taufiq, a labour NGO worker in Bangladesh, lamented to Amnesty International, "When workers raise their voices, they are ignored; when they try to organise, they are threatened and sacked; and finally, when workers protest, they are beaten, shot at, and arrested."

Sokina, a survivor of the Tazreen Fashions fire in 2012, shared her distress with Amnesty International, stating, "It has been over eleven years, and we have still not received our rightful compensation. The owner of the factory is roaming scot-free and running new businesses by establishing strong ties with the ruling party while we are living a life of destitution."

Despite some global reforms initiated after the Rana Plaza tragedy, such as the International Accord for Health and Safety in the Garment and Textile Industry, occupational safety remains lacking for many workers across various sectors in Bangladesh.

The snail-paced progress during the last eleven years in the Rana Plaza and Tazreen compensation cases, together with widespread preventable occupational deaths and injuries, underscores the wider culture of corporate impunity in Bangladesh.

"We call on the government to remove the limits on compensation for occupational injuries under labour law, ensure those affected receive adequate compensation, and introduce a national data repository on workplace deaths and injuries to ensure transparency and fill the current gaps in official data," said Nadia Rahman.

Bangladesh must also ratify and then comply with the two key International Labour Organisation (ILO) Conventions 155 and 187 on occupational health and safety, along with ILO Conventions 102 and 121 on minimum standards of relief for victims of occupational injuries and deaths.

"We also urge the Government of Bangladesh to immediately end the repression of worker rights and ensure that they can exercise their right to freedom of expression and association, including by being able to form and join trade unions at the factory level, without fear of reprisals," she said.​

 

[Saif]

RMG export to US down 17pc in January-March

Bangladesh's garment exports to the US, the country's largest export destination, fell by over 17 per cent year-on-year to $1.75 billion in January-March, according to the Office of Textiles and Apparel (OTEXA), a body under the American Commerce Department. The slump is evident in both the value

thefinancialexpress.com.bd

RMG export to US down 17pc in January-March
MONIRA MUNNI
Published :
May 04, 2024 23:58
Updated :
May 04, 2024 23:58

Bangladesh's garment exports to the US, the country's largest export destination, fell by over 17 per cent year-on-year to $1.75 billion in January-March, according to the Office of Textiles and Apparel (OTEXA), a body under the American Commerce Department.

The slump is evident in both the value and volume of exports.

US import figures show Bangladesh's key ready-made garment competitors China and Vietnam outperformed Bangladesh in the first quarter.

Exporters list a number of domestic issues like long lead times, inconsistent energy supplies and an overall high cost of doing business for their loss of export share in the US market.

These same factors, they say, give China and Vietnam an advantage in the American market.

US apparel imports from Bangladesh totaled $1.75 billion in January-March this year, compared to $2.13 billion in the same period of 2023, show OTEXA figures released on May 02.

In Q1, the country shipped 11.92 per cent fewer garments, which is 586.09 million square metres, compared to the previous year's 665.42 million square metres.

In contrast, though China's apparel exports to the US saw a slight decline in value, they did experience volume growth.

However, overall US apparel imports fell by 7.14 per cent to $18.07 billion in the first quarter of 2024, down from $19.46 billion in the same period of 2023.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said buyers are now placing orders with shorter lead times due to various factors. This situation puts China and Vietnam, with their shorter lead times and more consistent energy supplies, in a more advantageous position.

Exporters are struggling to meet lead times for current work orders due to a severe gas crisis, he told The Financial Express on Saturday.

He added that meeting production timelines is difficult as they require 15-20 days to obtain fabric due to gas and electricity shortages. Bangladesh also cannot receive all materials efficiently due to the lack of a deep-sea port, further delaying import and export activities.

The BKMEA leader said high production costs due to rising gas prices, recent wage hikes and anticipated electricity rate increases are eroding their competitiveness.

"In many cases, we can't receive the work orders as buyers offer prices below the production costs," he noted.

SM Mannan Kochi, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said price is the key factor.

"Buyers are offering lower rates while production costs are steadily increasing," commented Mr Kochi, calling for measures to reduce costs and ensure fair apparel pricing to remain competitive.

Abdullah Hil Rakib, managing director of Team Group and also BGMEA vice president, attributed the decline to the Red Sea crisis.

OTEXA data shows China's apparel exports to the US in the first three months of 2024 reached $3.44 billion, marking a 0.71 per cent decline.

China saw a 9.79 per cent increase in volume, exporting 1.92 billion square metres of apparel during the first quarter.

Vietnam's apparel exports to the US in January-March 2024 increased by 0.91 per cent to $3.39 billion. US apparel imports from Vietnam also increased by 11.54 per cent, reaching 1.08 billion square metres.

The US's RMG imports from Cambodia rose by 11.13 per cent to $807.87 million in January-March compared to the same period in 2023. India's RMG exports to the US market declined by 8.79 per cent to $1.21 billion compared to $1.33 billion in the same period of 2023.

US RMG imports from Indonesia decreased by 14.16 per cent to $1.02 billion in the first three months of 2024, compared to $1.19 billion in the same period of 2023.

​

 

[Saif]

EU supply chain law is both a threat and an opportunity

How will it impact Bangladesh’s garment manufacturers?

www.thedailystar.net

EU supply chain law is both a threat and an opportunity

Photo: REUTERS

Recently, the European Parliament approved the Corporate Sustainability Due Diligence Directive (CSDDD), moving it one step closer to formal adoption by the European Union. The CSDDD, once adopted, will create a legal liability for companies in relation to environmental and human rights violations within their global supply chains.

There has been a huge discussion about the CSDDD in Western media, with concerns raised that it has been significantly watered down from the initial proposal. But what is this directive/legislation, and how will it impact Bangladesh's garment manufacturers?

The CSDDD actually represents a significant regulatory initiative by the EU to promote sustainable business practices across various industries, including the garment sector. At its core, it mandates that large companies operating within the EU take active steps to identify, prevent, mitigate, and account for the adverse impacts of their operations on human rights and the environment. It is built on the principle that businesses should be proactive in their sustainability efforts, rather than reactive or merely compliant with existing norms.

The regulation covers a number of areas. In terms of due diligence requirements, it means that companies are required to conduct due diligence processes to assess and address the risks associated with their business operations and their entire supply chain. It also means looking into how their products are made, where materials are sourced, and the working conditions in factories, among other factors. All have obvious implications for manufacturers, particularly with regard to the rights of garment workers, which are a contentious issue throughout Asia.

Transparency is also a crucial aspect of the CSDDD. The new regulations mandate that companies must regularly report on their due diligence activities, findings, and the measures they take to mitigate negative impacts. The reporting ensures that stakeholders, including consumers and investors, are well-informed about the company's sustainability practices.

The key here is that, to ensure greater transparency, fashion brands will have to further engage with suppliers. Will this mean more audits and questionnaires for manufacturers? This seems to be a distinct possibility.

Stakeholder engagement is another key aspect of the CSDDD. Engaging with potentially affected groups and other stakeholders is essential under the new rules. This includes dialogue with local communities, workers, and NGOs to gain insights into the real-world impacts of business operations. If a company identifies that it has caused or contributed to adverse impacts, it must provide or cooperate in remediation. This could involve compensating communities for environmental damage or improving working conditions in factories. Previously, the issue of remediation had been left for the supply chains to sort out. To this extent, it will be interesting how the issue of remediation plays out under the CSDDD.

In Bangladesh, the garment industry is already heavily scrutinised for its environmental and social impacts, ranging from excessive water usage and pollution to labour rights abuses in the supply chains. Given that, I assume the CSDDD could significantly impact garment manufacturers in several ways.

The first of these is supply chain scrutiny. Manufacturers will need to have a thorough understanding of their entire supply chain—from raw material sourcing to the final product. This includes ensuring that all parts of the supply chain adhere to environmental standards and respect workers' rights. For instance, manufacturers might need to switch to suppliers who use sustainable materials or enforce fair labour practices.

The potential for increased costs is another issue. Implementing comprehensive due diligence processes can be costly. Garment manufacturers might face higher operational costs as they invest in better supply chain management systems, conduct audits, and potentially pay higher prices for sustainably sourced materials. These costs could also affect pricing strategies and profit margins.

On the other hand, adhering to the CSDDD could provide a competitive advantage for some suppliers. Consumers are increasingly conscious of the environmental and social impacts of their purchases. Companies that demonstrate genuine commitment to sustainability may attract more customers and build stronger brand loyalty. This could be an opportunity for some suppliers, and we are already seeing this as brands put more effort into supporting progressive, responsible garment manufacturers.

The directive may also spur innovation in the industry. Manufacturers might invest in new technologies and processes that reduce environmental impacts, such as water recycling systems or energy-efficient production techniques. This can not only help comply with the CSDDD but also improve overall efficiency and cost-effectiveness.

Moving forward, for garment manufacturers in Bangladesh, compliance with the CSDDD is going to be essential for accessing the European market—our largest market alongside the US. Non-compliance can result in legal risks, including fines and restrictions on market access. Therefore, it's crucial for the manufacturers to align their practices with the directive to avoid such risks. We cannot afford to get this wrong.

While the transition may be challenging and costly, the long-term benefits of building a sustainable operation could outweigh these initial investments—not just in profitability, but also in contributing positively to society and the environment.

Mostafiz Uddin is the managing director of Denim Expert Limited. He is also the founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE).​

 

[Saif]

Garment exports to US continue to decline

In the January-March period of the current year, garment shipments to American markets declined by 17.68 percent to $1.75 billion, according to data from the Office of Textiles and Apparel (OTEXA), a body under the American Commerce Department.

www.thedailystar.net

Garment exports to US continue to decline
American retailers cut back on imports from all over the world

Garment exports to the US, Bangladesh's single largest export destination, continued to decline over the past few months as American retailers and brands cut back on imports of apparel from all over the world.

In the January-March period of the current year, garment shipments to American markets declined by 17.68 percent to $1.75 billion, according to data from the Office of Textiles and Apparel (OTEXA), a body under the American Commerce Department.

In the January-February period, garment exports to the US declined by 19.24 percent to $1.18 billion, according to the data.

The collective shipment of textiles and garments slipped 17.37 percent to $1.81 billion in the January-March period of the current year, the data also showed.

Garment exports to the US have been declining over the past several months as American retailers and brands are importing less garments despite a gradual improvement in inflationary pressure to adjust with higher exports of garments in previous years.

For instance, garment exports from Bangladesh to the US rose more than 53 percent after the Covid-19 pandemic as retailers and brands imported more to meet pent-up demand in 2022.

But garment exports did not increase at same pace last year as American retailers and brands had plenty of old stock of unsold clothing items.

Retail sales began to revive in November last year during the beginning of the festive season while sales peaked in December last year during Christmas. The demand for apparel has been slowly reviving since then, with exports gradually approaching positive territory.

Moreover, many garment factories in Bangladesh have faced long closures due to the wage hike movement, which stretched from September to December last year. Production at many factories was disrupted severely as workers agitated, demanding a wage hike.

AK Azad, managing director of Ha-Meem Group, which exports 95 percent of its garment products to the US, said the demand for the apparel among low-end consumers in the US did not fully recover.

This especially affected Bangladesh because the country mainly exports low-end garment items to the US, Azad added.

Moreover, the interest rate in US banks is still high, which means consumers are busy making interest payments against loans, such as ones taken to purchase houses, he added.

Furthermore, the gas and power crisis in the garment industry has been severely affecting lead times.

As a result, manufacturers cannot ship goods as per commitments to buyers, said Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

The lack of a deep-sea port in the country has also been affecting lead times, Hatem added.

The National Retail Federation (NRF), the largest retailers' platform in the US, said retail sales grew at a steady pace in March.

"As inflation for goods levels off, March's data demonstrates steady spending by value-focused consumers who continue to benefit from a strong labour market and real wage gains," said NRF President and CEO Matthew Shay.

"In this highly competitive market, retailers are having to keep prices as low as possible to meet the demand of consumers looking to stretch their family budgets," Matthew added.

Total retail sales, excluding automobiles and gasoline, were up 0.36 percent seasonally adjusted month-on-month and up 2.72 percent unadjusted year-on-year in March, according to Retail Monitor.

That compared with increases of 0.4 percent month-on-month and 2.7 percent year-on-year in February, based on the first 28 days in February.​

 

[Saif]

Denim exports in blues as inflation forces buyers to tighten belt

The country's dominance of the global denim market -- built on its position as the top supplier to the United States and the European Union -- was challenged last year by a decline in shipments to both regions, show data. For the fall, local denim-makers point the finger at a sluggish dema

thefinancialexpress.com.bd

Denim exports in blues as inflation forces buyers to tighten belt
Top exporters see recovery signs as int'l expo focuses on sustainability
MONIRA MUNNI
Published :
May 07, 2024 02:48
Updated :
May 07, 2024 02:48

The country's dominance of the global denim market -- built on its position as the top supplier to the United States and the European Union -- was challenged last year by a decline in shipments to both regions, show data.

For the fall, local denim-makers point the finger at a sluggish demand in the global market and high production costs at home.

According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), denim exports to the US and EU bloc saw negative growth of 31.07 per cent and 23.42 per cent respectively in 2023.

Denim exports to the US market fetched Bangladesh $649.96 million in 2023 calendar year -- down from $942.96 million in 2022, according to OTEXA, a body under the US Department of Commerce.

Bangladesh has held the top denim supplier position in the US market since 2020, displacing Mexico.

OTEXA data also shows a decrease in total US denim apparel imports from the world last year -- down 23.97 per cent to $3.16 billion from $4.16 billion in 2022.

Once the leading exporter, China fell to fifth place in the US market in 2023 with $312.47 million in exports. Pakistan and Vietnam ranked third and fourth, respectively, with $374.56 million and $336.31 million.

According to BGMEA data, Bangladesh's denim exports to the EU also declined last year, fetching $1.20 billion compared to $1.57 billion in 2022.

Turkey and Pakistan followed Bangladesh in the EU market, with both countries experiencing negative growth exceeding 12 per cent. Bangladesh has maintained its top position in the EU market since 2017, according to BGMEA.

For the decline in denim shipments to both the US and EU, exporters blame a sluggish demand caused by the economic slowdown triggered by the Russia-Ukraine war and the resulting high inflation.

This, they say, forced Western consumers to prioritise essential goods, while rising production costs due mainly to the local energy crisis were also contributing factors.

Anwar-ul-Alam Chowdhury Parvez, managing director of Argon Denims Ltd, said consumers are focusing on meeting basic needs due to the economic climate, with fashion taking a back seat.

"This has led to a decrease in international demand for denim, not just for Bangladesh but for other exporting countries as well," he said. "On the other hand, sales of functional wear and activewear are increasing."

According to Mr Parvez, the situation is unlikely to improve unless global demand picks up.

Rising energy costs and central bank policies were also cited by denim-makers as factors contributing to a decline in local production.

Optimism as innovation in focus at denim expo

Referring to positive buyer projections, exporters at an international denim expo in Dhaka expressed optimism for an upturn in orders from September onwards.

The two-day Bangladesh Denim Expo, held at the International Convention City Bashundhara (ICCB) in Dhaka, features over 60 exhibitors from 11 countries showcasing their latest innovations.

Organised by the Bangladesh Apparel Exchange, the event began on Monday. Manufacturers are displaying a wide range of products, from sustainable fabrics to cutting-edge designs, highlighting the diversity of the denim industry.

The show's theme, "Reimagine", reflects the industry's focus on continuous innovation and the integration of digitalisation. Organisers believe this approach can reshape the denim landscape and leverage the power of technology.

Shovon Islam, managing director of Sparrow Apparels Ltd, a company exporting value-added denim, told the Financial Express that Bangladesh controls 9-10 per cent of the global denim market, worth $85 billion, with annual exports of $8 billion.

High buyer inventory in 2021 and 2022, due to lower consumer demand during the pandemic, led to weaker sales in 2023, he said. However, he was optimistic for an upturn in orders from September onwards for the next season, based on positive buyer projections.

Mr Islam added that global demand has been on an upward trend since the beginning of 2024. Buyers are booking capacity as their inventory levels have depleted.

He also said that some orders are shifting from Egypt due to war and safety concerns.

Mr Islam, who moderated a session at the expo, told the FE that Bangladesh is adapting to changing fashion trends by producing high value-added denim goods.

Shams Mahmud, managing director of Shasha Garments Ltd, said, "Inflation and historically high interest rates set by the Federal Reserve are still impacting the US market."

"This has led to a decrease in disposable income, affecting demand for denim, particularly entry-level high street products which are price-sensitive," Mr Mahmud added.

However, he too expressed optimism for the future. "We are seeing new orders coming in and are hopeful that demand will pick up and exports will rebound in the near future."

The Bangladesh Textile Mills Association estimates that over 40 local mills currently produce denim fabrics.​

 

[Saif]

Five strategies for garment exporters to navigate geopolitical risks

Bangladeshi garment makers can mitigate risk in an uncertain world with foresight, resilience, and agility.

www.thedailystar.net

Five strategies for garment exporters to navigate geopolitical risks

Geopolitical risks are just intrinsic to the global business landscape. FILE PHOTO: STAR

Geopolitical tensions are on the rise in apparel sourcing hubs, with major implications for Bangladesh. For instance, the trend of "friendshoring," whereby apparel manufacturing and sourcing shift to countries that are geopolitical allies, is coming under scrutiny due to increasing political tensions. A recent report produced earlier this year, by risk intelligence firm Verisk Maplecroft, underlines that.

Maplecroft looked at trends over five years across 40 emerging markets, including major manufacturing hubs like Bangladesh, Indonesia, Mexico, Thailand, and Turkey and assessed risks related to civil unrest, government instability, and exposure to conflict and terrorism. It suggests "civil unrest" as a "primary threat to manufacturing," with more than three-quarters of the assessed emerging markets experiencing an increase in civil unrest over the past five years. Alarmingly, Bangladesh ranks seventh highest on political risk related to civil unrest, according to the report.

While Bangladesh has established itself as the world's second-largest exporter of ready-made garments, protests for higher wages in 2023 resulted in at least four deaths and significant disruption to the apparel sector. This unrest has continued into 2024, despite the agreement on a new minimum wage, with reports of garment factories terminating workers who participated in the protests.

Bangladesh is not alone on these issues. The report details how other key apparel manufacturing hubs like Mexico, Turkey, Thailand, and Indonesia also face political risks.

So, what is driving this unrest? Economic inequality is identified as the primary driver of civil unrest, with global, regional and national issues contributing to instability. Maplecroft's report predicts that political risks in garment hubs are unlikely to decrease in 2024. This could have been the same in Bangladesh had we not been able to resolve issues related to the minimum wage increase.

There are other risk issues at play as well. Disruptions in crucial logistics routes, such as the Red Sea and Suez Canal, are posing further challenges to global apparel supply chains. Recent conflicts and attacks on cargo ships in these maritime routes have prompted companies like AP Moller-Maersk to suspend transits. This would potentially cause delays in stock delivery.

The report also raises concerns over the deepening divide between powerful nations, particularly the US and China. Sanctions and counter sanctions between these countries pose risks to global supply chains. Their actions are much more complex beyond numbers and are something which industry leaders in Bangladesh need to keep an eye on.

As apparel entrepreneurs seek to diversify their supply chains after the pandemic, the report emphasises the importance of tracking political risks and conducting "scenario analysis" to mitigate potential disruptions.

But how can garment manufacturers mitigate against geopolitical tensions in an ever-changing and uncertain world? How can they reduce their exposure to the impacts of trade disputes, political unrest, geopolitical dynamics and other developments which are beyond their control? I can suggest five effective strategies for Bangladeshi export-oriented manufacturing companies in this context.

First, geopolitical tensions can disrupt the flow of goods and raw materials, leading to supply chain bottlenecks and production delays as well as increased costs for raw materials. To counteract this risk, garment manufacturers or companies should diversify their supply chains across multiple regions and suppliers. By reducing dependence on a single source or location and conducting thorough risk assessments and developing contingency plans for alternative sourcing, businesses can minimise the impact of geopolitical disruptions.

A second tactic is to continuously monitor regulatory changes. Geopolitical dynamics often manifest in the form of regulatory shifts and trade policies including changes in tariffs, sanctions and export controls. Moreover, maintaining open channels of communication with government agencies and industry associations enables businesses to stay informed and proactively address compliance issues.

Third, in these unstable times, building strong-trustful relationships with customers, suppliers and local partners is crucial. Garment manufacturing export companies should prioritise long-term partnerships based on mutual respect, transparency, and shared values. By cultivating a network of trusted allies, businesses can navigate geopolitical uncertainties more effectively and leverage collective expertise to mitigate risks.

Fourth, on a practical level, political risk insurance (PRI) can provide financial protection against losses stemming from geopolitical events such as expropriation, political violence, and currency devaluation. Export-oriented manufacturing companies can secure comprehensive PRI coverage tailored to their specific operations and markets. Working with reputable insurers and leveraging PRI solutions can safeguard against potential disruptions and provide peace of mind in uncertain environments.

Finally, it stands to reason that an overreliance on a single market increases vulnerability to geopolitical shocks and economic downturns. To mitigate this risk, export-oriented manufacturing companies should diversify their market exposure across regions and customer segments. This will diversify revenue streams and reduce dependence on any single geopolitical entity. While this would demand stepping into unknown space by undertaking deeper research into any new market (economy), demography or consumers' behavioural pattern and preferences, an interested company should walk that uncharted path even making social or cultural investments in a new destination (society).

In my experience, these risks are just intrinsic to the global business landscape. As much as geopolitics may paralyse export-oriented manufacturers from Bangladesh, mere criticism won't help us. By undertaking pro-active or strategic steps like diversifying supply chains, monitoring regulatory changes, fostering partnerships, enhancing political risk insurance, and diversifying market exposure, I believe, Bangladeshi garment makers can navigate geopolitical uncertainties with foresight, resilience, and agility.

Mostafiz Uddin is the managing director of Denim Expert Limited. He is also the founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE).​

 

[Saif]

BGMEA for continuation of gas supply to new factories outside EZs

The country’s apparel makers on Monday demanded that the government should reconsider its decision to withhold gas and electricity connections from industries located outside economic zones...

www.newagebd.net

BGMEA for continuation of gas supply to new factories outside EZs
Staff Correspondent 13 May, 2024, 22:47

The country's apparel makers on Monday demanded that the government should reconsider its decision to withhold gas and electricity connections from industries located outside economic zones.

Bangladesh Garment Manufacturers and Exporters Association president SM Mannan Kochi made the demand at a meeting with textiles and jute minister Jahangir Kabir Nanok held at the Secretariat in the capital Dhaka on the day.

The BGMEA president also demanded continuation of cash incentive against readymade garment exports until 2026.

Recently, the Bangladesh Bank has issued a circular stating that the new industrial establishments would not get electricity and gas connections if they are constructed in places other than the economic zones or government designated industrial areas.

Kochi said that no fresh investment would take place in the apparel sector due to the circular as only 3 economic zones out of proposed 100 started its operations in the country.

The BGMEA president informed the textile minister about the non-cooperation from customs and the National Board of Revenue and demanded that harassment-free environment be ensured.

Kochi also requested the government to reduce tax at source to 0.5 per cent from existing 1.0 per cent.

Jahangir Kabir Nanok assured BGMEA leaders that he would raise the issue of the NBR and customs in the next cabinet meeting.

He termed the NBR and customs' issue as 'big problem' for business and said that his ministry received such complaints from some other sectors.

The minister also assured that he would try to ease the decision of the government over the utility connections to the new industry outside the economic zones.​

 

[Saif]

Cash subsidy for exports surges. Only garment yields expected results

The government’s cash incentive against export receipts has soared over the years although many sectors could not make their mark in the global market, bringing in limited results for the government’s diversification initiative.

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Cash subsidy for exports surges. Only garment yields expected results

The government's cash incentive against export receipts has soared over the years although many sectors could not make their mark in the global market, bringing in limited results for the government's diversification initiative.

Currently, 43 sectors receive taxpayer-funded cash support, with the maximum rate standing at 15 percent and the minimum rate at 0.5 percent.

Of them, only the garment sector has consistently fared well, turning Bangladesh as the second-largest apparel supplier in the world. The sector accounts for about 85 percent of the country's exports as well.

The government has spent thousands of crores of taka over the years to help exporters become competitive in international trade. The subsidy amount stood at Tk 8,689 crore in the last financial year of 2022-23, slightly down from Tk 8,784 crore from a year prior, Bangladesh Bank data showed.

However, the generous handout can't be continued after 2026 since World Trade Organisation (WTO) rules don't allow developing and developed countries to pay direct cash incentives to exporters. Bangladesh is set to become a developing country in November 2026.

The imminent graduation and persisting pressure on the coffer amid low tax collections prompted the government to cut the subsidy for almost all sectors in February with a view to bringing down the rates gradually and protecting exporters from any shock that may emanate in the event of a sudden withdrawal of the cash aid.

The highest cash incentive rate has been reduced to 15 percent from 20 percent for most sectors. Only four sectors – diversified jute products, vegetables, fruits and products in the agro-processing sector, potatoes, and halal meat and processed meat exporters -- will qualify for the top rate.

Despite immense potential and direct cash assistance, sectors such as jute and jute goods, leather and leather goods, and agro-processing and frozen foods have not been able to emulate the feat achieved by the garment sector.

Even, results are mixed within the garment sector. For example, Bangladesh is still strong in cotton fibre garment items although the world has moved towards non-cotton items. Furthermore, apparel items produced from artificial materials fetch better prices than those made from the natural fibre.

Speaking to The Daily Star, Zahid Hussain, a former lead economist of the World Bank, said the way the cash incentive is now being given is not wise.

"The way should be reconsidered because many sectors could not produce positive outcomes though the money was spent."

If Bangladesh, as a developing nation, provides direct cash incentives on export receipts, disputes regarding compliance will arise, he said.

Hussain said the diversification in the export sector did not take place except in the garment industry despite spending the money. Even corruption took place in the management of cash incentives.

"Therefore, if the incentive is retained for any sectors after the LDC graduation in different forms, the eligibility of sectors should be assessed."

SM Mannan Kochi, president of the Bangladesh Garment Manufacturers and Exporters Association, said they had already held meetings with finance ministry officials and called for the continuation of incentives after the LDC graduation since countries such as India and China pay such incentives under different names.

"Many countries are giving the incentive in the name of technology upgradation or skills development funds."

According to the business leader, there are numerous small and medium enterprises and emerging sectors in Bangladesh that are not strong enough financially to cope up with the potential challenges in the post-LDC era.

"The cost of doing business is increasing because of the power tariff hike, so the government should continue the incentive even after the graduation."​

 

[Saif]

BGMEA seeks extension of EU's Everything but Arms facility

EU ambassador meets BGMEA president in Dhaka

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BGMEA seeks extension of EU's Everything but Arms facility
EU ambassador meets BGMEA president in Dhaka

Bangladeshi garment makers today urged the European Union (EU) for extending the transition period from the Everything but Arms (EBA) to the GSP Plus scheme to help Bangladesh export more to the EU member countries.

SM Mannan Kochi, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), made the call in a meeting with Charles Whiteley, EU ambassador in Bangladesh, at the BGMEA office in Dhaka.

The ambassadors of other EU countries were also present at the meeting.

The extension of the EBA is crucial to ensure that Bangladesh can sustain its economic growth even after graduating from the least developed country category, Kochi said in a statement.

The BGMEA chief also sought cooperation from the EU envoy for capacity building of the industry.

He also requested the envoys to engage with European buyers to ensure fair pricing and ethical sourcing.​