Many occurrences are happening continuously in the Textile & Clothing (T&C) industry. New budget for 2017-2018 has been passed, provisional data of the Export Promotion Bureau (EPB) has been explored, Accord announced to extend its period unilaterally, unexpected boiler explosion happened at a garment factory in Gazipur and so on, which are remarkable and require special attention and analysis. The people and stakeholders are concerned to know experts and industry leaders’ opinion on those issues. On that note, recently Textile Today has taken an exclusive interview of Faruque Hassan, Senior Vice President of Bangladesh Garment Manufacturer & Exports Association (BGMEA).
He has been elected trice in BGMEA as director. He has completed his Master degree in Management from Dhaka University, started his carrier in garment industry from 1982 and eventually became the business icon of the industry. He is the Managing Director of Giant Group, one of the pioneers in textile and readymade garments since mid eighties. Mr. Hasan is one of the most dominating RMG leaders in the country advocating strongly in Bangladesh and abroad for the betterment of the country. The glimpse of the discussion between Textile Today and Faruque Hassan is put here for the readers.
Textile Today: In the last financial year 2016-17, Bangladesh RMG has seen lowest export growth in 15 years. It happened in such a time when the country is enjoying good stability; RMG and Government is pursuing a goal of 50 billion USD export by 2021. Why it happened and what does it indicate?
Faruque Hassan: This is very alarming. We have done huge investment in workplace safety especially after the Rana Plaza, and Tazreen Fashion fire incidents. All the member of BGMEA, BKMEA invested huge amount of money to upgrade work place safety in terms of fire, electrical and structural issues and eventually those have been audited thoroughly. Now we can challenge and proudly say that the Bangladesh RMG industry is the safest garments industry in the world. We are investing huge amount of money in our factories to upgrade the whole production process and new machineries. New automatic, semi-automatic and resource efficient machinery have been added. But event after all these things, unfortunately the export growth which we observed in last financial year is 0.20 percent and in terms of woven item it was negative 2.35(-) percent. We are exporting garments over 25 years and this happened for the second time in our history.
However I think there are some reasons, one of the reasons we are losing the competiveness in export market is the currency. Bangladesh currency is in strong position than that of the rival countries, which is not good for RMG export. Over the last five years, depreciation of the currency against dollar was 32 percent in India, 102 percent in Turkey and 15 percent in Pakistan, whereas currency of Bangladesh has been appreciated by 3.58 percent.
Besides this the international global apparel export business are observing a negative growth. In 2015 the negative growth was 7.88 percent, in 2014 total market of export was 483 billion US$ and 2015 it reduced to 435 billion US$, which is also alarming. However, in 2015, despite the negative growth we had a growth of over 8.21.percent. In 2016, we had also a growth of over 7.76 percent but in last FY, we had no growth at all. In the first six month of 2017, we had a negative growth of 3.57percent, which is more alarming. As I say that the international market has been decreased, the buying pattern of western world and consumer behavior is changing. The new generation is buying more electrical devices and they are going holidays instead of buying more apparel.
Textile Today: In the same period, we have seen our competitor in RMG India has achieved phenomenal growth.
Faruque Hassan: India is very strong in textile, they have their own cotton, own chemical, yarn and fabric. They are the largest cotton producer, largest woven fabric producer; they are the second largest manmade fiber producer in the world. Now they are concentrating more in apparel. February to June 2017, India has observed double digit of growth in apparel sector, which is very challenging for us. China is leaving their market share as they are giving more concentration on higher value items. This is the opportunity for Bangladesh to grab the chair, but unfortunately, we could not do it for last few months.
To overcome the situation we have to utilize our demographic dividend and we need support from all the stakeholders and specially policy and financial support from our government.
Textile Today: How Bangladesh can bounce back in the path of achieving 50 billion USD by 2021?
Faruque Hassan: BGMEA have given a vision to export 50 billion by 2021, when Bangladesh is going to celebrate 50 years of Independence. This is a vision, in that vision we are working. It was challenging but now it is getting very difficult, almost impossible. Because globally there is a lack of growth in last few years in export market and, the unit price has reduced. However, we are trying to bounce back. We are trying to make value added item and we are expanding new market. From 2009 to 2016, there is a good growth in the new market. Our market share in North America and EU was almost 94 percent in 2009 and in the other countries, it was only 6.88 percent. But in 2016, the growth rate in new market was 15 percent, which is remarkable performance done by BGMEA & our entrepreneur who got some incentives for new market. Last two years we could not expand our new market more, but we are again starting to expand our new market.
We are also trying to diversify our products. Bangladesh RMG has success stories, but these are mostly on cotton-based items and we are exporting 80% product in five main items like trouser, shirt, sweater etc. We are giving more attention on producing other items like lingerie, swimwear, sports item, functional fabric, functional textile etc. We are expanding to produce items from manmade fiber as it is getting more and more popularity in the world. We are trying to make value added item for branding Bangladesh. If you just provide same item, same product, buyers will never give better price.
Textile Today: BGMEA demanded the withdrawal of RMG tax at source, but the government has increased it from 0.7 percent to 1 percent. However, the government has reduced corporate tax for garment industry to 15 percent. If you consider garment industry’s average profit margin, is the policy balanced? What will be its impact on RMG and textile industry?
Faruque Hassan: RMG industry is a sector that creates huge number of employment where 70 percent workers are women and every year 2 million people are coming in the workforce. Other sectors look for experienced people as their employee, where we give opportunity to new unskilled people in the workforce and we train them. I think government should focus on how to invest more, how to create more employment, how to create more business friendly environment. If government does so then government automatically will get their revenue and taxes. RMG sector is not only the largest export earner, at the same time through to it, many other businesses is occurred and government is getting revenue. So I think government should give more incentive and government should make plan to develop the sector. If we see one of our competitor countries Vietnam, they have a policy that first five years there is no tax, next nine years there is 10 % tax. However, in Bangladesh every year there is a budget where tax is reduced or increased. But government should make a policy like Vietnam. So, new entrepreneurs will be inspired to invest in T&C indsutry.
Textile Today: IndustriALL Global Union and UNI Global Union announced a three-year new Accord on 29 June 2017, though Bangladesh government and garments manufacturers do not want the extension of Accord tenure. How do you evaluate this unilateral announcement? Will it be executed?
Faruque Hassan: I do not think so. The first five-year agreement of Accord will expire in May 2018. The legally binding agreement has been signed by more than 220 global garment brands and retailers and Accord is doing audit and inspection based on these 220 brands and retailers. Most of the factory has completed more than 85 percent remediation work and some has been completed 100 percent. We believe that within their tenure they can complete their remediation work. Accord and Alliance inspect only their member factory and they do not inspect other factories. Even if they come for more years, they will not inspect other factories. Our challenge is to inspect other factories, which are not member of Accord or Alliance. We proposed Remediation Coordination Cell (RCC) under the Ministry of Labor where worker and owners representative like BKMEA, BGMEA, fire services, RAJUK and Govt. will monitor, follow up and inspect all of the factories remediation work with the Cell.
Brands representatives, Alliance representatives can join there. We believe that in this process the industry will be more sustainable. Accord cannot impose their unethical decision on a sovereign country like Bangladesh, which they have announced without discussing with owners association like BGMEA, BKMEA and government.
Definitely we will go for a 100% risk free factory, will have no tolerance in terms of worker safety. Therefore, we will not compromise about the worker safety. More work to do and we are doing. Either they have to make their company compliant or they will be suspended from BKMEA and BGMEA and cannot do business.
Textile Today: Recently a boiler explosion at a garment factory (Multifabs Ltd.) in Gazipur killed 13 people, which was inspected by Accord. However, according to a report of Reuters the Accord itself did not inspect boiler, it was monitored by the Bangladesh government. So, is the incident proving that local body for inspection is not enough for ensuring safety in RMG factory? How do you see all the matters?
Faruque Hassan: It was just an accident, which was happened at Multifabs Ltd, a dyeing factory (they have also garment unit), during the maintenance work. We believe that the Govt. should strengthen their inspection. Therefore, Accord cannot solve this problem, as Accord does not inspect boiler. We have to be more careful, and we have to create more skilled and trained people as they can properly do maintenance work.
Textile Today: Could you please share with us the establishment and development of Giant Group. How do you maintain the sustainability issues here?
Faruque Hassan: Giant Group started its journey in textile and garment in 1995 as a knit factory. Now have a swing factory, a knit composite, where we have state-of-the- earth machinery imported from Europe. We have our own dyeing facilities; we are energy efficient factory in terms of building design, machinery efficiency. We go for water saving technologies and we use low liquor ratio fabric dyeing machinery. We are further upgrading our machineries recently. We are making our factory more sustainable by improving our fabric quality, process of product manufacturing. We are trying to give all types of worker facility as they can do better work. You know we are producing all types of knit fabric and garments and regularly exporting in USA and EU. We have a good relationship with our buyers as we maintain all requirements of buyers.