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Chinese Textile companies shifting production to Bangladesh

Firms from Singapore, Japan, Taiwan and South Korea, which have traditionally relied on low-cost production in China are seeing Chinese textile firms shifting out of China and making their way to Bangladesh as a result Bangladeshi textile value chain is rising faster than any other Asian countries according to Asian Development Bank.

chineseWith rising production costs in other economies in general, setting up operations such as in Bangladesh and Vietnam has been on the rise, the report states. Apart from rising domestic value added shares, the foreign value added to Bangladesh and Vietnam exports is also increasing in a much faster pace than that experienced by the rest of their peers (excluding China). Bangladesh has attracted FDI in garments and generated new trade, but has had limited success in upgrading and diversifying Special Economic Zone (SEZ) exports. According to the ADB’s Asian Economic Integration Report 2015, the progress in sector-level value chains’ intraregional production activities within sectors appears to be changing, with shares within industrial exports showing interesting shifts between 2000 and 2011. The report examines trends in trade, finance, migration, foreign direct investment and other economic activities in the region.

Bangladesh RMG sector puts its house in order
In 2015, readymade garment manufacturers in Bangladesh had to work to restore retailers’ confidence in workplace safety. People across the globe raised questions about readymade garment workers’ rights and safety plus electrical and structural integrity. The sector was able to restore buyers’ confidence through improvement of safety standards over the last few years to ensure a safer workplace.

In 2016, Bangladesh will focus on skills development, efficiency improvement, productivity and use of modern technology to save the environment. Another challenge is to relocate shared building factories to make them fully compliant.

In 2016, the RMG sector expects buyers to come to Bangladesh and place more orders. But manufacturers want better prices since factories have invested a lot on improving safety standards. If buyers do not increase prices, manufacturers say they do not want to hurt their competitive edge and will just say ‘no’.

Meanwhile the industry is preparing to concentrate on product and market diversification along with product upgradation as Vietnam, a major competitor of Bangladesh, is being connected with the Trans-Pacific Partnership.

The RMG sector in Bangladesh contributes over 81 per cent to total export earnings and over 10 per cent to GDP. The sector has 40 lakh workers, of which 80 per cent are women, mostly from rural areas.

Alliance and Accord’s agreement won’t be extended: Tofail
The minister came up with the remarks while addressing the inaugural ceremony of a three-day “Building and Fire Safety EXPO – 2015″ at Bangabandhu International Conference Center in the capital recently. Commerce Minister Tofail Ahmed said Accord and Alliance would not be given any additional time for inspection of garment factories in Bangladesh after the agreement expires in July, 2018. .”Accord and Alliance are trying to extend their stay. But they will not be given a single day, even a second after July 2018,” Tofail said.
These are the two platforms of North American and European buyers for ensuring safety in Bangladesh RMG industry. There is a five-year legally binding agreement between them and trade unions to ensure a safe working environment in the industry. The retailers’ initiatives were launched in 2013 after the Rana Plaza tragedy. Tofail said after Tazreen Fire incident and Rana Plaza building collapse, lots of initiatives have been taken to ensure safety of workers. He said to ensure safety in work places, the government has cut import duty to 0% from 52% on fire safety equipment and prefabricated building materials.

Readymade garment exporters have demanded lowering of the shipment cost
Readymade garment exporters have demanded lowering of the shipment costs to export their shipment through the Pangaon Inland Container Terminal (ICT).

The country’s industry bodies such as members of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), have held meetings with the Pangaon ICT authorities to express their concerns such as high cost of container vessels, irregular schedule and lack of container vessels, absence of freight forwarders, lack of stevedoring and other logistic supports in and around the terminal.

According to the industry insiders, most of the exporters and foreign buyers import and export garment products and related raw materials to and from Bangladesh through their appointed freight forwarders, but since most of them are stationed at Chittagong and not enlisted with Pangaon ICT, which creates a lot of hassles in handling the consignments at the newly constructed ICT.

Sources say that after all the consignments have been cleared by customs authorities at Chittagong port after checking all necessary documents, including LCs (Letter of Credits) and BL (Bill of Lading) that bear the name of Chittagong as the port of call, the containers need further permission for Pangaon ICT, which also involves some extra expenses. The loading and unloading of consignments from Chittagong port for Pangaon ICT also require extra charges and labour costs.

Non-tariff measures impacting Bangladesh knitwear exports
According to Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), different non-tariff measures such as anti-dumping, countervailing, safeguard measures being imposed by the developed nations are making an adverse impact on the knitwear manufacturers and exporters of Bangladesh.
Speaking at a seminar organised in association with Bangladesh Tariff Commission on problems and measures regarding non-tariff measures for ready-made garments industry held at BKMEA’s main office in Narayanganj this week, the speakers said the manufacturers and exporters in developing countries lack the key information, facilities and capabilities. Meanwhile, the complex requirements of a variety of non-tariff measures have made it expensive and difficult of the manufacturers and exporters.

BKMEA Director Md Habibur Rahman said the buyers impose conditions on the manufacturers of buying raw materials from certain firms, which also have negative impacts on the capacity of the manufacturers. Former vice-president of BKMEA, Md Hatem said Bangladesh’s garment factories are also subjected to strong compliance and production cost is increasing due to the compliances despite no increase in the export earnings.

Bangladesh textile value chain is rising faster than any other Asian country
As per a Asia Development Bank study, Bangladesh textile value chain is rising faster than any other Asian country. Reason: shift of low cost manufacturing from China to Bangladesh. In fact, companies Singapore, Japan, Taiwan and South Korea, which have traditionally relied on low cost production in China, have had to adjust. Intraregional trade within the labor-intensive Asian textile industry is still increasingly dominated by China but Bangladesh and Vietnam are emerging as important players, says the ADB report on Asian Economic Integration, 2015.

In the meantime, domestic value added shares of Japan, Korea and China have declined six to eight percentage points during 2000 to 2011. Apart from rising domestic value added shares, the foreign value added to Bangladesh and Vietnam exports is also increasing at a much faster pace than that experienced by the rest of their peers (excluding China).

With rising production costs in other economies, operations are being set up in countries like Bangladesh and Vietnam. Governance gaps and lack of focus have undermined performance in some special economic zones in Asia, while successful zones have managed to build close ties with the domestic economy. Bangladesh has attracted FDI in garments and generated new trade, but has had limited success in upgrading and diversifying special economic zone exports.

Bangladesh Govt to take legal action against errant RMG units
The government of Bangladesh has decided to take action against RMG units that have not adhered by the corrective action plan provided by a government-set review committee for ensuring structural, fire and electrical safety at the apparel units. The government is contemplating a legal action against such factories.

If the units fail to implement the recommendations of the government-set committee, they will no longer be allowed to run their businesses. Recently, Alliance for Bangladesh Worker Safety, a consortium of North American buyers, recently submitted a list of its 11 supplier factories to the Department of Inspection for Factories and Establishments (DIFE) stating that the progresses the factories made in implementing the recommendations by the review committee were not at all satisfactory.

Alliance also added that out of the 11 factories had got time from 412 days to 642 days to implement the review committee’s recommendations like conducting detailed engineering assessment, removal of water tanks and columns from the rooftop and keeping a specified area of the building empty until remediation is completed. The four other factories got time from 96 days to 17 days for demolishing unauthorised cantilevers, propping under the cantilever parts and removal of additional load from the structures. Four of the 11 factories have been directed to stop running the factories until the review committee’s recommendations are implemented but none of them have suspended production in their factories.

150 new Bangladeshi entrepreneurs trained by ILO
New entrepreneurs are set to chase their dreams after receiving entrepreneurship training by the International Labour Organisation (ILO) in collaboration with the Bangladesh Employers Federation (BEF) recently.
The group received certificates at a ceremony held at the BEF to mark their successful completion of the first module, “Generate your Business (GYB) Idea” of ILO’s ‘Start and Improve Your Business’ (SIYB) course. The course is supported by ILO’s Bangladesh Skills for Employment and Productivity (B-SEP) project funded by Canada. In addition to the 150 new entrepreneurs, 16 local trainers who have also been trained by the Sri Lanka SIYB Association also received certificates.

Cezar Dragutan, Chief Technical Adviser of ILO’s Bangladesh Skills for Employment and Productivity (B-SEP) project said: “Start and Improve Your Business is ILO’s flagship management training program targeting micro and small enterprises. By introducing it to entrepreneurs in Bangladesh we will help them gain the confidence and skills to launch or better manage their own businesses, generate jobs and contribute to the national economy.”
Developed in the 1980’s by ILO, SIYB has been introduced in more than 100 countries through a network of 2,500 partner institutions with 237 master trainers and 17,540 trainers, 40 per cent of whom are women. Its current outreach stands at 4.5 million trainees (50 per cent women entrepreneurs) and has generated an estimated 2.7 million new jobs, making it one of the biggest programmes of its kind.

Textile millers demand fair gas prices
BTMA leaders has demanded gas supply on competitive and fair price. President of the association Tapan chowdhury said, the economy will be in big trouble if the textile sector falls into any crisis for the wrong decision of the government. “As a backward linkage industry for readymade garment export, our mills play a very significant role in the economy,” Chowdhury said at a seminar on ‘energy efficiency and textile: lifeline of the economy’.
But the sector has been put in a disadvantageous position in recent times due to the increases in minimum wage and gas tariffs for captive generators, which the textile millers and spinners use, Chowdhury said at the event organized by BTMA at the capital’s Lakeshore Hotel. Textile millers have invested hugely in gas-based captive power plants as the government was not able to supply adequate power to the industrial plants, he said. Currently, the captive power plants can produce 1,200-1,300 megawatts of electricity.
Tawfiq-e-Elahi Chowdhury, prime minister’s energy and mineral resources adviser, assured the businesses that the government would be able to supply 300-400mmcf gas within the next two years as the state-owned Bapex has been drilling 10 new wells.

Japan provides financial aid to Bangladesh’s RMG industry
Japan International Cooperation Agency (JICA) – the primary Japanese governmental agency responsible for technical cooperation component of Japan’s bilateral ODA (Japan’s Official Development Assistance) programmed has signed Japanese ODA loan agreements with Bangladesh to provide up to 133 billion Yen for six major projects, with the readymade garment sector of the country coming under the first project.

The readymade garment sector is a main driver of the growth and comprises 80 per cent of the country’s exports. However, against a backdrop of fierce global competition and a lack of competitiveness in the industrial sectors, it will be more and more difficult for Bangladesh to achieve economic growth in a sustainable manner despite a stable 6 per cent growth for more than 10 years, Japan International Cooperation Agency (JICA) said.
The six projects to be funded by the Japanese agency include urban building safety and improving public services, encouraging industrial diversification and promoting economic growth by improving investment climate in Bangladesh, safer and efficient transportation, improving health service to a higher level and stable power supply, a press release issued by the Japan International Cooperation Agency noted.

Rana Plaza defendants to face murder charges
A Bangladesh court has accepted the murder charge and has agreed to put several defendants in the case on trial over the collapse of the Rana Plaza which killed 1,135 workers, many of them making garments for Western retailers.

Senior Judicial Magistrate Md Al-Amin took the decision as he accepted the charges, which were filed in June by the criminal investigation department of the police. Forty-one defendants in total face charges over the April 2013 disaster at the complex, which housed five garment factories supplying to global brands. Plaza owner Sohel Rana is the principal accused. The court has issued an arrest warrant against those absconding and others, who are out on bail.

The incident, one of the worst industrial calamities put a question mark on safety conditions in Bangladesh. Duty free access to the west and low wages made Bangladesh one of the leading garment exporters with $25 billion a year industry. Estimates indicate that 60 per cent of the product are supplied to Europe, with 23 per cent heading to the United States and 5 per cent to Canada.

BGMEA signs deal with Daily Star to boost exports
BGMEA President Siddiqur Rahman has said that, the target to hit $50 billion exports by 2021 is achievable if political stability, infrastructure and policy support are in place.
“We would be able to export more than $27 billion worth of garments at the end of this year. We need to increase shipment by another $23 billion in the next five years to reach the target of $50 billion,” he said.
“The target is achievable as Bangladesh is getting more export orders, which are being shifted to the country from China, the largest apparel exporter globally,” Rahman said at an event for signing a memorandum of understanding with The Daily Star at the BGMEA office in Dhaka. Under the deal, a roundtable will be organised at The Daily Star Centre on January 23 to discuss the prospects and challenges of the garment sector to help it reach the $50-billion export target.

Mahfuz Anam, editor and publisher of The Daily Star, and Rahman of BGMEA signed the MoU. “Our export market is expanding every year,” Rahman said. China exports garments of more than $180 billion a year, but it is now losing its market share as its entrepreneurs are getting involved in other sectors due to high production cost and a shortage of skilled workers in the apparel industry, he said.
Mahfuz Anam said the target can be achieved with adequate supply of energy, improved infrastructure, low lending rates, and policy support. He urged media outlets to extensively cover garment-related issues so that the barriers to business are removed.

RMG exports exceed target
The export earning in first six months of this fiscal year exceeded target by 1.38% as the latest data showed $16.08bn earning against $15.86bn target set for the period. The readymade garment industry had played a major role in the overall export rise. Export Promotion Bureau (EPB) data showed that Bangladesh earned $16.08bn in the July-December period, increasing 7.84% from $14.91bn a year ago. The readymade garment sector, the main driver of Bangladesh’s export, alone earned $13.14bn of the total figure, with 9.24% growth from $12.02bn of the same period last year.

According to EPB data, the woven sector earned $6.7bn with 12.42% growth and the knitwear sector received $6.43bn with 6.11% rise. The month-to-month data showed that in December the exports posted 12.66% rise to $3.20bn. The figure was $2.84bn in December last fiscal year. The earning during this December is 7.30% higher than the target set for the month. The target was $2.98bn. Data showed that among the major and potential sectors, pharmaceutical earned $43m during the last six months posting 17.22% growth. The leather goods export rose by 60.68% to $176.86m. Rubber export grew 44.65%, followed by jute yarn 32.77%, specialized textile 11%, home textile 16.68%, engineering products 25.73% and furniture 13.19%.

Growth was negative in the sectors including jute and jute goods, bicycle, jute sacks and bags, frozen foods, tea, vegetable, plastic products and leather.

BTT National Desk

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