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Ease of doing business is a big challenge for BD’s economic growth

Bangladesh and Denmark enjoy excellent bilateral relations, characterized by friendly feelings and empathy, as is well reflected in the economic co-operation between the two countries in various sectors of our development.

Over the last couple of years’ export from Bangladesh to Denmark has grown spectacularly, giving a rise to positive trade balance in favor of Bangladesh.

Bangladesh’s export to Denmark amounted to US$ 664.02 million during 2015-2016 and the import payment was made US$ 71.30 million leaving a trade balance of US$ (+) 592.72 million.

 Winnie Estrup Petersen, Denmark Ambassador, Bangladesh
Figure 1: Winnie Estrup Petersen, Denmark Ambassador to Bangladesh.

In FY 2014-15, Bangladesh exported RMG goods worth US$631.70 million (Source: http://www.bangladeshembassy.dk).

H. E. Winnie Estrup Petersen, Danish Ambassador to Bangladesh discussed some vital issues with Textile Today including global economic slowdown, bilateral trade between Bangladesh and Denmark, economic strategy that can be taken by Bangladesh, etc.

Textile Today: It is said that the textile and apparel industry is the main catalyst of Bangladesh’s economy. How do you see the higher dependency of Bangladesh on this sector?

Winnie Estrup Petersen: Bangladesh has grown incredibly over the last decade or so. And really made great strides towards modernizing its economy, reduction of poverty, etc. where the textile and apparel industry has been leading the country, be it export earning, job creation, or achieving the Lower Middle Income status.

The responsibilities are two-fold; both apparel manufacturers and the government will need to find ways to increase competitiveness, making factories more productive, and find out ways to cut production cost. The industry’s responsibility is to ensure the wages are increased, and demand for sustainable products are increasing, both of which costs money.

Textile Today: Bangladesh’s economy is highly dependent on textile and apparel, how do you evaluate it?

Winnie Estrup Petersen: I think Bangladesh is already going for diversification of the economy, which is paramount for the further development of the economy.

As we know there are some worrying trends in the garments industry – the number of jobs going down, factories getting shut – there can be a number of reasons for that, the international economy is slowing down as well.

It is a matter of great worry for Bangladesh, as its economy is mostly dependent on RMG export. Also, the State has a great responsibility in ensuring that the apparel sector maintains its global competitiveness.

As we must know, the textile and apparel sector is a very volatile sector. It moves wherever the manufacturing cost is low, along with suitable conditions and quality.

The responsibilities are two-fold; both apparel manufacturers and the government will need to find ways to increase competitiveness, making factories more productive, and find out ways to cut production cost. The industry’s responsibility is to ensure the wages are increased, and demand for sustainable products are increasing, both of which costs money.

It is the responsibility of the government to ensure competitive framework conditions. Meaning, ensuring that the infrastructure necessary for cost-effective and efficient transport of goods is in place, export and import port facilities are top class with less cost, timely deliveries, and availability of affordable energy, etc. Ensuring all these elements and improving Bangladesh’s position in the Ease of Doing Business Index will definitely be a big challenge in the time to come.

Textile Today: The Danish government pledged 335 million DKK in support of various development projects in Bangladesh. Is there any project related to textile or apparel industry?

Winnie Estrup Petersen: Yes, we have institutional co-operation between the Danish Occupational Safety & Security and DIFE (Ministry of Labor) to improve occupational health and safety for the last couple of years.

We also have a project with IFC, called PACT, which helps manufacturers and factories to introduce better and more sustainable productions by introducing new technologies, etc.

The third important engagement we have is called the Social Dialogue and Harmonious Industrial Relations project where we try to empower the government, the buyers, factories, and workers to come meet and discuss come issues and challenges in a win-win-win situation.

It is the responsibility of the government to ensure competitive framework conditions. Meaning, ensuring that the infrastructure necessary for cost-effective and efficient transport of goods is in place, export and import port facilities are top class with less cost, timely deliveries, and availability of affordable energy etc.. Ensuring all these elements and improving Bangladesh’s position in the Ease of Doing Business Index will definitely be a big challenge in the time to come.

Textile Today: Danish retailers pay the highest among the 28 European nations when it comes to garment items, according to a survey by the International Apparel Federation. What scopes do you see for the improvement of Bangladesh apparel manufacturing sector?

Winnie Estrup Petersen: Danish retailers pay more because they have a small consumer market compare to, for example, the UK market, whose market size is huge and place orders in bulk. Danish buyers – due to small market size – orders in small amount and understandably, it costs more.

I can certainly say, the Danish buyers are very happy with the way the textile and apparel industry of Bangladesh took great strides in the aftermath of the Rana Plaza incident. Now, it is a matter of branding all the positive and incredible developments since.

I believe, BGMEA is doing exceptionally well in terms of formulating a new vision for the apparel sector of Bangladesh. Still, there are a lot of things to do to mitigate the challenges – such as increasing productivity, improving the skills of workers.

The textile and apparel industry must look 10 years ahead – where will the apparel sector be in the global apparel market? And what will it take to be competitive in future markets?

Moving up in the value chain, gaining proficiency in making more value-added products, finding new markets, and the whole question of Bangladesh possibly losing favorable access in the EU market after the graduation from the LDC category.

And I am happy to see, there are top transformation leaders in the Bangladesh textile and apparel industry having a vision with taking the industry in the future and lead.

Of course, we will provide our full support.

Textile Today: Bangladesh is one of the top sourcing countries for apparel products for Denmark. What is the reason to choose Bangladesh as a top sourcing destination for apparel products from your point of view?

Winnie Estrup Petersen: I think it is not a matter of Danish brands choosing Bangladesh as such. The brands will go wherever the price is more favorable.

And as long as Bangladesh can maintain its competitiveness, it will remain a top sourcing destination for Denmark.

But as I said earlier, the apparel market is a volatile market, it is a constant challenge for Bangladesh to remain in the top sourcing position.

“One of the colossal hurdles for Bangladesh, it ranks very poor in the World Bank’s Ease of Doing  Business Index. As the index has a lot of elements of a good business climate and come up in the index like other countries in the region.”

Textile Today: European fashion brands who buy readymade garments from Bangladesh agreed on 3 September to hand over responsibility for ensuring worker safety to a new body called the RMG Sustainability Council (RSC). How do you see this initiative?

Winnie Estrup Petersen: I think it is a very interesting initiative; it could be a good transition in terms of anchoring the industry efforts in the Bangladeshi context.

This is a new tripartite model– with the brands, factory owners, and the trade unions – linked with the government (DIFE).

Of course, it remains to be seen what kind of governance structure will be set up for this council. I’m quite optimistic that it will have a positive impact and also all the involving parties should realize the importance of safety and security of the workers and the concern of productivity for producers.

We look forward to seeing the concrete proposal of this, which I understand will be ready by November.

Textile Today: Bangladesh apparel industry is the second-largest in the world. Government is working for making 100 economic zones, some are already ready to invest, where many foreign nations like China, Australia and Japan are investing in textile and apparel sector. What are the opportunities you see for Denmark to invest in Bangladesh?

Winnie Estrup Petersen: Denmark is relatively a small player in the global apparel market, comprising only 5-6 million people. Danish apparel companies are also not huge in size.

Besides as a nation, Denmark mainly has knowledge-based industry besides agriculture. Thus, I do not foresee major Danish investment in export production zones.

Textile Today with Denmark Ambassador
Figure 2: Akhi Akter, Managing Editor, Textile Today in a cozy discussion with Winnie Estrup Petersen, Ambassador, Denmark.

Textile Today: What are the challenges do you see in the bilateral trade with Bangladesh and how the challenges could be overcome?

Winnie Estrup Petersen: Danish companies are really interested in the Bangladesh market, as it is the fastest-growing market in South Asia. The economy is really promising, but, the companies have to face a lot of barriers.

Danish companies are comfortable in doing business in a rule-based and business-friendly environment. In contrast, it is difficult to understand the rules in Bangladesh and abide by.

Also, it is a highly protective market. I believe Bangladesh will have to re-evaluate and open up its market, as it will leave the LDC status soon.

The protective measures have to be lessened up slowly and carefully. While ensuring more competitiveness of the local companies in the international market.

One of the colossal hurdles for Bangladesh is that it ranks very poorly in the World Bank’s Ease of Doing Business Index. The index comprises a lot of elements of a good business climate like other countries in the region – India, Pakistan, and Vietnam have done – and ensuring a better investment atmosphere for local and foreign companies.

Textile Today: Lack of skilled workers is dragging Bangladesh down in every aspect, as you have rightly pointed earlier, do the Danish government running any project regarding that?

Winnie Estrup Petersen: Yes, we are coordinating with BRAC in a skill development program, notably with vocational training. Bangladesh has a lot of university graduate students and unskilled workers. However, Bangladesh is missing the skilled mid-level worker – who can do electrical works, operate machines, etc. – that level is missing

I think developing these credentials are immensely vital for Bangladesh’s future workforce.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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