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Ethical manufacturers cry out for ethical pricing

Bangladesh is the second-largest RMG exporter in the world after China. According to BGMEA, Bangladesh has the highest number of green apparel factories in the world. U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) is the most widely used green building rating system in the world. Also, from QIMA (Quality Control Services) Auditing Report, Taiwan is first, Bangladesh is second and China is sixth in ethical production practices.

Figure 1: (Clockwise) Tareq Amin, Founder & CEO, Textile Today; Rafee Mahmood, Vice President, BAYLA & Director of Mahmud Group; Asif Ashraf, Director, BGMEA & Managing Director of Urmi Group.

Textile today arranged a webinar titled ‘Sales Negotiation Proposition’ in the episode of TexTIMe presented by COATS on 08 August 2021.

The Panelists:

  • Asif Ashraf, Director of BGMEA & Managing Director of Urmi Group
  • Rafee Mahmood, Vice President of BAYLA & Director of Mahmud Group
  • Tareq Amin, Founder & CEO, Textile Today moderated the webinar.

“In Bangladesh RMG sector, we comply ethical practices from the producer or manufacturer side but buyers are shown less ethical in terms of pricing,” said Asif Ashraf, Director, BGMEA & Managing Director of Urmi Group in the webinar.

After the Rana Plaza incident, the Bangladesh RMG sector built many green and LEED-certified factories. The manufacturers have made a huge investment. “But we are not getting market advantages for these certifications,” said Asif Ashraf. Certifications have only become a prerequisite for getting orders from buyers.

Figure 2: Asif Ashraf, Director, BGMEA & Managing Director of Urmi Group

Some buyers are unwilling to pay the cost of sustainability. Sustainable costs such as ETP, low carbon footprint, recycling, etc. that manufacturers have to bear which is also a part of the product cost. Rafee Mahmood said, “Most famous brands are willing to pay the cost of sustainability but there are some buyers who are not willing to.”

Quick Looks
Are we weak in negotiation or are we doing well?

Asif Ashraf: We are weak in negotiation; especially in RMG sector.

How can we overcome the fear of negotiation?

Asif Ashraf: We need to do our homework before sitting on the negotiation table.

Did you get any market advantage by LEED certification?

Asif Ashraf: Unfortunately not

Buyers may have dominated the RMG industry, but manufacturers have not been able to put much on the negotiation table. This country is still considered a country of cheap labor. Country’s RMG sector has created more capacity but fewer market options. Bangladesh has low numbers of segments of value-added products and the lead time longer than competitors. Last year, BGMEA has identified 51 readymade garment products for export diversification within the sector.

“Cheap labor will no longer help the industry so the industry has to consider the whole supply chain to develop the scopes of negotiation,” said Rafee Mahmood.

Also, Covid-19 dragged Bangladesh’s RMG sectors behind. During the first wave of the epidemic, many buyers canceled their orders and on top of that continuous lockdowns kept the factories closed for a long time. The Government of Bangladesh has given a huge incentive to sustain the RMG industry. But this incentive is not a grant, it is a soft loan with 2% interest.

Raw material prices have risen now. Cotton yarn prices went up 50-70%. There is a shortage of containers at the port. During the webinar, Industry experts requested BGMEA to work on the pricing of raw materials and other issues. But BGMEA is a trade organization, it cannot make any decision on individual pricing.

On the other hand, BGMEA is working to protect and promote industry interests. Thus it is ensuring continuous growth of the country’s foreign exchange earnings. The trade body recently protested derogatory remarks about Bangladesh’s apparel sector in Netflix movies. Also, this organization is promoting the RMG industry in the world market.

Figure 3: Rafee Mahmood, Vice President, BAYLA & Director of Mahmud Group.

Asif Ashraf said, “Soon, BGMEA’s advertisement will be broadcast on CNN”.

In addition to promoting the RMG sector in Bangladesh, we need to work on Unique Selling Proposition (USP). “Merchandisers need more USPs to negotiate the prices which require major work on research and development,” said Rafee Mahmood.

Bangladesh replicates Chinese products under the name R&D. There are a few large industries that are investing in their research and development. Bangladesh Apparel Youth Leaders Association (BAYLA) is a new organization inspired by the youth’s inspiration and determination to commit to innovation research for the apparel industry, bring together youth leaders, and discover new possibilities for training, capacity building, and market expansion.

Training is needed to improve negotiation skills. Organizations like BAYLA, Textile Today are helping professionals to develop negotiation skills. However, merchandisers do not always have the power to make decisions. It takes patience and time for a merchandiser to get to a new buyer. Rafee Mahmood said that once he spent two years building a business relationship with a new foreign buyer.

Asif Ashraf said “A decentralized management system is needed to give negotiators the opportunity to make decisions.”

Bangladesh’s RMG industry is trying to be established in new markets. Moreover, Bangladesh’s RMG has shown tremendous growth in new markets. Asif Ashraf said, “Exports from the new market have grown from USD 6-7 lakh to USD 4 billion in a few years”. Latest progress has been made in the Russian market. But Russia does not give any FDI facility to Bangladesh and Russia’s duty structure is very difficult.

Watch the full video here:

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

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