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“German importers to pay higher prices, if you offer a better product”

Germany is the largest trading partner of Bangladesh in Europe and the second largest globally. More than 92% of imports in Germany from Bangladesh are textile products whereas Bangladesh imports mainly consisting of machines, electro-technical items and chemicals, and related products.

H.E. Peter Fahrenholtz, German Ambassador Bangladesh
Figure: H.E. Peter Fahrenholtz, German Ambassador to Bangladesh.

Last Monday (on 21 January) H.E. Peter Fahrenholtz, Ambassador of the Federal Republic of Germany to Bangladesh shared several issues with Akhi Akter, Managing Editor, Textile Today, that include relationship between Bangladesh economic progress, RMG worker’s unrest, contribution of Accord in establishment of safety standard in apparel sector and many more burning issues.

Here is the glimpse of the conversation for our readers.

Textile Today: How do you see the economic growth of Bangladesh and how do you evaluate the contribution of the textile and apparel industry in Bangladesh’s economy?

H.E. Peter Fahrenholtz: I think we’ve seen tremendous economic growth and progress for the last ten years. The GDP per capita almost tripled. Also, we’ve seen great progress and development in the millennium development goals, which basically benefited the population of the country. This is tremendous progress and Bangladesh is now graduating to middle-income status. The garment sector has played a very important role to enable this economic growth. The export from the garment sector is the main foreign currency earner. And a country can’t develop economically without essential foreign exchange.

The garment sector has been creating jobs, income, and tax revenue. So, the garment sector is one of the important sectors for the economic development of Bangladesh.

Textile Today: Majority of German’s imports from Bangladesh are textile products but overall export to Germany is not satisfactory for Bangladesh, how Bangladesh can boost its export in Germany more?

H.E. Peter Fahrenholtz: That’s exactly the problem. Bangladesh is too dependent on the garment sector for its exports, and it’s a foreign exchange revenue earner as well. If there is a problem in the garments sector, then it’ll hurt the economy of Bangladesh. So the garments sector is the strength of Bangladesh economy as well as weakness.

For example, we could have a recession in the western world. A recession is coming, we are seeing the signs already. Interest rates are going up, growth rates of some countries going down. So, we can expect a global economic recession. But we don’t know when exactly it will happen, this year or next year, or two years later. But it’ll come for sure. This already certainly mean the demand for garment import from other countries will go down. So, out of these two reasons we can conclude Bangladesh must take precautions.

One, of course, would be to diversify its exports not only to depend on the export of garments but find other products for exports.

It’s not easy because the global market is extremely competitive. There are 150+ countries competing for every product in the global market. So, this is why you need to have a strategy with the business associations to identify the export sectors which could be successful to produce a high-quality product at good prices which could be exported to Germany and be sold in Germany.

The other is, the garments sector needs to prepare against upcoming problems. First of all, apparel manufacturers need to produce higher quality products for export to Germany. Secondly, there is a need to further improve the working conditions for textile workers and to improve wages for textile workers.

Textile Today: Bangladesh textile and apparel manufacturers are struggling on profitability, mainly due to lower prices from brands, do you think manufacturing could be sustainable with current prices brands offering to Bangladesh?

H.E. Peter Fahrenholtz: I don’t really agree with that. First of all, the global market prices can’t be changed. And nobody can influence the prices. You can’t say to Germany to increase the prices of garments import from Bangladesh. We also believe that the garment industry in Bangladesh is doing well. The margins are high enough to be able to compete.

So, I don’t agree with the statement. It is useless to argue that the importer should pay more. This may not happen, it’s a global market. So, if you want the German importer to pay higher prices, you have to offer a better product. This could be higher quality, it could be ecologically more sustainable, or it certifies good working conditions for the workers.

Furthermore, it could be explained to the purchasers/consumers in Germany that conditions of productions have changed. This way it maybe possible to justify higher prices.

Textile Today: Recently the Bangladesh government increased apparel workers’ salary, will this initiative help to shine the sector’s image in the global arena?

H.E. Peter Fahrenholtz: We saw that thousands of workers were striking on the streets. Because they were not happy with how this was handled. And it seems also, according to the information that we have that many factory owners did not really follow the scheme of increasing the minimum wage.

And I was very disappointed to see the reaction of the factory owners was to call the police and use violence and force on the demonstrating workers.

These images went around the world.n Germany, we were shocked to see what happened. In Germany, we believe in a consensual relationship among owners, management, and workers. Where all the concerns of all parties must be satisfied with dialogue and consensus, not by suppression and other means.

Textile Today: Following the continuous apparel workers’ protest, government has revised the new wage structure for garment workers and they have gone back to their factory…

H.E. Peter Fahrenholtz: Yes, but we’ve seen that hundreds of them have been terminated or their job contracts have been suspended, hundreds have been accused, they are persecuted by the police or authorities. So, I don’t think this is the right way to deal with the workers. If you are an employer, you have the social and human responsibility to take care of the workers. To create conditions where workers can work in a satisfactory way and earn decent wages.

I’m not saying workers should get rich. But they should get fair wages, fair working conditions.

There are many factories which improved their working conditions. I’ve visited garment factories in Bangladesh which offer good working conditions, fair wages and hence they have no worker dissatisfaction. But that’s not the majority of the factories.

So, I appeal to the whole textile and apparel sector to look for a way forward through dialogue which can find a consensus for workers, managers and factory owners. And this will lead to benefit for the whole garments sector of Bangladesh.

Textile Today: What is your viewpoint on safety conditions in the Bangladesh garment industry?  How do you evaluate Accord and Alliance in terms of safety transformation in Bangladesh Apparel Sector?  

H.E. Peter Fahrenholtz: I would be very disappointed if the tenure of Accord is not extended. We don’t believe that the job has been done. As I said, many factories are up to the international standard and Bangladesh can be proud of these factories. But there are so many more factories that are not up to the international standard. And they do not offer good and safe working conditions for their workers, which means the job is not done. Accord needs to work on.

Also, we have an agreement on the accident injury insurance for garment workers with the government in 2014. And this has not been implemented. The cost to insure a worker against injury is minimum. Maybe two to three dollars annually.

Textile Today: As I know Germany is involved with many development projects in Bangladesh. Could you please share us the projects that are related to the textile and apparel industry?

H.E. Peter Fahrenholtz: There are several initiatives. First of all, even before the Rana Plaza, we’ve supported the sector. We have promoted for the improvement on social and environmental standard.

And after the Rana Plaza, we agreed with the government to come up with several initiatives additionally-One is to establish injury insurance, another one is to provide the textile sector with loans and credits for safety enhancement measures together with  French cooperation.

We also supported a tripartite dialogue and invited the social partners of the textile and apparel sector to Germany to take a look, how this is being done in Germany solving social problems in the sector.

We also supported cooperation between universities that have a textile management branch, so they met up and exchange on how to enhance the curriculum for the students on issues of social responsibility.

And we also provide counseling and we do provide technical services for the textile and apparel industry for enhancement of the security and safety situation.

So, there is a whole range of measures that address the crucial elements that are important to come up with a modern and competitive sector. All the stakeholders are been brought together in this program.

Textile Today: Bangladesh apparel industry is the second largest in the world, what are the opportunities you see for Germany to invest in Bangladesh?

H.E. Peter Fahrenholtz: I think we have supplied many machines to the garment sector ­– knitting and other machinery – of course, production of the machinery is one of the strengths of the Germany economy. Germany machinery is of very high-quality, and of technology.

Of course, these are expensive, but German machinery is more productive, more efficient, and it’ll last longer. Also, it’ll be environmentally more sustainable.

I think probably the technology and the production has not reached a level yet where such high-level investment in the high-level technological industry exists to invest.

There are some who have exchanged with global technology producers/investors, but these are very few. And the majority of sector players, textile factory owners do not have yet that level.

But if it would be required, maybe in the future there might be opportunities to invest in technology for the sector.

Related to that, there are possibilities for investments in the energy sector

Textile Today: What are the challenges in bilateral trade with Bangladesh? How these could be overcome?

H.E. Peter Fahrenholtz: The challenge is that there are not enough products to import to Germany. There is garments, jute and a few other products, at the moment we don’t see enough competitive or interesting products which could be sold in the German market. This will change in the future hopefully. It is up to Bangladeshi entrepreneurs to be innovative to develop products which can be sold in the European market.

I see great potential in the exports to Bangladesh and investments in other sectors – beyond the garment sector.

However, the Bangladesh government will have to substantially improve the ease of doing business. At the moment Bangladesh is one of the lowest performers on ease of doing business, it is 176 out of 190 countries. All the countries and regions are competing to receive investment. So, an investor will look around, where should I invest? Then the question every country must answer, why should a German investor invest in Bangladesh.

What are the costs of doing business here and what are the profits? I still believe that there is a great potential for Bangladesh. It’s a growing economy, it’s creating prosperity, demand is going up, and also income is going up. But ease of doing business is quite bad.

This is a deterrent for foreign investors. So, this has to be changed urgently. And it is possible to change it.

Also Read: EVONIK opens full-fledged strategic office in Bangladesh

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

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