Transcript Export Promotion Bureau

Presentation on Post-MFA scenario
and its Impact on Garment Export
from Bangladesh
By
Monoranjan Biswas
Deputy chief (Textile)
Ministry of Commerce
Govt. of the People’s Republic of
Bangladesh
Presentation date : 2nd May, 2006
Venue : Imperial, Janpath,
New Dehli, India
1
Introduction:

Today Bangladesh has successfully established herself as a
prominent apparel/textile exporter in the global textile trade.

The country has accumulated export earning from few
millions to billions US dollars over a period of one and half
decade time.

Over 1.8 millions workforces are directly employed in
sector, 80% of whom are women.
this

Centering the readymade garment (RMG) sector many more
ancillary industries have also been set up as a supportive sector to
RMG.

The vibrant growth in this sector has been possible due to
quota restriction in the USA, Canada under Multi-fibre
Arrangement regime and Preferential GSP facilities in
the
EU market.

Under the MFA system, Bangladesh enjoyed an ensured
market restricted by quota limit to our competitors.
2
Contribution of RMG in the national economy:
 The export of RMG plays an immensely important role in the socioeconomic development of Bangladesh accounting for more than 75
percent of Bangladesh’s total export earnings.
 The sector accounts for about 10 percent to the GDP.

The foreign exchange reserve of the country largely depends on the
RMG sector.
 The employment of woman in this sector has created empowerment
amongst women of the lower segment of society.
 RMG sector is playing the pivotal role in the export and social economic
development of our country.
 The export earning has rose to U.S. dollar 6.4 Billion in 2004-2005 from
U.S. Dollar 1 Billion in 1985.
 With the span of 15-20 years, export earning from this sector has been
increased more than 5 times, which is a phenomenal growth.
3
Export earning from RMG for last five years are shown below :
(Value in million U.S Dollar)
Year
Total
Export
Export of
RMG
Contribution of
RMG (%)
2000-01
6467
4861
75.16
2001-02
5986
4584
76.57
2002-03
6548
4912
75.01
2003-04
7603
5686
74.78
2004-05
8655
6418
74.15
4
Export Earning (Region wise)

Total export in RMG sector during 2004-2005
amounted to U.S. Dollar 6.4 billion.

The major destination of our RMG products is EU,
USA, Canada, Japan, and Australia.
Countries
2003 2004
%
2004 2005
%
EU
3653.59
64.25
3921.93
61.11
USA
1628.18
28.64
2023.96
31.54
Canada
256.70
4.51
307.25
4.79
Others
147.62
2.60
164.53
2.56
G. Total 5686.09
100 6417.67 100
5
Assessment of the post-MFA scenario of RMG sector
The textile and clothing sector now stands at a crossroads.
Trade in RMG & Textile sector has undergone a fundamental
change as MFA quota system has been out on December 31,
2004 .
Only tariffs remain as a market entry mechanism.
It was apprehended that phase-out of quota would have a
serious adverse impact on RMG and Textile sector of
Bangladesh.
A study namely “Post-MFA development Strategy and
Technical Assistance for the RMG sector” was undertaken by
Government of Bangladesh in 2002-2003 fiscal to assess the
post-MFA scenario, its challenges and recommendations to
address the coming challenges.
This study was undertaken under Bangladesh Export
Diversification Project (BDEXDP) by a world renowned Swiss
organization namely Gherzi Textil Organization.
6
Assessment of the post-MFA scenario of RMG sector
This study indicates that quota phase out might have a serious
negative impact on RMG export of Bangladesh.
A considerable number of RMG factories would shut down failing to
compete in the quota-free regime resulting in losses of jobs.
30-40 percent garment industries of Bangladesh would be closed
down after 2004, some other showed.
There would be 100 to 300 thousand loss of jobs in the RMG sector.
Gherzi study proposed 14 recommendations, which are
Export Trade Promotion; Infrastructure; Central Bonded Warehouse(s);
Duties- dyes, chemicals, spares; Investment Incentives; interest RatesBMRE/Green issues; Bureaucracy and speed money; Human Resource
Development; Compliance, Clusters; Local Operating Environment/ FDI;
Social Accountability; Labour Safeguards; Marketing Support & Business
Strategies.
7
Precautionary Measures Taken by Govt. of Bangladesh:
Predictions of several studies including Gherzi study regarding closure
of considerable number of garments factories and job losses of about
100 to 300 thousand in the post-quota regime helped the Govt.(MOC)
to undertake extensive programme namely ‘Post MFA Action
Programme (PMAP)’ to address those adverse impact,
Components of PMAP were as follows:
•
Skill & Quality Development Programme (SQDP);
•
Displaced Workers Rehabilitation Programme (DWRP);
•
Small Enterprise Capacity Enhancement Programme (SECEP);
•
Support to Technological Capacity Development of SMEs
(STCD);
•
Support to Primary Textile Sector (SPTS);
•
Support to Handloom Sector (SHS);
•
Support to Forward Linkage Industries (SELI); and
•
Support to New Market Opportunities (SNMO).
8
Skill & Quality Development Programme (SQDP)
Training activities in six areas such as Compliance Norms,
Quality
Management,
Marketing
Management,
Merchandizing, Inventory Management & Customs and
Port Clearance were carried out.
Five Institutions were engaged to impart the above training
under these programme and 643 personnel had successfully
completed their training programme in these Training
Institutions.
Although the training programme was huge, it could not be
continued due to resource constraints.
Only US $ 41,000/= was left to spend from BDEXDP Fund for
the Training purpose. Persuasion is going for arrangement of
fund for training under above mentioned programme.
9
Displaced Workers Rehabilitation Programme (DWRP)
Apprehension that between one and three lac workers would be jobless as
many small and medium factories would be forced to close down
DWRP has been initiated under PMAP to help employment to those
retrenched workers, most of whom are women.
Most of these workers are not in a position to go back to the place they
come from particularly to rural areas.
The social and economic consequence of these may be disastrous.
No formal sector where this large workforce could be employed.
The government, the NGOs, the donors and the private sector needs to work
together to face the situation through the following programme:
Imparting training on different trades including poultry, small diary, small
scale leather goods, agro processing, hand dyeing, boutique, embroidery,
tailoring, handicraft, nursing, hotel catering, small business and
entrepreneurship, etc. This will help them finding alternative employments;
Provide micro credit to them for starting new business or enterprise at zero
interest rates for at least five years;
Provide subsistence allowance or jobless allowance for the first six months of the
training on alternative trade and unemployment; and
The training programme would be organized by both private Institutes as well as Govt.
Departments like Youth Directorate, Women’s Directorate, BRDB.
The NGO's who are involved in doing such type of activities would also be involved.
10
GEREC (Garment Employees Retraining and reemployment Cell) was formed in Textile Cell of Export
Promotion Bureau, Dhaka in 2005 for the purpose of
training and re-employment of the retrenched garment
workers in other profession.
A special budgetary provision amounting to TK.200 million
was made in 2004-05 fiscal year for this purpose.
But no one came to register his name for training
and re-employment purpose.
Again same budgetary provision has been made in present
fiscal year and efforts are also going on to transfer the
amount for training of RMG workers, Management Officials,
factory owners in the field of Compliance (both on Labour
Welfare and Occupational Safety) and in other areas of
Management, Production, Merchandizing and etc. to
enhance their skill.
11
Actual scenario

Actual RMG exports registered 10.77% growth (US Dollar 6889.30
million in 2005 from US Dollar 6219.38 million in 2004) leaving behind all
negative prediction and scare.

Knitwear export grew at an impressive 26.58% over the previous year
(amounting to US$ 3,206.76million) .


263 new RMG factories are registered in Export Promotion Bureau (EPB).
Created approximately 75,000 - 80,000 new jobs in the RMG setor
during the year 2005 and 2006.
Export of Woven & Knitwear during MFA & post MFA
(Value shown in million U.S. Dollar)
Commodities
JanDec’2005
JanDec’2004
% of growth
Woven
3682.54
3686.09
(-)0 .10%
Knit
3206.76
2533.29
(+) 26.58%
Total :
6889.30
6219.38
(+) 10.77%
12
Factors helping our RMG and Textile sector to continue its growth:

A considerable investment has occurred in the field of RMG as well as in the
textile sector and a sizable investment is in the offing in the field of textile and
ancillary industries to facilitate the necessary support to RMG sector

Positive initiatives taken timely by Bangladesh Government in association with
exporters’ associations and different development partners.
Simplification of customs procedures for clearance of goods through computerization,
erection of new gantry cranes and deduction of procedural delays, etc.


Withdrawal of VAT from utility bills, reduction of insurance premium .

Duty free import of capital machinery & raw materials for export oriented RMG &
Textile Industries.

Continuation of cash incentive in export of RMG & Textile products.

Import of yarn through land port,. One-Stop-Service for FDI.

Reduction of interest rates in export credit & port charge.

Permission to set up RMG industries in EPZ area with 100% foreign investment.

Initiatives of both the Government & exporters’ associations in collaboration with
different development partners to make the sector compliant.

The new GSP scheme of the European Union has opened up tremendous opportunities
for LDCs as well as Bangladesh regarding RMG & Textile exports.
Decision of EU to graduate India from their new GSP scheme and imposition of anti dumping duty on home textile exports from Pakistan.
European Commission‘s voluntary imposition of restraint for 10 categories of Chinese
Readymade Garment products has created new opportunities for Bangladesh.
CITA ‘s announcement of invoking safeguards on textile imports from China to USA will
opt U.S buyers for sourcing from Bangladesh instead of China.



13
Key issues and challenges that face the RMG sector.
 Global sourcing pattern, particularly for the apparel and textile products has undergone
drastic changes.
 Consumers, and thus buyers, demand not only the quality products at competitive
prices with reduced lead times but also they expect the suppliers to be socially
compliant while producing the goods.
 They demand that minimum labour standards, occupational safety measures and other
environmental concerns are properly addressed by the suppliers.
 As a result, compliance issue has come out as a major threat to our RMG sector.
 All the big and medium range buyers are setting different conditions (code of conduct)
as precondition to secure order.
 Before confirming export orders, importers are pressing RMG exporters to ensure that
these exporters are in a state of situation to comply with these codes of conduct, briefly
known as compliance.
 A core labour standard which covers wages, working hours, overtime, safety, jobsecurity, right to form trade unions, environment and social security are being
negotiated under compliance issues.
 Many of our RMG units are finding it very difficult to cope up with the demand, set out
by the importer under compliance issue as every single components of compliance
issues means additional investment.
 Though these issues are very fundamental as far as the workers interest is concerned
but at the same time these are very capital intensive for implementation.
 Price fall against volume of export.
14
Steps Taken to Address the challenges by MOC, GOB:
 To help the Bangladeshi RMG exporters being socially compliant, the Ministry
of Commerce has formed in July 2005 a high power “Social Compliance
Forum for RMG’ headed by Honourable Commerce Minister. All related
stakeholder
associations
(BGMEA,
BKMEA,
BTTLMEA
etc.)/Ministries/Departments/Workers’ Associations/ NGOs /Development
Partners/Buyer Groups etc. are represented in the Forum.
 This Forum acts as the guiding authority on compliance issue in RMG. Since
its establishment, there have been three formal meetings.
 Moreover, a small group of people known as the ‘Working Group’ meets often,
conducts threadbare discussions on the issue and recommends various
suggestions to the Forum.
 Under the Forum, two Taskforces – one on ‘ Occupational safety in RMG,
and the other on ‘Labour Welfare in RMG’ were formed. Representative
from related associations/Ministries/ Departments / Workers’ associations /
Development Partners etc. are included in both the taskforces. Some issues
like minimum wages and maximum working hours could be resolved
soon.
15
 The Taskforces were entrusted with the responsibility of formulating time-bound
Work Plans to be implemented in the short, medium and long terms.
 A 3 tier mechanism would enforce Implementation of the actions suggested in
the Work Plans.
 The factory owners in cooperation with factory based worker leaders would
implement the recommendations at the grass-root level in the 1st tier.
 The Taskforce members would physically visit the factories, monitor
implementation status & report to the Monitoring Working Group of Social
Compliance Forum for RMG in the 2nd tier.
 At the final tier, Forum would oversee and guide the implementation.
 In addition to the Forum and Taskforces, a Compliance Monitoring Cell (CMC)
headed by Director General (Textile) in the Export Promotion Bureau has been
created.
 CMC’s responsibilities include—to provide secretarial support services to the
Forum, review the reports received from the Taskforces, keep contacts with the
international buyer groups on compliance, raise awareness, do publicity abroad
on measures taken for compliance, etc.
 A conference regarding compliance issue is being organized by MFA Forum in
Dhaka from 2nd to 3rd May, 2006 in collaboration with UNDP. Ministry of Commerce
is also participating in the conference and some positive results would come up
from it.
16
Initiatives taken by RMG Manufacturers and Exporters associations:
Both BGMEA and BKMEA have started Crush Programmes regarding factory inspection
by forming several Inspection Teams.
BGMEA has formed 10 inspection teams for Dhaka region and 3 teams for Chittagong
region. They already have inspected nearly 1000 factories.
These teams are conducting fire drills, checking whether the factory has alternative fire
exits or not, whether the stairs of the factory building is blocked or not, whether the
gates(exits) are locked or not during working hours, and whether the factory employs
any child labour or not.
They have chalked out some punitive measures for the non-compliant factories
regarding the aforesaid matters to be checked during inspections.
A fine for first time offence is Taka 10,000/-, Taka 50,000/- for the second time of the
same offence and cancellation of BGMEA’s membership for 3rd time of same offence.
But very few factories are found to be non-compliant regarding this.
Proper punitive measures have also been taken against the non-compliant factories.
BGMEA in collaboration with SEDF is going to start a project regarding inspection of
the RMG factories.
BKMEA also inspected near about 300 factories in which very few factories are found
non-compliant regarding the aforesaid offence and those non-compliant factories are
taken under proper punitive measures.
17
Conclusion:

Post MFA scenario has been talked about for a long time. We have to be
serious and do all necessary so that Bangladesh’s market share in RMG
sector should be retained and expanded.

We are committed to follow the post-MFA Action Programme (PMAP) with
full determination, drawing support from both the private and public sector.

We are taking necessary steps to formulate common code of conducts
covering labour law, safety and job security conforming to our socioeconomic condition and with these efforts we surely will be able to address
the post-MFA challenges and retain our export-market share with
continual growth.

That is why we want to say that optimists see opportunities in
challenges and pessimists see challenges in the opportunities. We are
definitely optimists and we will turn all challenges into our
opportunities and potential.
18
Thank you all
19