Bangladesh is going through one of its worst phases in two decades with growth in garment exports slowing down quite drastically in the Financial Year 2016-17. While overall exports in the fiscal year (ended in June) rose nearly 1.7 per cent from a year earlier, garment sales posted only 0.2 per cent growth, 7.34 per cent below the target. This is the slowest growth in 15 years. Leading the industry at this very critical juncture is Md. Siddiqur Rahman, President, BGMEA. Rahman is a stalwart of the industry being Chairman of the Sterling Group of Companies and closely associated with the BGMEA for many years in various capacities. Though his two-year tenure is nearing an end, his dynamism has resulted in an extension of another six months in office by the governing board. In a very honest interaction with team Apparel Online, the President of BGMEA shares the reasons behind the setback and measures being taken to get the industry back on the growth track. Bangladesh is going through one of its worst phases in two decades with growth in garment exports slowing down quite drastically in the Financial Year 2016-17. While overall exports in the fiscal year (ended in June) rose nearly 1.7 per cent from a year earlier, garment sales posted only 0.2 per cent growth, 7.34 per cent below the target. This is the slowest growth in 15 years. Leading the industry at this very critical juncture is Md. Siddiqur Rahman, President, BGMEA. Rahman is a stalwart of the industry being Chairman of the Sterling Group of Companies and closely associated with the BGMEA for many years in various capacities. Though his two-year tenure is nearing an end, his dynamism has resulted in an extension of another six months in office by the governing board. In a very honest interaction with team Apparel Online, the President of BGMEA shares the reasons behind the setback and measures being taken to get the industry back on the growth track.
Excerpts from the interview….
AR: Industry has seen a very difficult year, what are the factors that have derailed the Bangladesh growth story?
Rahman: Over the past 10 years we experienced about 13 per cent growth year-on-year, which had become our benchmark, but this year, there is practically no growth. There are several reasons for the slowdown including the fall of Euro, Brexit, US Elections and also an unusually slow global economy. Another thing is that dollar has also depreciated by 4-5 per cent against Bangladeshi Taka in last 4-5 years. Indian currency is devaluated by about 30-35 per cent, Turkey by 102 per cent; Vietnam, Cambodia, and even China’s currency devaluated, whereas currency of Bangladesh has appreciated – 1 Dollar was BDT 84, but now it is 80; it was BDT 77 for a long time. Competition among the sourcing countries has increased manifold. If you want to stay in this business, you have to be very cautious and competitive. Our market share is only 6 per cent whereas China enjoys 37 per cent.
These are all global problems over which we have no control. Besides, there are global propaganda against us which create more problems for the industry, as it generates a negative perception about the country, which is not true. Only last year, we had made commitment regarding amendment of EPZ laws governing labour, labour rights ethics and Bangladesh Labour Act (BLA), but there is no respite.
AR: What are the threats that you foresee?
Rahman: Our port capacity is very poor and it virtually always remains clogged. Following our complaints to the PM, she has given orders to open all the ports, 24×7 which is a good decision. Also, the Government is preparing to hire 4 cranes for the port. If you think about Dhaka air freight, the situation is even more chaotic. I’ve been fighting every day for the industry for the last 1½ years since I have been holding this post, and now finally last month, the Government has formed a committee to look into the issues regarding airport freight, but the situation is still far from what it should be.
I think the fresh thrust that the Indian Government has given to this sector could also make things more challenging for us. India is giving lots of incentives to its industry such as Rs. 6,000 crore cash incentives, upgradation fund of up to 30 per cent and even if one sets up a factory in some remote area like Odisha or Jharkhand, the State Governments will give Rs. 1,500 per month for every worker for 3 years. They are also enjoying bank loan with low interest rate. Also, India has its own resources – cotton, land, textile background, deep sea ports, etc. But we’ve nothing of our own. We don’t even have a deep seaport. That’s why our lead time is very high. Nowadays, fashion is changing rapidly, but we’re still struggling to reduce lead time, especially in woven garments, for which we have to still import more than 65 per cent fabrics from China, India and Pakistan.
“The industry is self-motivated. We have 67 ‘green’ factories, while 220 more factories are on their way to get ‘green’ factory status. Moreover, seven industrial units of the country have been ranked among the top 10 in a list of the world’s 25 most environment-friendly factories.” – Md. Siddiqur Rahman, President, BGMEA
AR: What is the situation like on the compliance front?
Rahman: For the industry, the Accord, Alliance and National Action Plan have created another set of challenges. We don’t find these types of agencies anywhere else in the world. Now they are expecting us to extend their tenure for another 3 years. They’re giving us new CAPs one after another and it has been challenging for us to fulfil their demand.
Yet, the industry is self-motivated. We have 67 ‘green’ factories, while 220 more factories are on their way to get ‘green’ factory status. Moreover, seven industrial units of the country have been ranked among the top 10 in a list of the world’s 25 most environment-friendly factories, including for instance – Best woven factory, Best washing plant and Best spinning mill. But still the custodians of compliance are unhappy with our efforts. I have seen factories in Italy, Vietnam, Cambodia and even in China. Our factories are much better in terms of compliance. I’ve been in this business for last 34 years and seen lot of things. No country will allow you to pay unannounced visit to the factories but we allow announced or unannounced visits to the factories. The buyers came to visit our factory even before Rana Plaza tragedy and called all the workers on the floor to ask questions in terms of their wages, safety or other issues. We allowed all these things, which won’t be permitted in any other country. After all these manoeuvres, everybody is talking negative about us. Now we’ve decided that enough is enough… We’ve finally decided to raise our voice.
AR: RMG sector is the lifeline of Bangladesh’s economy. Is it not a top priority for your Government to ensure a good conducive environment to work?
Rahman: Our Government is very business-friendly and we have been getting very good support from our PM herself. But, the problem is that the product price is going down every day and this the Government can’t control. The reality is that Bangladesh is no longer a ‘cheaper’ destination. Though we’ve developed our efficiency level, we have also increased the wage range by 25 per cent. Today, we have a very productive workforce that is loyal but ‘outsiders’ are always trying to influence them to create unrest.
Everybody is talking about labour rights but nobody is talking about their responsibilities. Now we’re doing a social dialog project to train the workers about their rights and responsibilities. We have set up offices in different places. Retailer brands like H&M have also set up offices to train the workers. In our factories, we have a participation committee and also a safety committee.
We are even working to develop the middle management level, for which the new university is coming up to provide quality education. There are 9 training centres established in different remote places to train the mid-level employees and the workers. We even have some expert trainers to train them and have also been providing them job facilities.
AR: What are the new directions to keep the growth momentum?
Rahman: Exploring new markets have become very critical for growth; there is a big market, each in Russia and China. We are also focusing on South Africa, Japan, and Australia apart from already catering to South America. Of all the potential markets, we consider Russia as the biggest market for us. We have requested the Government to seek out facility of duty-free entrance into this huge market. Japan is also a very good market. We know China has a very big domestic market of US $ 400 billion. Despite their significant global presence, we can find some space there for us.
We are also looking at new product categories and moving up in the value chain. In earlier days, we didn’t even know about R&D, but now many of our factories have product development teams, although the numbers are still small. Slowly but surely we’re learning, and hopefully, can produce some diversified products in the coming days.
