Beacon of hope for the RMG sector
Termed a bottomless basket case at birth, Bangladesh is now highly acclaimed as an example of continuous development, thanks to the RMG sector
"It was the best of times, it was the worst of times, it was the age of wisdom, and it was the age of foolishness…." Charles Dickens – A Tale of Two Cities
Fifty years from its independence, Bangladesh is on its way to graduating from a Least Developed Country (LDC)and becoming a developing nation--a moment of great pride for us. This gives us more mileage to go forward. Being on the threshold of the fourth industrial revolution, it stands out that business integrates knowledge, efficiency, sustainability and constant changes which are exquisitely true for the Ready-Made Garments (RMG) industry as it is a consumer and fashion driven cutting age competitive business.
However, many challenges are looming over the RMG sector of Bangladesh while we are striving through the Covid situation and its multiple waves for a prolonged period. The government, especially Honourable Prime Minister Sheikh Hasina, has gone all out to extend her support in tackling the first onslaught of Covid-19. Our countrymen are on the fast track to be vaccinated.
Bangladesh is today one of the world's largest garment exporters, with the RMG sector accounting for 84% of Bangladesh's exports. Over the last decade, Bangladesh's RMG industry increased its share of global garment exports from 4.7 to 6.7%. Termed a bottomless basket case at birth, Bangladesh is now highly acclaimed as an example of continuous development which has taken many by surprise. RMG certainly contributes a great deal to this success story. It is a driver of growth with a large social impact and it is the largest institutional employer as well as the champion of women empowerment. The beauty of RMG remains in the fact that it is a part of a global supply chain and has huge backward and forward linkages.
Opportunities presented by manmade fibres
It is the best of time and at the same time; it is the worst of time as presented by Charles Dickens in his famous novel, Tale of Two Cities, has come to life for Bangladesh. Through the civilisations, the human race has been designed to fight back to survive. Hence, we always strive and dare to dream of prosperity as a country. For Bangladesh, many opportunities in the RMG sector will be opened in the forthcoming days and one of the areas is the export of manmade fabrics apparels in the US market.
There lies an imminent need to diversify new Markets and move to more complex products and value-added services like synthetic fibre-based garments which are fashion dominated because the consumers are mostly women. To diversify and upgrade product offerings, there are marginal changes that need to be made in the up-gradation of machines but the key requirements are training the operators and mid-management production staff.
So, the potential for growing our Market share is huge with very few investments. But to activate this, coordinated efforts are required from an organisation like BGMEA. Certain Policy support has to be enabled by BGMEA by negotiating with NBR and customs on HS code inclusion as well as enabling some new equipment importation without duty such as specialised machines for multi-operation, dehumidifiers and so on.
BGMEA and the Commerce Ministry in conjunction with the Finance Ministry need to work jointly to remove all the barriers to enable this growth. A cross-functional Task Force led by BGMEA needs to be formed with team members composed of the manufacturers who are already succeeding in these categories of manufacturing and they can share their expertise with others.
Although the EU allows duty-free access to man-made synthetic fabrics without any source of fabric origin clause, the USA does not allow this at this time. So, the export of RMG to the USA which is made of synthetic fabrics is very small now and the Bangladesh RMG sector is missing this market category segment which has the highest growth rate.
There is a high duty on the export of manmade fibre to the USA: 27-33 % versus the 17% against cotton-based products from Bangladesh. So, trade negotiation needs to take place to overcome the challenges in making the policy changes with the USA government through trade diplomacy from the Bangladesh government to get better duty rates for export synthetic-based RMG. If this is made possible, then our market segment will grow exponentially in the USA from 20% up to 60% of the Synthetic based product export of Bangladesh. This will add about USD 4-6 Bill to our RMG export which will be a milestone achievement for Bangladesh.
Use of technology
Technology is the buzzword for any success in this age of competition. Perfect matches and usage of technology improve productivity and increase production. Bangladeshi firms have made investments in productivity improvement, digitisation, automation, and sustainability, and they operate according to international best practices. Leading global apparel brands and retailers have partnered with their Bangladeshi suppliers helping them to improve efficiency and sustainability by the use of technology.
For its apparel industry to prosper in the future, Bangladesh will need to strengthen its transport, energy, and digitisation infrastructure. Several major infrastructure projects that are under development including the Padma Bridge (scheduled to open in 2021) and Bangladesh's first deep-sea port, the Matarbari development will prove to be useful in this case. We need to focus on and make investments in digitisation, automation, and sustainability. Suppliers also need to invest in up-skilling, vertical integration, digitisation, and automation to unlock speed and transparency.
Connecting the dots of Human Resources
There is a greater focus on gender diversity, as well as opportunities for upskilling and career progression today in the RMG sector. Bangladesh is full of opportunities and I would like to emphasise the existence of a young working force that can be moulded and trained easily. Providing workers with incentives, opportunities and provisions as well as training the workforce and ensuring that they remain motivated at all times will prove helpful.
With combined efforts of all, we can do a tremendous amount of work to eradicate the challenges that the RMG sector is facing. One of the biggest challenges faced is the liquidity crisis. Worldwide all the big retail brands are undergoing this crisis as well. The crisis will prevail all through 2021. As the loans will not be paid back on full terms, a lot of support from the banking sector is required.
If the industry can stand back on its feet again, then it is possible to repay the loan within a limited period. The government under the Honorable Prime Minister's leadership has charged limited interest. With a little bit of policy support from the Government, the Bangladesh RMG sector is set to regain its glory. Challenges remain in places like local customs, policy and training. To resolve this, we require a holistic approach. The development of infrastructural facilities and policy changes will bring a change in the whole scenario. In the new era of the post COVID world, we need to grasp developmental opportunities like these to graduate into a developing nation. All the stakeholders must come forward and advance with a common goal in unison to achieve success.
Shovon Islam is the CEO & Managing Director Sparrow Group which was established by his father late Dr Mahzharul Islam. Shovon is a computer scientist (Ex-Functional Software Architect, Hewlett Packard, USA) and the opinion in the article is his own and can be reached at [email protected].
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.