Editorial
10 months ago

Boosting backward linkage industry

-File Photo
-File Photo

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Manufacturers of garment accessories have complained that the just announced budget has no direction on how to circumvent the problem of dollar crunch, high price of imported raw materials and opening of letters of credit (LCs). The issues raised by the Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) are the ones facing its members right now but they are also concerned about their future directionless navigation through the uncertain business environment with the country's graduation to a developing country and in the face of challenges from the 4th Industrial Revolution (4IR). As members of the backward linkage industry, these manufacturers have rightly pointed out that they deserved better because they are acting as the main driving engine behind the apparel sector which is more a service sector than an industry. The rapidly developed supply chain of the BGAPMEA has helped the readymade garment (RMG) sector to be what it is today.

The rise of the backward linkage industry here has contributed to the economy in many ways. First, value addition to imported raw materials through their transformation into intermediate inputs for the garment sector. Because this process is furnished locally, the products are invariably cheaper compared with the imported ones. The other two benefits are equally, if not more, important for the economy. Local accessory suppliers have a lead time advantage over their counterparts abroad and above all, generation of employment. The greater the size of accessories in demand is, the more the expansion of the job market in this particular backward linkage area. As manufacturers of intermediate components and inputs, these linkage industries, however, cannot go beyond a certain limit. Currently, this type of small and medium enterprises are more suitable for the country because of their labour-intensive capacity for employment. How these enterprises will cope with the post-graduation emerging environment is what they are worried about.

In a situation like this, capacity building comes to the fore. Human labour cannot compete with automated modes of production of industrial goods. Even in service sector, robotic infringement has been quite significant. Preparation has to be afoot from now on to turn workers with digital literacy, knowledge and skill sets. Most likely, the future industrial activities will be marked by specialisation where manual labour will nearly be dispensed with. However, the service sector will still largely have to depend on physical labour and skills. The accessory manufacturers will certainly not enjoy this commission.

Before that happens, the immediate task is to facilitate the working conditions of the accessory units. About the high prices of raw materials abroad, little can be done except looking for sources other than the known if those are available at lower prices. But so far as dollar crunch and problem facing in opening LCs are concerned, appropriate measures can ease the process. In that case, the manufacturers also have to be cooperative enough by making their transactions totally transparent. Their demand for bringing of the current 1.0 per cent source tax on export proceeds down to 0.50 per cent, smacks of protectionism rather than business competition. They need to be competitive. The 0.50 per cent source tax they had to pay before 2022 was in consideration of the initial fledgling growth. However, they must be allowed to enjoy, without delay, equal benefits with the RMG as spelled out in the national industrial policy, export policy and textile guidelines.

 

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