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The Financial Express

RMG's challenges to be sustainable

| Updated: August 10, 2020 21:53:54


RMG's challenges to be sustainable

After the incidents of unrest for a few years, mainly for wage hike for the 4.4 million workers, the garment sector witnessed a peaceful and stable environment in the year 2019. However, the garment sector, which typically contributes 84 percent to the national export in a year, experienced a negative trend of shipment since August. In the first 11 months, between January and November in 2019, Bangladesh exported garment items worth $30.14billion, according to data from the Export Promotion Bureau (EPB). In the year 2018, Bangladesh exported $32.93 billion worth of apparel items, the data also said. The slowdown in export growth is apparently a reflection of the diminishing competitiveness of Bangladesh's RMG industry. Bangladesh's export earnings from the corona virus-hit apparel sector are likely to fall by around $10 billion in 2020 from $33 billion in the previous calendar year. As a result, the country is surely going to face a massive shortfall in meeting its target of exporting $38.2 billion worth of apparel products in the current fiscal year. Bangladesh earned $34.13 billion by exporting clothing items in the 2018-19 fiscal. The global apparel consumption had been decreasing for the last few years. Covid-19 pandemic has added to this declining trend. Our fear is the export figure may not be more than $23-24 billion in 2020. The pandemic has worsened the already declining trend in global apparel consumption, and we also do not know what the post-pandemic situation will be. Apparel manufacturers also have no idea as to what will happen in the next three to four months as the time for placing orders for those months are already over but most factories have received orders equivalent to less than 50 percent of their production capacities. According to BGMEA data from May 1 to May 19 this year, the country's apparel export has dipped by 55.7 percent as compared to the corresponding period the previous year. In April, the export saw an 85-percent negative growth. Considering the present situation, we have to look at some specific areas of development which will be of  help to confront this mountain of challenges on the sustainability issue  in the RMG sector.

PRODUCT CATEGORY & BACKWARD LINKAGE DEVELOPMENT:  We have passed almost 40 years in RMG exports but still we have been producing and exporting low price category products only. We have failed to draw the attention and trust of buyers about the fact that our capacity in all respects have now reached the level to produce high category products. Our competitors like China, Cambodia, Vietnam and India are still making pricey category of products and they have set up ery strong backward linkages whereas we are still very weak in backward linkages except circular knits. For woven fabrics, laces and other accessories, we have to depend basically on China. It's a matter of concern for me that we need to set up all kinds of backward linkages to achieve the said targets, otherwise our dreams will remain a mere dream. And we have  to strengthen our negotiation skill with buyers for better pricing. The failure to diversify products and explore new markets are proving to be a major factor behind the loss of competitiveness with other exporting countries like Vietnam, Cambodia, India, & Pakistan, They added. We are focusing on 5 items which occupy over 80.0 per cent of the capacity. This shows we have more capacity on low value items. This type of over-concentration of the industry into a few items in the lower tier of price range and over-concentration of markets are also among the top-rated challenges. Diversification of the industry is one of the most important priorities now and we need special incentives to encourage product and material diversification and innovation. For long term business sustainability, Vietnam is honing in on Bangladesh's position as the world's second-largest apparel supplier by focusing especially on product diversification.

 IMPROVING EFFICIENCY: Low efficiency and relatively higher cost of doing business are the significant drawbacks affecting our trade competitiveness. The garment industry has to increase its efficiency at least by 30 percent if it wants to be more competitive globally. The sector can obtain efficiency through efficient management of practices, technology selection and product and market diversification, lack of efficiency and weak productivity have become critical factors, as a result of which average production cost goes up unnecessarily. The rising wages is another factor relevant to the sector's competitiveness. The average monthly wage of a garment worker in the country was US$ 35 a decade ago. But the wage has risen substantially since then. It is likely to rise even further in the coming months, which will lead to entailing additional expenses by the entrepreneurs. But the buyers are not interested in paying additional money to their suppliers. In that case, there is no alternative to improving productivity and product development if the growth trend is to be sustained.

INFRASTRUCTURAL DEVELOPMENT: The government needs to increase its aid to the owners in all aspects. Gas, electricity, port facility, carries facility and others support have to be provided for 24 hours whenever needed on an urgent basis. Bureaucratic red-tapism need be stopped totally in  getting permission for new factories, getting connection of gas, power lines etc. The government needs to set up more industrial Export Processing Zone for local and foreign investors on demand basis. It should increase cargo loading and unloading capacity.  Until the Seaport's capacity is not increased or it is modernised, the $50 billion export target will remain in dream only. It's time we placed our demand to the government to set up a special one-stop service center to provide all kinds of support to the businessmen and investors. Deep Sea Port is also necessary to support the export and draw the international buyers' attention.

SKILLED WORKFORCE DEVELOPMENT:  It is known to us that RMG industries are not driven by automated machines. It is dependent on manpower and mostly run by female workers. These female and male workforces are the  souls of those industries. Production, productivity, quality and export rhythm depend on their happiness and activities. To achieve the $50 billion export target within 2021 will doubtlessly need doubling the strength of the industries as well as their workforce. It's a must to educate the workforces on different matters to face the challenges. But every year, an unlawful increase in house rent, increase in essentials prices, increase in  electricity rent, cooking gas charge and so on are putting them under huge pressure. The government and the  RMG owners have no control over the price and cost increases. And that is why when the workers cannot manage with the salaries they get, then the find  no other  alternative  but to go for demonstration for a salary hike. And then international competitors plot to take advantage of the situation and things get out of control and draw media attention. We need huge improvement in production capacity and skills. We need to focus on quality, not just quantity. We need to fully utilise our existing training institutions to impart training to our workers. We also need to create new training facilities to meet our increased demand for skilled manpower. We need to improve our bargaining skills. BGMEA should team up with universities to introduce courses on negotiation skills which is critical for ensuring fair price of products.

DEVELOPING HOLDING  WELFARE FACILITIES FOR WORKERS: We need to ensure garment workers' freedom of association and bargaining. Building relations with workers and social dialogue are two important ways to involve the workers in the journey towards US$50 billion export target. The owners need to respect workers as a partner. Another important issue is that the garment factories are reluctant to employ workers aged above 40. How can the garment industry be a sustainable business model where a worker has to retire at an early age? We need to improve the working environment of the factories in such a way that a worker can continue working for a longer period. We need to establish low cost hospitals and other health facilities near the factories.

 BGMEA SHOULD HAVE GOOD NEGOTIATIONS WITH THE GOVERNMENT: BGMEA should provide the government with an exact account of their required services. For example, they should clearly mention what amount of power they need for the next five years. It will give the government a clear picture of what it needs to do for the RMG industry. Small factories are facing the challenges of maintaining competitiveness and compliance. They need support from the low-cost funds to survive. The low-cost funds should remain low-cost. The compliance standard should also be enforced in other countries so that the global market remains competitive. Our development partners should consider this issue seriously.

BGMEA has enough political clout to talk to the government and ask whether we can have a ministry or not, whether we can have a separate department or not but let us have a high-powered inter-ministerial committee for five years. It will help us to reach the target. May the Honorable Prime Minister can head it herself. With her blessings, it is possible to have an inter-ministerial committee with the power to respond to all the needs of BGMEA and enable the sector to reach the US$ 50 billion export target. Workers must own this target as much as the owners of factories. And only in that collective ownership we will get the energy and spirit to reach our goal.

PRODUCT DEVELOPMENT STRATEGY: To Develop R&D With the exception of a handful of cases, most garments manufacturers in the country lack any research and development (R&D) set-up. But the R&D teams in the factories of competitor countries are usually stronger. The local factories usually take three to four months for product development (from design to sample preparation). But countries like China spend only 15 to 30 days for this purpose. However, in the past, our entrepreneurs engaged workers after installing garment machinery, and then automatically received purchase orders from the buyers. Now it is the turn of the entrepreneurs to make offers to the buyers. Product development and diversification have therefore become crucial as the fashion trends worldwide undergo changes frequently.

INVESTMENT IN PRODUCING HIGH-END TEXTILE : At present around 50 percent of the demand for woven fabric in local RMG factories have to be met through imports. It's time-consuming and costly. The lead time for RMG manufactures would have decreased considerably if the fabric was produced locally through enhanced investments in the sector. The value addition in RMG would also have increased as a result. So, it makes a good case for focusing on product development in the textiles sector as well. The local factories will have no option but to continue importing high-end textiles from abroad if appropriate investments are not made for producing high-end textiles locally. This is neither desirable nor cost-effective, and the government as well as textile entrepreneurs should take initiatives on an urgent basis for attracting investments in the sector.

The  writer is AGM at OPEX  Group

mehediruma1986@gmail.com

 

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