France and Germany yesterday offered more than $60 million in low-cost loans to Bangladesh, to speed up remediation process in the garments sector. The French and German governments are offering the money as many garment factories, especially the small and medium ones, are delaying remediation because of a fund crisis, said German Ambassador Thomas Prinz. “We are ready to give the money anytime. It is just waiting for an approval from the Bangladesh government,” he told The Daily Star after a meeting with Finance Minister AMA Muhith at the latter’s secretariat office in Dhaka yesterday. The loan carries an interest rate of 1 percent. “We are offering the money at a low interest rate to make funds available for investment in the factories and to make the units safe and more environment-friendly,” Prinz said. The main credit line of $50 million is coming from the French government, which is complemented by $4 million from German state-run bank KFW, $6 million from the European Union and a small component from GIZ, German’s international development organisation. On the progress in safety improvement by the Accord and the Alliance, two factory inspection agencies run by brands and retailers, Prinz said rehabilitation is going on, but it is slow in many cases because of a fund crisis. The factory owners either are not getting money from banks or they are not interested in borrowing from the banks at a higher interest rate, he said. Sometimes, the banks are not interested in giving the money to them, he added. Recently, international retailers and garment makers called for a government-guaranteed fund to finance the remediation as many small and medium units are yet to complete upgrades due to a shortage of low-cost funds. Owners of about 3,800 factories in the country are now remedying their units as per the recommendations made by the engineers of Accord, Alliance and government-sponsored inspections, to improve workplace safety. So far, more than 60 percent of the work is complete, according to data from the Department of Inspection for Factories and Establishments. Some other international organisations like the Japan International Cooperation Agency (JICA) provided a fund to the central bank of Bangladesh at an interest rate of 0.01 percent, but the scheduled commercial banks have been demanding more than 10 percent to disburse it to borrowers. So far, only one company could receive loan from the JICA fund. The total cost of remediation in the Bangladesh garment sector, prior to any remediation efforts, was estimated at around $929 million, according to a report of International Finance Corporation. The report also said that if no remediation efforts had occurred, the cost of remediation for factories under Accord would amount to $403 million, $362 million for national initiatives and $162 million for Alliance. Of the $929 million, work of $294 million has been done so far. According to the study, the cost of remediation can range from $20,000 to $900,000 per factory. The total remediation cost for 80 percent of factories ranges between $100,000 and $250,000. It is estimated that 75 percent of factories in Bangladesh will not need large structural retrofitting work, and therefore will fall within this range.
