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Shipment delay weighs on RMG

Shipment delays and late presentation of documents to Bangladesh’s authorities are among the most critical challenges faced by the country’s garment sector, according to a survey.Some 66 percent of the exports could not be delivered on time while late presentation of documents, which poses a money laundering risk, occurred 53 percent of the time, said the survey of the Bangladesh Institute of Bank Management (BIBM).Inadequate knowledge of domestic and international regulations was also to blame, it said. The BIBM revealed the findings of the “Trade Facilitations in RMG by Banks: Risks and Mitigation Techniques” survey at a workshop at its auditorium in Dhaka yesterday.The institute organised the programme in association with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).Garment exports account for more than four-fifths of the country’s total exports, earning about $30 billion in 2017, of which woven and knitwear garments constituting around 52 and 48 percent respectively, according to the survey.The survey spoke of another risk: the increasing amount of overdue export bills: 48 percent against letters of credit (LCs) and 53 percent against contracts.The bills increased sevenfold to $119.63 million last year from $16.23 million the year before, said the survey, adding that some 42 percent of the export proceeds were found to have been non-repatriated against contracts.The overdue bills raised concerns about money laundering and whether the exports actually did occur. The LCs cater to transactions between locals and foreign banks while contracts to direct deals between buyers and suppliers.During the survey, members of the BGMEA and the BKMEA pointed out some key operational challenges to trade facilitation and financing by banks.These include low packing credit usage, inefficiency in assessing working capital, absence of credit limit tolerance and of a customised collateral system, and inconsistent trade charges among banks.Other obstacles are lack of awareness and inefficiency of traders and bankers in handling operations, they said, adding that problems were sometimes faced in trade facilitation with countries including Russia, Iran, North Korea and Cuba.Some 46 percent of bankers suggested increasing skilled workforce in the RMG sector to address the risks, the survey said.Though foreign trade facilitation service improved, non-compliance still remains a major concern in banks, said Prof Shah Md Ahsan Habib, director of the BIBM, while presenting the research paper at the workshop.Incidents of trade-based money laundering are a growing concern for policymakers and central banks throughout the globe and it is affecting the RMG trade and service-providing bankers, he said.Though available anti-money laundering rules are in line with globally accepted standards, there is still a lot of scope for improving their enforcement and identifying applicable red flags in the country’s context, he said in his recommendations.Shipment delays result from a lack of efficient workforce in the industry, said FazleeShamimEhsan, second vice president of the BKMEA. Subcontract in the RMG sector is a great risk factor for banks and the government should give policy support to banks to minimise risks of foreign trade, said Helal Ahmed Chowdhury, supernumerary professor of the BIBM.Banks should intensify monitoring in the entire import and export process to avert risks, said Syed Mahbubur Rahman, managing director of Dhaka Bank.  There is no alternative to training for reducing risks in foreign trade, said MehmoodHussain, managing director of NRB Bank.

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