To navigate beyond the bond and BBLC facilities, we must recognize that the limited support from the caretaker government isn’t just about a lack of business-friendly policies or buyer support. It reflects a broader collapse in the economic ecosystem, posing challenges across various sectors. This systemic issue makes it even more crucial for us to innovate and adapt.
However, amidst these challenges, there’s a silver lining. The success of young entrepreneurs and experienced minds in our industry is truly inspiring and much needed. It’s crucial for someone with vision to provide clear guidelines to government officials on the policy support our sector needs. Over the past 20 years, we’ve never faced a shortage of orders—our challenge has always been meeting the overwhelming demand. With strong leadership, we can address these challenges and make meaningful changes that will elevate our industry to new heights.
The future of our industry depends on proactive measures and strategic planning. By addressing these issues head-on, we can ensure that Bangladesh’s garment industry remains a global leader, providing livelihoods for millions and driving our economy forward. May Allah (SWT) give us the strength to overcome the obstacles ahead with unity. I can boldly say we will not face a shortage of orders in the coming days, but we need policies that excite and support our industry. Everyone, from small units to green factories, must be on the same page.
I shared my thoughts with my limited knowledge and apologize for any mistakes in my writing.
Let continue our part 2
The Ready-Made Garment (RMG) and textile industries in Bangladesh have grown tremendously over the past few decades, thanks to policies like the bonded warehouse system and back-to-back letter of credit (BBLC) facilities. These mechanisms have provided significant advantages, allowing manufacturers to import raw materials duty-free and streamline the financing of exports. However, as the industry matures and the global market evolves, it’s crucial to explore sustainable alternatives to these facilities to mitigate risks and ensure continued growth.
The backbone of Bangladesh’s garment industry
In the 1980s and 1990s, many young entrepreneurs, despite numerous obstacles, built a robust garment industry based on trust, integrity, and strategic use of financial facilities. They understood the importance of repaying bank loans and maintaining good financial standing. Today, we boast a highly educated and technologically advanced generation of entrepreneurs. Yet, the industry remains import-dependent and heavily reliant on BBLC and bonded warehouse facilities.
The government has set an ambitious target of $100 billion in exports by 2030, which seems almost impossible. Despite reaching $50 billion, we have encountered significant challenges with manpower and the banking and financial sectors. Moreover, we face immense pressure with the post-LDC (Least Developed Country) graduation in 2026. Currently, the government’s support for only one single sector is limited. We neither have the bank capacity nor the skilled manpower necessary to achieve this target.
However, it is not an impossible goal. We can achieve it, but we need to address the financial crisis management and explore various financial strategies to relieve internal reserves and financial institutions from pressure. This will enable us to run our businesses without financial obstacles, which is the key to success.
Bridging the banking and industry gap
In our current banking sector, we lack the dynamic bankers and strong linkages between banks and the industry that were prevalent in the past. From 1971 to 1990, numerous bankers and bureaucrats nurtured entrepreneurship through their guidance. My father is an example of this legacy, and many others in this sector also share similar experiences. Back then, these visionaries were deeply concerned about loan repayments, a concern that still resonates today. Many promising entrepreneurs are hesitant to expand due to the fear of loans. This is a major reason why several talented entrepreneurs fall behind in their endeavors.
We need to bridge this gap and create a supportive ecosystem where banks and industries work hand in hand. It’s essential to cultivate trust and provide the necessary guidance to foster growth and innovation in our economy. Every month, our RMG and Textile organizations (BKMEA, BGMEA, BGBA, BTMEA) and stakeholders should organize seminars with bank heads, not just MDs, to show & exchange dialogues about real garment banking. Everyone will agree that it is impossible in the garment sector to maintain 100% compliance with SOPs as per norms. It is essential now to invite them and show them our part of the issue. Otherwise, this fight will continue. Arranging dialogues and finding new ways of financial management is crucial.
The legacy of bond and BBLC facilities
The bond and BBLC facilities have been instrumental in the growth of Bangladesh’s garment sector. By allowing duty-free import of raw materials, these policies have enabled manufacturers to remain competitive in the global market. However, this dependency also poses significant risks. If these facilities were to be withdrawn or altered, the industry could face severe disruptions.
Challenges and risks
Loan burdens
Despite the advancements and investments, the industry grapples with substantial loan burdens. Many manufacturers have taken on significant debt to finance their operations and expansion. The reliance on BBLC and bond facilities means that any change in these policies could exacerbate financial stress.
A vision for a sustainable future
In light of these challenges, it is crucial to explore and implement sustainable alternatives. One potential strategy is to facilitate our customers in Bangladesh, including non-garment trading houses, foreign investors, buying houses, and trading houses, with BBLC and bonded warehouse facilities beside existing ones. This would enable them to import their required fabrics, trims, and raw materials at their own expense and utilize our manufacturing capabilities solely for CM (Cut, Make) basis. This approach reduces risk for both banks and manufacturers. Increasing CM-based work on an FOC (Free of Cost) basis is also beneficial. Currently, a manufacturer can import 50% on an FOC basis based on their performance. This should be expanded to help many new small and medium factories grow their exports.
Developing alternative financing mechanisms
Exploring new financing mechanisms can reduce the reliance on BBLC facilities. Options like factoring, supply chain financing, and partnerships with international financial institutions could provide the necessary capital without the constraints of traditional BBLC structures.
Policy reforms
The government and industry stakeholders must collaborate to develop modern policies that support sustainable growth. This includes creating incentives for local production, improving data management systems, and ensuring that financial regulations keep pace with industry needs.
Planning for the future
The garment industry in Bangladesh has a rich history of overcoming challenges and adapting to changing conditions. As we look to the future, it is essential to recognize the importance of bond and BBLC facilities while also preparing for a time when these may no longer be available. By investing in local production, exploring alternative financing mechanisms, leveraging technological advancements, and facilitating customer imports, the industry can reduce its dependency on imports and build a more sustainable foundation.
The current generation of entrepreneurs is highly educated and skilled, but to secure the industry’s future, we must also focus on policy reforms and strategic planning. This way, we can ensure that the next generation can conduct business safely and successfully, without the looming burden of debt and dependency on outdated facilities. It is not only a matter of surviving but thriving in a competitive global market.
By addressing these challenges now, we can create a resilient garment industry that continues to be a pillar of Bangladesh’s economy for generations to come. With the collective effort of industry leaders, policymakers, and stakeholders, we can pave the way for a brighter and more sustainable future, ensuring the legacy of the garment industry endures.
I have witnessed the growth of the RMG industry since childhood, experiencing its highs and lows, its successes and challenges. This unique perspective drives my belief that we must research and implement alternatives to bond and BBLC facilities to safeguard the future of our industry. RMG is no longer just an industry; it sustains the livelihood of approximately 50 million people in this country, directly and indirectly, with the potential to support many more in the future. No other sector can create such vast employment opportunities.
Therefore, we need to think critically and focus on securing not only the industry but also the future employment of the next generation. We must explore innovative solutions, implement best practices, and ensure that our policies and infrastructures are robust enough to withstand future challenges.
To be continued…
In the final part of this article, we will share valuable opinions from some of our most successful and forward-thinking RMG owners, who are ahead of their time and can provide insights into securing the future of our industry.
