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Brazil poised to become world’s largest cotton exporter

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RMG Bangladesh
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Brazil is poised to become the world’s largest cotton exporter, overtaking the United States, as the main US producing region, Texas, is suffering from droughts and heatwaves, a Brazilian cotton industry leader has said.

“If the US crop continues to deteriorate, Brazil can easily overtake the United States,” Gustavo Vigano, vice president of the Brazilian Cotton Producers Association, said, reports Xinhua.

“The two countries are already equal in basic statistics. It is conceivable that Brazil will become the world’s largest exporter this season,” Vigano added.

The United States and Brazil are the world’s largest cotton exporters, accounting for more than half of the global supply. The United States is expected to export 12.5 million bales in the 2023-24 season. However, due to the drought in Texas, the figure may be reduced.

As a result, Brazil, with an export forecast of 11.25 million bales this season, could become the world’s largest exporter.

Moreover, US cotton quality “has not been as good” in recent years due to droughts, while Brazil has “very good quality” because of its rainfall pattern, according to Vigano.

The US cotton crop is only one grade above its worst level on record, as about 40 per cent of its production is coming from drought-stricken areas, including nearly all of Texas, which had the second-hottest summer on record this year.

“Many (Brazilian) farmers want to increase the area planted for cotton for next year,” Vigano added. “Since we cannot absorb all the supply, we will export more.”

The current situation of the RMG industry and ongoing review of minimum wages

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RMG Bangladesh
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Dear valued Brands, Retailers, and representatives of esteemed Buyers. Greetings from BGMEA. Hope you are doing well.

Though I am addressing you in this letter, I hope you are in receipt of my regular emails updating you about trade and other contemporary issues. As the subject, mentioned above, suggests I am writing to share with you about one of the current and most important issues in our industry.

Regardless of our position and stake in the global apparel value chain – as manufacturers or buyers – we all are going through a tough time. The unprecedented inflation, leading to contractionary policies by central banks in all developed countries, is affecting disposable income, spending and demand for products. While managing the supply chain has become difficult at the retail end, we, the manufacturers are in a complete ‘nightmare situation’ to manage our capacities, supply chain, planning and forecasting.

Yet, we have been quite successfully able to retain growth momentum in our exports, so far. Of course, we acknowledge your continued support in this journey with deepest gratitude. Challenges were and are emerging in new forms and scales. You know about the zero tolerance and committed efforts and investments made by the industry to remediate and ensure complete safety at the workplace. While we made significant progress in this area and continued our efforts, we faced the pandemic of the century and its devastation on us. But with the support of yours and our government, we proved our resilience and came back to business. I do also think that the support you received from us, especially operating during the time of pandemic following strict health protocol, is unparalleled. This makes us unique as a nation and we want to continue this journey with you.

We are working continuously to improvise ourselves. We are making all the efforts to make business easier and efficient. Some of our steps in the recent past have already brought results, especially with regard to the importation of textiles from India through multiple land ports, the relaxation of rules regarding partial shipment while importing textiles from India. The direct cargo train between India and Bangladesh and improved warehousing capacity in land customs ports have opened a gateway for improved trade logistics. The government also waived the rule of mandatory fumigation for importing cotton from the USA. At the same time, the rule regarding import of raw materials on FOC basis is relaxed from 4 months to 6 months. Several mega infrastructure projects are completed and we are waiting to have the new terminal opened at Dhaka airport by the end of this year! More reforms and mega projects are underway. These will add more pace to our business in the coming days.

In our journey ahead, we have committed to putting the utmost importance on sustainability, aligning with the SDG vision. We now have 202 LEED certified RMG factories in Bangladesh of which 73 are platinum. We are working with a clear sustainability vision to significantly decarbonize our industry and adopt circularity by 2030, which aligns with your priorities and complements your values as well. Well, our efforts are not limited to social and environmental causes, but how we remain economically viable through innovation, digitization, diversification and being more productive and resource-efficient. I gratefully acknowledge the support and collaboration from a few major brands, who are working with BGMEA to support the industry transformation at a larger scale. We need more handholding to pursue the area of possibilities. For your kind information, we are trying to make BGMEA as a futuristic organization. We established a Future Center at BGMEA which covers a Center for Innovation, Center for Efficiency and Center for OSH to foster innovation in every segment of the trade; the Textile Technology Business Center (TTBC), which is an offspring of the Partnership for Cleaner Textile (PaCT) project; a Responsible Business Hub (RBH) in BGMEA to strengthen the capacities of our manufacturers to adapt and comply with the globally emerging due diligence; and a Circular Fashion Unit to deal with the circular economy initiatives. Besides, BUFT is being strengthened further to better cater to the need for professionals in the industry in diverse disciplines. The Chattagram BUFT is also made functional. We are now exploring collaboration opportunities with fashion institutes overseas so that we can facilitate more exchange programs and learn better. I would appreciate it if you could connect with such institutes. We are also in the process of establishing a digital data platform to baseline and monitor improvements in ESG practices at factories.

While having all these visions and aspirations, the reality is full of challenges. No one can tell you better about the cost factors and their dynamics. We are yet to recover from the loss caused by the pandemic, and we are investing so much to make the industry transparent and sustainable. Now, inflation and production cost hike including gas, electricity, fuel, transport and other costs, is squeezing our breathing space. In fact, the workers, who are the lifeline of this industry, are suffering the most from inflation. We know that the price level has also gone a bit higher, but barely enough to cope with the cost upsurge.

However, you may know that the Minimum Wage Board for garment workers is working to review the current minimum wages. The Board has already done several meetings and currently consulting with different stakeholders. They are visiting factories and discussing with workers and owners. I believe before the end of this year a new minimum wage will be declared and there will be quite a significant increase if we look at the trend of previous reviews, as well as the aggregate inflation in past five years. In fact, in today’s world there is no respite from inflation, be it in Bangladesh or any country around the world. Well, the Minimum Wage Board is an independent body, with equal representation from workers, owners and independent groups. It works independently, so it’s difficult for me to speculate about the hike in wages. But considering the standard and cost of living of our workers, and the inflation, I would urge you to kindly consider a rational price upcharge in your current price negotiations for the orders to be produced from the 1st of December 2023 onwards. This is important for a smoother transition to a new wage scale.

I also take this opportunity to solicit your suggestions, advice, information, or comments to make our industry more competitive, efficient and sustainable. Please send me your thoughts to president@bgmea.com.bd

As we commit ourselves to continuously delivering the better, we are leaving no stone unturned to optimize the value of our spending, with an uncompromising stance on ethical and responsible business. Let us be more empathetic toward each other and find the space for realignment and continued partnership.

Author: Faruque Hassan
President, BGMEA

BGMEA seeks support of buyers, unions, consumers in adopting new wage board

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RMG Bangladesh
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The BGMEA’s letter states that it believes ensuring a better life for workers is not only the manufacturers’ responsibility, but also brands, consumers, international organisations and trade unions

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has sought support from all beneficiaries of the apparel sector – including buyers, brands, trade unions and consumers to adopt the new wage board for ensuring a better life for garment workers.

An RMG factory. Photo: TBS

Its President Faruque Hassan sent a letter on Sunday to all members of the Action, Collaboration, Transformation (ACT), an initiative of 19 international apparel brands and retailers, and the IndustriALL Global Union, addressing the issue of better living wages for the readymade garments (MRG) workers. He sent it in response to the ACT’s letter from 12 September regarding the minimum wage board.

The ACT letter had said, “We sincerely hope and urge that the minimum wage board members reach a negotiated consensus that allows setting the new wage covering the minimum income necessary for a worker to meet their basic needs, as well as some discretionary income. This should be earned during the normal working hour limits.”

The BGMEA’s letter states that it believes ensuring a better life for workers is not only the manufacturers’ responsibility, but also brands, consumers, international organisations and trade unions.

Referring to the stakeholders, the trade body said it would not be possible to execute a new wage structure if they do not cooperate in consideration of low product price amid high inflation and the ongoing global economic crisis.

The apex body also assured that Bangladesh has safe workplaces for workers, and the apparel sector is making progress; especially through its green initiatives.

BGMEA President Faruque Hassan further said, “Workers are the lifeline of our industry and we are always trying to pay better wages. But buyers and brands also have a responsibility to pay fair prices for products.  An ethical purchasing practice is key to ensuring a better life for workers.”

The government has already formed a new wage board. We will get a new salary structure as soon, he added.

Besides, the BGMEA also sought duty-free market access till at least 2032 – though Bangladesh will graduate from the Least Developed Countries (LDCs) list in 2026 – from export destinations’ government authorities. 

Speaking to The Business Standard, BGMEA Vice President Shahidullah Azim said every exporter is facing challenges in running their units due to the liquidity crisis. “Despite that, we have to adopt the new wage board to give breathing space for our workers during the inflationary pressure.”

Exporters’ dollar retention limit lowered again

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RMG Bangladesh
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The central bank has once again lowered the US dollar retention limit that exporters have to maintain in their foreign currency accounts from the shipment proceeds as Bangladesh continues to face the shortage of the American greenback.

Traders are allowed to keep a portion of their earnings in the export retention quota (ERQ) accounts to settle back-to-back letters of credit liabilities without facing exchange losses.

For example, merchandise exporters are entitled to a foreign exchange retention quota of 60 percent of repatriated FOB (free on board) value of their exports.

For the shipment of goods having a high import content like products such as naphtha, furnace oil and bitumen, garments made of imported fabrics and electronic goods, the retention quota is 15 percent, according to the central bank guideline of 2018.

Exporters of software, data entry and processing and other ICT-related services may retain 70 percent of net export earnings.

But in July last year, the BB asked banks to encash 50 percent of the balance held in the ERQ accounts immediately.

It also ordered them to revise downwards the retention limit from 15 percent, 60 percent and 70 percent to 7.50 percent, 30 percent and 35 percent, respectively. 

The tenure of the reduced limit ended on December 31, meaning the cap went back to the previous level from January 1 since no order was issued by the central bank immediately. 

Yesterday, the central bank brought down the limit to 7.5 percent, 30 percent, and 35 percent, again. This time, the central bank, however, has not said how long its latest instruction would remain in place.

In July of 2022, the BB had said the retention of foreign currencies in such accounts for a longer period without using them is a cost to exporters since deposits in the taka bear adequate yield.

The latest move from the BB comes as the country continues to witness the forex shortage owing to the depletion of the forex reserves amid higher import bills against lower-than-expected remittance and export receipts.

Thus, the forex reserves came down to $21.45 billion on September 21.

A central banker yesterday said if exporters keep a lower amount of export proceeds in the ERQ accounts, the liquidity in the banking system improves.

BGMEA demands fair price from buyers

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RMG Bangladesh
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The BGMEA made the demands in a letter sent to Action, Collaboration, Transformation (ACT)

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) today urged the members of Action, Collaboration, Transformation (ACT) for fair pricing and ethical sourcing of garment items from Bangladesh.

The BGMEA made the demands in a letter sent to ACT, a joint initiative between 19 international garment brands and retailers and IndustriALL Global Union, which aims to support the development of living wages in the garment sector.

BGMEA President Faruque Hassan made the statements in a letter in reply to a letter ACT had sent to the BGMEA last week.

In the letter, Hassan said international retailers and brands should pay a fair price, considering the workers’ standard and cost of living and inflation.

“Therefore, we would urge you to engage with global brands, retailers and their representatives, urging them to be more empathetic and rational on pricing and sourcing practices,” Hassan said.

Hassan said they had been working relentlessly to improve skills and efficiency among workers. Such initiatives should have broader collaboration so that workers become more empowered and add more value to their factories, he said.

The Minimum Wage Board for garment workers is reviewing the current minimum wages. The board has already held several meetings and is currently consulting with different stakeholders. They are visiting factories and discussing with workers and owners.

“I believe a new minimum wage will be declared before the end of this year. There will be a rational adjustment if we look at the trend of previous reviews as well as the aggregate inflation over the past five years,” he said.

“In fact, in today’s world there is no respite from inflation, be it in Bangladesh or any country around the world. Moreover, you may know that since 2013 the minimum wage gazette makes it mandatory to give a 5 percent annual increment on base wage (which increases after adding other allowances),” he added.

“So their wages are increasing automatically every year. The Minimum Wage Board is an independent body, with equal representation from workers, owners and independent groups. It works independently, so it’s difficult for me to speculate about the hike in wage.”

Stitchwell Designs looking to restart production

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RMG Bangladesh
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The management of Stitchwell Designs Ltd, an export-oriented garment factory, yesterday claimed that it had to stop production in 2020 after international buyers took exception to the odour of naphthalene in shirts exported by the company.

In a press conference held on the now-shuttered factory floor in Dhaka’s Tejgaon locality, Md Iqbal Hossain, managing director of Stitchwell Designs Ltd, said the objectionable odour originated from the adjacent factory, which produces naphthalene and tar and is separated by a single wall.

Replying to queries, Hossain said that he had cleared dues of Tk 13 crore to workers in March 2020 before shutting up shop.

He added that he had lost all work orders from buyers, including the likes of Zara, Mango, LIDL, Carrefour, Walmart, Kmart and PDS due to the issue.

One of his buyers from the US claimed compensation amounting to $2.34 million and burnt his shipment in San Francisco after smelling naphthalene on the goods, Hossain said.

He said he had started the business on the premises in 1992, adding that buyers first began complaining about the foul smell in 2015, around the same time nearby Nazrul and Brothers started production of naphthalene.

He added that he had a lot of work orders from his buyers now and wanted to re-start production in the Tejgaon premises, where his 1,00,000 square feet factory has been lying idle for the past three years.

Currently, he is operating another factory in Tongi, which ships garment items worth more than $30 million a year.

Before closing down the factory in Tejgaon, he used to ship mainly woven shirts and trousers worth $20 million. He employed 2,500 workers, but the number fell to 1,500 in the final days of production as work orders dwindled following the complaints.

Hossain said he had sat with Nazrul Islam, chairman of Nazrul and Brothers, several times but those negotiations did not amount to anything.

Both parties are now awaiting a court verdict.

When contacted, Nazrul Islam told The Daily Star that he had been operating his factory in the same place since 1980 while following environmental and other regulations.

He said that he had not been receiving clearance certificates from the Department of Environment for the past three years after Hossain lodged a complaint to the government department.

Islam added that he had already built a new factory at Kanchpur in Narayanganj and is now awaiting the gas connection at the new factory before he relocates.

He said he was moving because the premises in Tejgaon was small and built nearly 44 years ago.

Imports on incremental fall under belt-tightening

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RMG Bangladesh
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Imports show an incremental fall under belt-tightening recipe the government has adopted amid dollar dearth, with the July-August turnover recording an 18-percent contraction.

Economists and businesspeople say lower-than-necessary imports have downstream economic implications, as the supply chains get into volatility for want of adequate supplies.

The overall import trade in terms of opening letters of credit dipped to US$ 10.5 billion, down 18.14 per cent during the first two months of the current fiscal year, 2023-24, over its corresponding period a year before, data compiled by Bangladesh Bank showed.

Supplies of consumer goods like cereals, edible oils and so took a knock as the import category dropped by 39.25 per cent to $926.11 million year on year in July-August 2023, according to the data.

The import of capital machinery also plunged by nearly 22 per cent to US$388.8 million, with its implications on production chain.

And the import of intermediate goods — again a necessity for industrial production — dropped nearly 20 per cent to $ 798.7 million during the period under review.

Another squeeze on economic activity come from fuel front — petroleum imports registered a fall by 22.33 per cent to $1.53 billion over the corresponding period.

And industrial raw-material imports declined by 27.64 per cent to approximately $3.3 billion during this past July-August period.

A saving grace is seen only in ‘others’ category, with an increase in imports by 7.75 per cent to $3.6 billion.

Bangladesh mainly makes cash import, accounting for around 60 per cent of the turnover. Import on buyer’s credit, loans and grants as well as IDB loans also takes place.

Economists and manufacturers find two main reasons behind the sharp fall in imports: persisting higher inflation which adversely affects demand for goods on the domestic market and dollar shortages as the banks are unwilling to open LCs.

Dr Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI), blames dollar shortage for the downturn in capital-machinery imports.

“There is also uncertainty in both export and domestic markets. Generally, sales are down,” he told The Financial Express.

“The implication of this is that the productive capacity of the economy will not increase and job creation will be low.”

“To my mind, the dollar-market volatility is the key reason as many banks are not willing to open LCs against imports,” says Dr M Masrur Reaz, chairman of the Policy Exchange of Bangladesh.

On a point of prudence, he sees such a continuous fall in imports as good when the balance of payments is considered. But “ultimately it will impact employment and growth.”

He notes that the global commodity market is favourable as the prices there have eased. “We fail to import because of dollar.”

Interbank dollar-taka exchange rate is now Tk 110 or up by nearly 7.0 per cent in a year since September 2022, according to dealers’-body BAFEDA.

Anwar-Ul Alam Chowdhury Pervez, managing director of a leading textile corporate — Evince Group — told the FE that the main reason for drop in the imports is dollar crisis.

“Banks are not showing interest in LC opening.”

Mr Chowdhury says many exporters have been failing to import industrial raw materials. “Now, persisting higher inflation has affected the buying power of consumers which is also another reason behind the sharp fall.”

Inflation has continuously outpaced the target, hitting nearly 10 per cent in August last, amid quirky price rises on an intractable market that tends to take least care of official interventions.

jasimharoon@yahoo.com

News Source : thefinancialexpress

Nepalese govt delegation meets BGMEA president to discuss trade opportunities

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RMG Bangladesh
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A delegation representing the Ministry of Industry, Commerce and Supplies of Nepal held a meeting with Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), on 20 September.

During the meeting held at BGMEA Complex in Dhaka, both sides discussed issues of mutual interests, potential areas of collaboration, and trade and investment opportunities between the two countries.

The Nepalese delegation, led by Baburam Gautam, director general of the Department of Industry within the Government of Nepal, exchanged ideas and information with BGMEA President Faruque Hassan.

The discussion encompassed a wide range of topics, including the thriving readymade garment industry in Bangladesh, its future prospects, and the strategic vision for its continued growth.

BGMEA President Faruque Hassan shared insights into Bangladesh’s emphasis on diversifying its market for garment exports and its ongoing efforts to explore new export destinations.

He expressed a keen interest in exporting readymade garments to Nepal and emphasised the importance of collaboration between the two countries to unlock mutually beneficial opportunities.

The Nepali delegation highlighted the investment potential within Nepal and showcased the various opportunities available to investors.

In the meeting, both parties expressed willingness to work together to realise mutual benefits.

Woven suiting fabric imported in guise of poly knitted fabric to evade Tk1.1 crore tax

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RMG Bangladesh
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An importer in Narayanganj imported 28 metric tonnes of woven suiting fabric from China under the guise of poly knitted fabric in an attempt to evade Tk1.1 crore in taxes.

The matter came to light when customs authorities at Chattogram port checked the container imported by Nazmul Hosiery (Pvt) and found only woven suiting fabric.

Ahsan Enterprise, the C&F agent of who oversaw the import, submitted a bill of entry to customs on 13 September to release the consignment worth $12,280, said Saiful Haque, deputy commissioner of Chattogram Customs House Audit Investigation and Research (AIR) unit.

However, the customs obtained information that the import was done under false declaration and the AIR branch locked the shipment on the same day, he added.

Later on 19 September, the container was manually checked inside the Chattogram port and about 28 metric tonnes of woven suiting fabric was found in place of 100% poly knitted fabric as previously declared.

Necessary legal action will be taken against the persons and organisations involved in tax evasion and misuse of bond facilities, said Deputy Commissioner of Customs Saiful Haque.

When contacted, Nazmul Hosiery (Pvt.) Ltd official Zakir Hossain told TBS, “We have imported poly knitted fabric products as per declaration. We don’t know how different products came instead. We are discussing with the customs authorities regarding the matter.”

The government provides duty-free import of raw materials through bond facility for garment exports.

The consignment was imported duty-free under bond facility citing the purpose of exporting ladies shirts to Leopoldo Gross & Asso S.A, Uruguay.

However, it is assumed that they imported woven suiting fabric to sell in the open market. This had caused a tax evasion of at least Tk1.1 crore, says customs sources.

Exporters urge buyers to pay more for future orders considering workers’ living costs

POST BY
RMG Bangladesh
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Acknowledging that the price levels have increased somewhat, the BGMEA noted that these adjustments are barely sufficient to offset the rising costs

Apparel exporters have appealed to brands and buyers to consider paying additional costs for forthcoming orders in view of rising living expenses of workers due to the high inflation across the world.

BGMEA President Faruque Hassan made the call in a letter, sent to all representatives of brands and buyers on Thursday, pointing out that the new wage board for workers is expected to be implemented by this December. He requested buyers to take this into account when placing upcoming orders, particularly for products scheduled to be produced from December onwards.

“Now, inflation and production cost hikes, including gas, electricity, fuel, transport, and other costs, are squeezing our breathing space. In fact, the workers, who are the lifeline of this industry, are suffering the most from the inflation,” reads the letter.

Acknowledging that RMG product prices have increased to some extent, the BGMEA noted that these adjustments are barely sufficient to offset the rising costs.

Photo: Rajib Dhar

“You may know that the minimum wage board for garment workers will review the current minimum wages,” the BGMEA chief wrote, adding that the board has conducted several meetings and is presently engaging with various stakeholders. “They [the board members] are visiting factories and engaging in discussions with both workers and owners.”

Faruque further said, “I believe before the end of this year a new minimum wage will be declared and there will be quite a significant increase, if we look at the trend of previous reviews, as well as the aggregate inflation in the past five years.”

While requesting buyers to contemplate a reasonable price adjustment for forthcoming orders, the leader of the apex trade body emphasised that it is also important for a smoother transition to the new wage scale.

He also sought suggestions, advice, information or comments from different brands and buyers to make this industry more competitive, efficient and sustainable.

“As we commit ourselves to continuously delivering the better, we are leaving no stone unturned to optimise the value of our spending, with an uncompromising stance on ethical and responsible business,” he added.

The first minimum wage board in the RMG sector in Bangladesh was formed in 1984 with Tk560 as minimum monthly wage. So far, the wages of workers in this sector have been revised six times. The latest minimum monthly wage is Tk8,000, which was effective from December 2018. According to the labour law, new wages have to be fixed every five years.

According to statistics for December 2021, Bangladesh has the lowest wage among the competitor countries – Pakistan, Sri Lanka, India, Myanmar, Cambodia, and Indonesia.

The government formed a new wage board for garment workers on 9 April 2023. The new wages are likely to be finalised by November and implemented in the following month.

Meanwhile, labour rights groups demanded offering workers a minimum monthly payment of Tk23,000.

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