The country’s readymade garment (RMG) sector went through ups
and downs last year, prompting industry insiders to seek immediate policy
support to tackle the challenges still ahead of them. Although the garment
export receipts showed an upward trend in the first five months of 2019, the
trend reversed mostly in the second half of the year. In January 2019, RMG
exports grew by 8.68 per cent with earnings of US$ 3.13 billion, compared to
the same month of 2018. But the export saw negative growth (3.49 per cent) in
June 2019 first and the fall continued until November with an exception in
July, official data showed. The RMG export earnings during January-November
period of 2019 clocked at $30.13 billion as against $32.92 billion in 2018,
according to the Bangladesh Garment Manufacturers and Exporters Association
(BGMEA) data. Moreover, the year saw dependency on a few RMG items and
traditional EU, US and Canada markets, little efforts for diversification and
production of mostly cotton-based items. According to the BGMEA data, some 73
per cent of the country’s total RMG exports are concentrated on only five items
— T-shirt, trousers, jackets, sweater and shirts. And prices of 83 per cent of
exports were as high as $15 per kg and 74.14 per cent of the exports were
cotton-based items. About 83.34 per cent of the total RMG exports went to
European Union and North America, the data showed. Dr Khondaker Golam Moazzem,
additional research director of the Centre for Policy Dialogue, said several
issues related to RMG sector dominated the year 2019 and the sector depended
largely on few items and cotton-based products. Industry people said the big
units are getting bigger and increasing the capacity but without proper
planning with regard to markets and demand. Such unplanned capacity expansion
of the industry focusing on a few products is one of the major reasons behind
weak price negotiation power and unhealthy competition among themselves, they
said. When asked, BGMEA president Dr Rubana Huq said, “It was a happening
year for the RMG industry as 2019 marked a number of positive developments, yet
it was not a pleasant time for our export as the growth had been faltering
throughout the year and had a nosedive in the latter half.” Ending the
stalemate with regard to Accord’s phasing out from Bangladesh and forming a
national safety monitoring regime, ‘RMG Sustainability Council (RSC)’, were
major breakthroughs this year, she added. The Accord, a platform of more than
200 global apparel brands, retailers and rights groups mostly based in Europe,
was formed immediately after the Rana Plaza building collapse to improve the
workplace safety in the country’s apparel industry for a tenure of five years
that ended in May 2018. The Alliance, another such platform, folded its
operations in the garment sector in Bangladesh on December 31, 2018, and more
than a dozen of its signatory companies, out of 21, launched a new platform,
namely ‘Nirapon’, to oversee the ongoing safety, training and helpline efforts
at the Alliance-listed garment factories in March 2019. Terming implementation
of a new minimum wage a major challenge for the RMG sector, though complied, Ms
Huq said, “The industry continues to face severe financial hardship,
resulting in closure of 61 factories, and export kept plummeting for the fourth
consecutive month since August 2019.” Some 60 garment factories have
closed down during January-October of 2019, resulting in job losses for 29,594
workers, while entrepreneurs have made fresh investments to set up 58 new
garment factories during the period, according to the BGMEA. Of the new units,
43 per cent have been set up by new entrepreneurs and the remaining by the ones
who are already in the business for a long period of time. The new units are
expected to create employments for more than 51,000 workers once they come into
full operation within one and a half years. “Stronger value of Bangladeshi taka
against US dollar compared to competitor currencies has added to the woes as
the industry keeps struggling with unit price,” Ms Huq said. Despite all
the investments made in workplace safety, compliance, implementation of new
wage structure and green industrialisation, the unit price did not see much
improvement, she said, adding that the unit price in EU and the USA has
increased by 2.22 per cent and 5.57 per cent respectively during
January-October of 2019 (year on year), yet the price level remains
significantly lower on a five-year comparison. Citing the Office of Textiles
and Apparel (OTEXA) and Eurostat data, she said the price of apparel imported
by the USA from Bangladesh during Jan-Oct 2019 fell 2.20 per cent, compared to
Jan-Oct 2014, and the same happened in the case of EU, with the price declining
by 1.94 per cent. Industry people, however, said that there are few other good
signs in 2019, including supply of RMG products to big online retailer, Amazon,
and coming back of another American company. Ralph Lauren, one of the world’s
largest fashion brands that stopped sourcing garment items from Bangladesh
after the Rana Plaza building collapse, has resumed sourcing from Bangladesh by
reopening its office in Dhaka. Online retail giant Amazon in November disclosed
the names and addresses of its suppliers, including 23 factories from
Bangladesh that produce Amazon-branded products, after the company recently
faced criticism over its hosting third-party sellers who sourced apparel items
from a Bangladeshi factory which was reported unsafe, the industry people said.
The 2019 calendar year started with labour unrest over the review of the last
wage structure that set Tk 8,000 as minimum monthly wage for the RMG workers,
which came into effect in December 2018. Both local and international right
groups raised concerns over mass job cut by factory owners following the labour
unrest. Irish retailer-Primark suspended
placing new orders with one local RMG supplier in August 2019 following alleged
termination of workers involved in demonstration for wage hike. At the June ’19 International Labour
Conference, worker delegates from Italy, Pakistan, South Africa, Brazil and
Japan suggested forming a commission of inquiry against Bangladesh over the
allegation that Bangladesh was not following ILO convention 87 on freedom of
association and right to organise, convention 98 on right to bargain
collectively and convention 81 on labour inspection. Meanwhile, experts have
recommended RMG product and market diversification, allowing foreign direct
investment in the garment sector, devaluation of local currency against US
dollar and restructuring of the government incentives to help the sector cope
with the existing problems.They also suggested product development, efficient
management of garment waste, skills improvement and further improvement in
labour rights situation. Policy Research Institute of Bangladesh (PRI)
executive director Dr Ahsan H Mansur in a recent meeting recommended allowing
foreign direct investment in the sector to promote product diversification
within the industry. He also suggested devaluation of local currency against US
dollar, saying that Bangladeshi exporters are losing their competitiveness, as
their competitors have already devalued their currencies. Incentives should be
given to the targeted groups such as entrepreneurs who are producing
value-added or upgraded items, managing waste efficiently and exporting items
to markets other than traditional US, EU and Canadian markets, said Khondaker
Golam Moazzem of CPD. The government
incentive packages for the sector should be restructured but without reducing
the amount, he noted.