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Thailand ends consultations on EU free trade talks restart

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The Thai ministry of commerce is preparing to wrap up consultations with relevant agencies and organisations across the country on a proposal to resume free trade talks with the European Union (EU). A summary of opinions would be submitted to a committee on international economic policy chaired by deputy prime minister Somkid Jatusripitak. Many parties support the resumption of trade talks, but there are concerns over the possible influx into Thailand of products like wine and liquor on a zero-per-cent tariff if a trade pact is signed, said Auramon Supthaweethum, director-general of the department of trade negotiations. She said Thailand would meanwhile hold free trade talks with Turkey next month, according to a report in a Thai newspaper. The European Free Trade Association (EFTA), which represents Iceland, Liechtenstein, Norway and Switzerland, has yet to be consulted as to whether it wishes to resume talks with Thailand. Those negotiations have been stalled for more than 13 years since the initial two rounds held in 2005 and 2006.

RMG exporters to go all out for fair prices

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In a desperate move for better prices, Bangladeshi garment exporters are planning to hold rallies and human chains in major European cities to create awareness among the end consumers. The activist move comes after brands opposed the idea of fixing a base price for garment items. At present, as many as 39 percent of the garment manufacturers are selling garment items to buyers at prices lower than the production costs, according to a survey of the Fair Wear Foundation, an Amsterdam-based organisation that works to improve labour conditions in garment factories. The reason garment makers resort to the desperate move is that insolvency safeguard mechanism is absent, said Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, the sector’s apex trade body. “The data mentioned in the report not only reflects the desperate move by the factories to retain their customers, but also their struggle to avoid any situation leading to insolvency since there is no legal route to safely exit from their investments.” The cost of production of apparel items increased 30 percent between 2014 and 2018, she said. Furthermore, the minimum wage of the garment workers has increased 51 percent since December last year. Between fiscal years 2015-16 and 2018-19, the industry’s value addition has gone down 1.61 percent though apparel exports have increased from $28.10 billion to $34.13 billion during the period. “This means that the growth is happening in physical terms only. But the value addition per piece of garment has rather declined over years.” She also blamed the unplanned expansion in the industry for accepting low prices from retailers. “While we are trying to find our way out from the price-trap situation, we need to look at ourselves and stop unplanned expansion and overcapacity. Overcapacity is perhaps the weakest point behind our poor bargaining ability.”  The current BGMEA board has taken a number of steps to bring discipline in the sector such as putting in a request with the commerce ministry to initiate a national database project named ‘National Base Capacity’ to monitor product-wise capacity in the industry and regulate future investments. The over concentration on few products and markets is another problem for the sector, she said. Almost 85 percent of the garment products from Bangladesh are headed to the EU and North America. “Product diversification is also not happening at the desired pace,” she added. Ahsan H Mansur, executive director of the Policy Research Institute, also supported the initiative of holding awareness programmes on the proposal to fix a base price. “In many cases the suppliers might lose the profit, but in the long run they may make profit.” The awareness programmes among the end consumers are needed because they should know that the low prices make poverty permanent in many countries. The suppliers should also form an association for launching such campaigns, he added. Syed M Tanvir, a director of Pacific Jeans, a leading denim jeans exporter, also welcomed the awareness programmes. Mohammed Hatem, first vice-president of the BGMEA, said: “Sometimes, we are bound to sell our products below our production costs.”   

RMG exports to US grow by 9.96pc in 9 months

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The growth in Bangladesh’s readymade garment exports to the United States continued decreasing in nine months (January-September) of 2019 as global consumption of RMG products dropped amid economic woes and some of the competing countries grabbed more market share, experts and exporters said. Bangladesh’s RMG exports to the US in January-September of this year grew by 9.96 per cent while the export growth to the market was 14.49 per cent in the first half (January-June) and 16.12 per cent in the first quarter (January-March), according to the data released by the Office of Textiles and Apparel (OTEXA) under the US Department of Commerce on Saturday. The data showed that Vietnam’s export growth to the US in the first nine months of this year remained steady while Cambodia and Turkey witnessed a sharp increase in the growth in the period. Bangladesh’s earnings from RMG exports to the US in January-September of this year grew to $4.56 billion from $4.15 billion in the same period of last year. ‘Still we have some growth in the US market but some of our competing countries are growing fast in the market that means we are getting very little and our competing countries are getting more benefits from order shifting from China due to the US-China trade war,’ Centre for Policy Dialogue distinguished fellow Mustafizur Rahman said. Despite having the impact of global showdown, Vietnam and Turkey are doing good in the US market in exporting apparel products, he said. Although the US import of apparel products from China remained still high, the import in the first nine months of 2019 posted a 1.10-per cent negative growth with $20.10 billion against $20.32 billion in the same period in last year. Vietnam’s RMG export to the US in January-September of 2019 grew by 12.70 per cent to $10.35 billion from $9.19 billion in the same period of 2018. Among the competing countries, Vietnam registered the highest growth in apparel export to the US in the first nine months of this year, the OTEXA data showed. Earlier, Bangladesh achieved 14.49 per cent growth in RMG export to the US in January-June and it was the highest growth among the competing countries. Apparel exports of Cambodia to the US in first nine months in 2019 grew by 11.13 per cent to $2.02 billion from $1.82 billion in the same period of last year. Cambodia’s RMG export growth to the US was 8.30 per cent in the January-June period and 5.96 was in the first quarter of this year. The US apparel import from India in January-September of 2019 grew by 8.37 per cent to $323 billion from $2.98 billion in the same period of 2018. Apparel export of Turkey to the US in January-September in 2019 grew by 9.17 per cent to $470.11 million from $430.62 million in the same period of last year. Turkey’s export to the US continued to increase in the nine months of this year and the export growth was 6.09 per cent in the first half of the year and it was 5.61 per cent in the first quarter, the data showed.

Country’s post-graduation challenges worry experts

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Bangladesh will have to address a few core policy challenges to achieve the upper-middle income country status by 2031, economists said. The challenges include ensuring equitable tax system, capital market vibrancy, and export diversification. Currently, the country remains mostly concentrated on the readymade garment exports, which are likely to come under threat after its graduation. The views came in the fourth conference of the Bangladesh Economists’ Forum themed ‘Strategies and polices for an upper-middle income Bangladesh,’ held at a city hotel on Saturday. In the first session on ‘Macroeconomic strategies and policies,” planning minister MA Mannan was the chief guest while former finance adviser to the caretaker government Dr A. B. Mirza Azizul Islam was in the chair. Vice chairman of the Policy Research Institute (PRI) Dr Sadiq Ahmed presented a paper on ‘Tax policy management for an upper middle income country (UMIC)’, executive director of the InM Dr Mustafa K Mujeri on the role of financial sector management, PRI executive director Dr Ahsan H Mansur on addressing the balance of payment concerns and PRI chairman Dr Zaidi Sattar on facilitating export diversification for the UMIC. Distinguished fellow of the Centre for Policy Dialogue (CPD) professor Mustafizur Rahman, executive director of the SANEM professor Selim Raihan and associate professor of Dhaka University Dr Sayema Haque Bidisha were discussants on the papers. While presenting the paper, Dr Ahmed of PRI said the country’s tax-GDP ratio has to be jacked up from the present 9.0 per cent to 17 per cent to be a UMIC. He suggested fiscal decentralisation, separation of tax policy wing from the collection, and the selection of a professional chairman for the National Board of Revenue with fixed tenure. He also stressed the need for addressing the issue of non-performing loans in banks, raising substantially the property tax rate, bringing the increased number of rich people under tax net and reducing harassment of taxpayers. He said the interest burden on the people is increasing due to costlier instruments like savings certificates. Dr Ahmed, a former World Bank senior executive, said higher dependence on revenue from trade sources distort the export performance of the country. Currently, up to 30 per cent of the taxes is coming from trade sources. He said the existing tax system has to be reexamined to address those issues. Dr Mujeri expressed the fear Bangladesh would face an increased economic and financial vulnerability after its graduation. He said strong and coordinated medium-term macro-economic framework is needed to face the challenge. “An economic crisis that includes the banking trouble has a more severe and prolonged impact on real sector,” he said. He listed four challenges in developing the capital market: macroeconomic stability, banking sector development, institutional quality and protection of the shareholders. He said the country’s share market is ‘immature’ and ‘illiquid.’ Dr Ahsan H Mansur underlined the need for tracking what he called “missing elements” in the economy: foreigners’ repatriated money, overseas medical treatment, etc. He said the country’s losses in the European Union export market will be higher after its graduation. The tax for apparels in the US market is 15 per cent against its global average of 2.0 per cent from other countries, he added. He stressed the need for developing the negotiations skills capacity for boosting the bilateral trade while diversifying export basket. Dr Zaidi Sattar said high tariff protection in the import-substitute industries works as anti-export bias in the country. He said incentives for the local market are higher than those of the export market, which is affecting export diversification away from garment. CPD distinguished fellow Professor Mustafizur Rahman said Bangladesh will lose preferential and other facilitates in the world market after its graduation. He said the country will have to identify the sectors where it should give strategic support. “We have to look at the global regime how democratic they are,” he added. Not only tariff regime but transport connectivity and other infrastructure issues are also important to stay competitive in the global market. He said the journey towards graduation will not be possible without equitable distribution of wealth. It should be determined what type of political economy the country needs, he added. Dr Selim Raihan said the tax-GDP ratio remains poor despite increasing the GDP base, though the scenario is opposite in other countries. He said the large infrastructure projects involved higher cost and often time overrun. There is a lack of appetite for carrying out reforms, he added. Dr Bidisha said the US-China trade war, Brexit issue, and non-tariff barriers to trade have to be taken into consideration while transitioning into the upcoming status. She said skilled labour, automation of industries are needed as the country’s demographic dividend will not sustain for a long. Former finance minister M Syeduzzaman took a swipe at the family oligopoly and the extension of board of directors’ tenure to nine years from six years in the banking sector. He also said the leather sector has the potential to take off if it is provided with necessary policy support. Dr Mirza Aziz said the government has taken too many projects with insufficient allocation. Still, the allocated money is not spent properly, he added. He suggested privatising all of the state-owned enterprises as those are incurring losses, running with inefficiency and indulging in corruption over the years. He suggested better coordination between central bank and the securities regulator to resolve the conflicting signals like Grameenphone issue. MA Mannan said all projects are on track now except the Padma bridge. About privatising state firms, he said he “personally favours this but not as minister.”

Kenya aims to end import of cotton raw materials in 5 yrs

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Kenya plans to revive its cotton industry by leveraging the cooperative model to boost the textile sector’s overall performance and eliminate the import of cotton raw materials in the next five years, according to Rajeev Arora, cotton, textile and apparel value chain advisor to the cabinet secretary of the ministry of industry, trade and cooperatives. As cotton production has reduced from 30,000 tonnes in the 1980s to approximately 7,500 tonnes now, the aim is to raise production to 10,000 tonnes by the end of 2020 by increasing area under cultivation, Arora said at the launch of the Kenya Investment Policy recently. The key driver of reducing cotton output is the increasing cost of production that has made the cash crop to become unprofitable. Kenya has a pilot project in the coastal county of Kwale where farmers have formed a cooperative, which the government plans to replicate in 22 counties, a news agency report quoted Arora as saying. He said farmers will be provided with certified seeds to ensure optimum yields. Kenya loses about $1.5 billion annually in lost value addition opportunities due to over-reliance on imports of intermediate cotton products that are converted into finished textile products, added Arora.

Indonesian Chamber of Commerce suggests import selectivity

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A focus group of the Indonesian Chamber of Commerce (KADIN) has requested the government to continue the policy of protecting the local industry in light of the China-US trade conflict and the alarming increase in imports. Non-tariff barriers can effectively protect the domestic industry, said KADIN deputy chairperson for industry Johnny Darmawan. Darmawan was speaking at the Non-Tariff Measures Group Discussion Forum last month. KADIN’s views match the statement of the incoming minister of trade Agus Suparmanto that reducing trade deficit is one of the tasks assigned to him by the president. Suparmanto said he will have a more selective policy towards imports as a way to improve the trade balance deficit, according to Indonesian media reports. The focus group observed that the rapid flow of imported goods entering Indonesia has reduced the competitiveness of the domestic manufacturing industry. The problem has been exacerbated by the provision of various subsidies from the governments of the exporting countries, document manipulation by exporters, transfer of tariff posts (circumvention) and undervaluation. The types of manufactured products that have been regulated in the import policy include steel, tyres, textiles and textile products (TPT), ceramics, electronic goods, footwear, flat glass and cosmetics. In general, the products whose imports are regulated are downstream products or finished goods or consumer goods. A case in point is the Indonesian textile industry. Moody’s rating agency predicts that China’s yarn, fabric and garment products will enter Indonesia in a greater volume. Since the US applies tariffs on textile products made in China of 25 per cent, similar products from Indonesia are levied only 10-15 per cent. Due to these tariff differences, Moody’s sees an opportunity for Beijing producers to shift its textile products to Southeast Asia countries, including Indonesia. This in turn will create excess supply of textiles, and with abundant supply, prices will fall, which will create a blow to Indonesia’s own manufacturing sector. The Indonesian Textile Association (API) has shown that 9 factories already closed down due to tougher competition from imported products in the period of 2018-2019. As a result, 2,000 workers were now out of jobs. These factories have lost their ground to the rush of imported textiles and textile products from overseas. There is a need to close loopholes that would allow general importers to import fabric raw materials. Previously, import permits were only granted to textile producers and even that was limited to raw materials such as filament yarn and fibre that in turn may not be traded.

Vietnam’s textile-garment sector may hit $40 bn in exports

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Vietnam’s textile and garment industry is likely to reach its target of $40 billion in export turnover this year despite facing difficulties in some markets, Cao Huu Hieu, managing director of the Vietnam National Garment and Textile Group (Vinatex) said after the sector reported export earnings of $29.3 billion in the first nine months of this year. The domestic market is expected to earn $9 billion this year. He said. After a quiet period, the fibre sector has started showing prosperity with customers displaying more interest and it is hoped the market will correct itself over the next year and return to the highs seen in 2016-17, he said. A Vinatex survey of about 150 enterprises showed that employment opportunities within the industry over the next 10 years would still be high. Many businesses have set up e-commerce systems deals or invested in their own online sales services to increase domestic market share, according to a report in a Vietnamese newspaper. Viet Tien Company has invested in a fashion design centre, while Duc Giang Corporation has focused on building and developing its own brands like Paul Downer, HeraDG and Forever Young. Other enterprises such as Nhe Be and May 10 are also offering fashionable products in various styles and categories to meet diverse consumption needs, ensuring quality and design to follow international trends.

Exports to major markets fall

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Country’s export earnings from all the major markets including the United States, Germany, the United Kingdom, Spain, France, Netherlands, Australia and Canada declined in the July-October period of the current fiscal year of 2019-20. Experts and exporters said that Bangladesh’s export earnings witnessed negative growth in all major destinations as consumption of readymade garment products decreased due to global economic woes and the country lost its competitiveness due mainly to strong value of the local currency. Although the RMG export to the US had increased before July-October this fiscal year due to the US-China trade war, the earnings posted negative growth in the four months of FY20 in the market as competing countries were getting benefits of orders shifted from China, experts said. Country’s export to the US, the largest export destination for Bangladesh, in the July-October period of FY20 fell by 4.57 per cent to $2.15 billion from $2.25 billion in the same period of FY19, according to the Export promotion Bureau data. RMG export to the US fell by 4.86 per cent to $1.92 billion from $2.01 billion. Export earnings from Germany, the second largest export destination for Bangladesh, fell by 10.20 per cent to $1.96 billion in July-October of FY20 from $2.18 billion in the same period of last fiscal year. RMG export to Germany in the four months of FY20 fell by 10.98 per cent to $1.84 billion from $2.07 billion in the same period of FY19. Export earnings from the UK, the third largest export destination for Bangladesh, in July-October of FY20 fell by 2.05 per cent to $1.38 billion from $1.41 billion in the same period of FY19. RMG export to the UK decreased by 1.98 per cent to $1.27 billion from $1.29 billion. ‘The released country export data for July-October is very alarming. If this negative trend in export continues, it would go to have a severe detrimental impact on  Bangladesh economy,’ New Age Group vice-chairman Asif Ibrahim told New Age. He said that the strong value of the taka against the US dollar was one of the key contributing factors to eroding competitiveness of Bangladeshi exporters. The countries which compete with Bangladesh not only devalued their currencies significantly but also provided both fiscal and non-fiscal incentives to their exporters for boosting their competitiveness in the international market, Asif added. Export earnings from Spain in July-October of FY20 fell by 4.47 per cent to $863.63 million while earnings from France decreased by 4.23 per cent to $628.03 million in the period. Export earnings from Italy in the four months of FY20 decreased by 14.26 per cent to $463.45 million and earnings from Netherlands fell by 6.23 per cent to $411.94 million in the period. Export earnings from Canada in July-October of FY20 fell by 12.75 per cent to $357.29 million from $409.54 million in the same period of FY19. RMG export to Canada in the period dropped by 11.76 per cent to $319.30 million. Export to Australia decreased by 5.82 per cent to $265.49 million in the four months of FY20 from $281.90 million in the same period of FY19. Export earnings from Poland in July-October in FY20, however, grew by 9.63 per cent to $385.75 million while RMG export to the country increased by 11.11 per cent to $354.58 million in the period, the data showed. Export earnings from Japan in four months of FY20 fell by 4.50 per cent to $444.04 million from $367.00 million in the same period of last fiscal year. RMG export to Japan in the period decreased by 1.97 per cent to $359.74 million. Export earnings from China in July-October of FY20 fell by 19.41 per cent to $240.80 million and RMG export to the country decreased by 18.79 per cent to $138.72 million. The EPB data showed that export to India fell by 0.61 per cent to $466.18 million in July-October period of FY20 but the RMG export to the market grew by 12.39 per cent to $210.57 million in the period.

Govt mulling raising subsidies to boost jute goods export

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Textiles and jute minister Golam Dastagir Gazi has said the government is considering increasing subsidies to boost export of jute goods. The entrepreneurs will also get raw materials at affordable prices to produce quality jute goods, he added. “The government will facilitate entrepreneurs to get raw materials at affordable prices for producing quality jute goods for boosting export,” he said while speaking as the chief guest after inaugurating a jute products fair in the city on Thursday. Jute Diversification Promotion Centre (JDPC) has organised the three-day exposition at the Officers Club. A total of 100 organisations are showcasing their products at the fair. “We will take initiatives so that the entrepreneurs could get raw jute at an affordable rate for producing fine quality of jute goods,” he asserted. The minister said various initiatives have been taken to promote jute and jute goods, including providing incentives to the exporters. He also said the government is trying to compete with other jute goods exporting players in the globe especially India and China. He urged the JDPC to hold jute goods fair regularly at different places of the country for the interests of the local entrepreneurs. There are around 700 entrepreneurs in the country who are producing 285 different types of eye-catching and environmentally-friendly jute products or goods. The demand for jute goods across the world is increasing due to their bio-degradable nature. Jute sector entrepreneurs said that as the world is more concerned about climate change, new opportunities opened up for the Bangladeshi entrepreneurs to increase export of jute goods. The government has implemented the Jute Packaging Act 2010 from 2014, aiming to promote the country’s jute sector. Agricultural commodities such as sugar, rice, maize, wheat, paddy and fertilisers are supposed to be contained in jute packaging (jute sacks). Textiles and jute secretary Lokman Hossain Mian and officials of JDPC were present at the function.

39pc RMG exporters supply at losses, a study finds

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As many as 39 percent of the Bangladeshi garment exporters accept prices below their production costs for the sake of business relations with international retailers, according to a study by the Fair Wear Foundation (FWF). Based in Amsterdam, FWF is an independent multi-stakeholder organisation that works with garment brands, garment workers and industry influencers to improve labour conditions in garment factories. Apart from the threat of severed business ties, the suppliers accepted work orders from froeign buyers at rates lower than their production costs for mistakes in cost calculation or to one-up their competitors, the study also found. If the suppliers do not accept prices below their production costs, they will lose everything as they will have to pay the workers at the end of the month without any production in the factories, said Koen Oosterom, FWF’s country manager for Bangladesh and Myanmar. The findings of the study styled “Labour minute costing and price negotiations with buyers” was shared at an event held at the capital’s Lakeshore Hotel. The data used were from 2013 to 2016. The factory management also accepts lower prices in the hope of price hike and profit in future, he said. The effects of selling the garment items at prices lower than the production costs are more dangerous. Some 33 percent think they will face the risk of closure and 29 percent will face difficulties in wage payment to workers, the study also said. Only 13 percent of the buyers who source from Bangladesh increased the prices of garment items after the minimum wage hike in 2013. Globally, the picture is almost similar to Bangladesh. During that time, only 25 percent of the global buyers had increased the prices of the garment items after the wage hike, he said. Between 2011 and 2016, the overall prices of Bangladeshi garment items declined 7.79 percent. The picture of price hike by buyers following the latest round of the minimum wage increase in December last year is worse than that of 2013: only one out of the 20 buyers increased the prices, Oosterom told The Daily Star. Every time the international retailers put pressure on the manufacturers to comply with their rules, they should also be mindful of the rates they offer the factory owners, said Mohammad Abdul Momen, director of the Bangladesh Garment Manufacturers and Exporters Association. “There is an imbalance in the negotiation table. We are fearful of losing work orders.” When every consumer of the Western world expresses concern about the environment and sustainability then how can the retailers offer to source garment items at such low rates. “The price they offer is even lower than a cup of coffee,” he added. The pressure is always put on the wage of the workers in this tug of price war between the factory management and the retailers, said KI Hossain, president of the Bangladesh Garment Buying House Association. Consumers always think about the cheaper prices and brands always think about profit, leaving suppliers with no room to make profits, he added. “It is unfortunate that there are no better buying practices although there are so many better manufacturing practices,” said Mohammad Hatem, first vice-president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). Although Bangladeshi apparel industry owners turned their factories into role models for safety by spending few billions of dollars, the retailers are not practising responsible buying practices. “Buyers are killing the garment industry of Bangladesh by offering lower prices,” he added. Fazlee Shamim Ehsan, director of BKMEA, said nothing is changing although the manufacturers are complaining of the low prices of garment items for long. “The buyers offer better prices to other countries, but not to Bangladesh. Is it fair?”

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