The 2014 Dhaka Apparel Summit (December 07-08) marks a watershed in setting ambitions for the future of Bangladesh’s textile and garment industry. Our research indicates an annual efficiency savings opportunity in Bangladesh worth over one billion dollar that, if seized, could give the industry a powerful modernisation impulse. The world’s #2 sourcing hotspot after China, Bangladesh’s USD 22 billion textile and garment industry is the country’s main export engine, and already makes an important contribution to national development. To fully contribute to Bangladesh’s goal of becoming a middle income country by 2021 and reach USD 50 billion in exports by then, the industry now needs to both build on its existing comparative advantages as well as keep innovating to resolve its longstanding challenges in terms of sustainable development. STRONG MOMENTUM HAS KEPT BUILDING IN THE AFTERMATH OF RANA PLAZA: After the collapse of the eight-story Rana Plaza factory in April 2013, an impressive group of players has come together to take action to address the industry’s deep safety problems. Ranging from international fashion brands and domestic producers to international organisations, government, and NGOs, all are motivated to make sure that such an accident does not happen again. The Bangladesh Accord on Fire and Building Safety, the Alliance for Bangladesh Worker Safety, and the National Tripartite Plan of Action on Fire, Electrical Safety and Physical Integrity in the RMG sector of Bangladesh (NAP) have inspected several thousand factories since. They have done a remarkable job in showing what needs to be fixed at the factory level. This is a major step forward on the vision to which, for example, the Accord’s signatories committed, namely “the goal of a safe and sustainable Bangladeshi Ready Made Garment (RMG) industry in which no worker needs to fear fires, building collapses, or other accidents that could be prevented with reasonable health and safety measures.” RECONCILING GREATER COMPETITIVENESS WITH SOCIAL AND ENVIRONMENTAL PERFORMANCE IS CRUCIAL: Fire and building safety are just a few of the many and disparate social, environmental and economic issues that need addressing. Given the industry’s growth ambitions and its infrastructure deficits, we will all need to be very strategic and engineer a systemic solution. As I argued in the report, Creating Sustainable Apparel Value Chains which was released in December 2013 by Impact Economy, the global impact investment and strategy firm, and made available to BGMEA (Bangladesh Garment Manufacturers and Exporters Association) members in Bengali, the problems are diverse and wide-ranging, but they nonetheless all meet at the manufacturing stage. Ground-breaking progress toward the overall vision of a sustainable apparel industry in Bangladesh requires achieving a win-win outcome of raising productivity and competitiveness, as well as social and environmental performance. This includes fire and building safety, as well as several other key levers, such as:

” Fostering total resource productivity and transparency across the supply chain;

” Upgrading industry infrastructure by (impact) investing;

” Improving working conditions with a new level of ambition; and

” Studying and replicating the best practices of leading producers.

THE SOLUTION REQUIREMENTS HAVE BECOME CLEAR: At Impact Economy, we were delighted to see that the IFC, the ILO, the Global Green Growth Forum and many others have enthusiastically incorporated these key recommendations of the report into their own strategic thinking and initiatives. Now is the time to drive real progress by designing solutions and implementation platforms that are able to achieve this triple win of greater productivity, a better environmental footprint, and higher social performance not just at the level of demonstration projects, but across the board. Such solutions need to:

* Drive the upgrades in the factories which help achieve competitiveness as well as higher social and environmental performance

* Mobilise capital from multiple sources

* Be financially attractive to the local producer and “factory owned” rather than only retailer or regulator enforced

* Minimise credit default and execution risk

* Become scalable across the industry and go viral

MAKING IMPLEMENTATION WORK IS KEY: In a country where over 5,000 factories produce for export, a powerful contribution to Vision 2021 means implementing factory improvement programmes which are practical, scalable and cost-effective. This means targeting the low-hanging fruit – measures that are easy to implement and cost-efficient. The business case is there. In our research, the top seven simple resource efficiency measures implemented in a model factory cost only USD 83,000, and were hardly ‘rocket science’, including eliminating water leaks from tubes and pipes, reusing cooling water from dyeing operations, process water from rinsing, recovering water from bleaching, reusing heat from drying operations and caustic soda or improving liquor ratio. Yet, they unlocked input savings in excess of USD 500,000 annually. Dedicating resources to improving working conditions can further strengthen the win-win situation, including measures to strengthen productivity, improve labour agreements and working contracts, optimise quality control systems, human resource management as well as decision-making practices. To make such upgrading happen across the board, we will need to design incentive structures that are attractive to factory owners, deliver real benefits for workers, and minimise bureaucracy and management attention for people who, after all, are busy running a competitive business. At Impact Economy, we are convinced that combining impact investing and efficient procurement will be the key forward strategy, and just the complement that is needed to the several development finance-funded initiatives under way such as PaCT or the GTSF programme. THE UPSIDE IS TREMENDOUS: Rana Plaza has made one thing clear: business as usual is no longer sufficient. A more ambitious health and safety track record needs to be built. The enormous opportunity to reach greater value added and sustainability is not yet fully appreciated though. Extrapolating from our research at the factory level to the overall cluster of factories indicates an annual savings potential of up to USD 2.6 billion in Bangladesh. If we conservatively assume to unlock one third of the potential, this would result in input cost savings of USD 860 million every year. In monetary terms, this would be roughly equivalent to the costs of the Rural Electricity Transmission and Distribution Project of the World Bank of 2014-2020 (estimated to cost USD 837 million in total). Just think about the impulse to development. IT IS TIME TO MOVE FORWARD: The time to act is now. Supply chain issues will soon start to become much more relevant to all textile and garment producing countries. As Bangladesh defines its ambition level and strategies to act upon it, it is worth to look further north to the Chinese textile and garment industry. With more than 100,000 manufacturers employing over 10 million people, and successful national brands eyeing international expansion, the changes occurring in the industry in China are tied in large part to the broader social and economic context of the country. China has experienced tremendous economic growth and urbanisation over the past thirty years; some project the rapidly growing middle- and upper-income segments to encompass 75 per cent of the Chinese population by 2025 as a result. These consumers are becoming more demanding in terms of the quality of different types of products. And demand beyond just the wealthiest Chinese consumers is swelling at increasingly fast rates as hundreds of millions of Chinese step out of poverty, and the most successful Chinese brands are bound to go East and West. China has raised its ambition level in terms of the industry’s sustainability, which is listed under China’s national five-year plan for prevention and control of environmental risk of chemicals as a “key industry for regulatory control.” Bangladesh can take ideas from this success story and ask how it can deliver similar or better results in its market economy setting. I agree with former Goldman Sachs chief economist Jim O’Neill, who argues that the densely populated and youthful Bangladesh has the potential to become one of the world’s most vibrant economies, and has included Bangladesh in his “Next Eleven” group of countries that he expects to lead the next wave of high-growth economies. It is now time to bridge the gap between reality and ambition so that Bangladesh can indeed become the high-growth economy that benefits the population at large. With cooperation, innovation, and smart approaches to financing, a modern, competitive, and sustainable textile and garment industry could become one of the finest ingredients as Bangladesh brings its middle income formula to life.

Bangladesh will miss this year’s apparel export target as foreign buyers are passing orders to other countries due to the political turmoil in the country, a top industry leader said.   “The shutdown and blockade has created multifarious negative impacts on the sector, posing a serious threat to achieving garments export target set for the current fiscal,” Atiqul Islam, President of Bangladesh Garment Manufacturers and Exporters’ Association (BGMEA) said this while speaking at a discussion in the city on Tuesday.The discussion titled “Regulatory challenge for trade and investment” was organized by Policy Research Institute (PRI).Dr Zaidi Sattar, Chairman of PRI made opening remarks where Dr. Sadiq Ahmed, Vice-Chairman, PRI presented the keynote paper. Expressing concern over the ongoing political impasse, Atiqul Islam said, the present situation in the country’s political arena is forcing foreign buyers to shift orders to other countries. Besides, the industry owners could not send the apparel goods to buyers within the stipulated time further risking cancellation of export orders.”The nationwide blockade has also affected our production and shipment sending negative message about Bangladesh’s RMG business to the foreign buyers.  The government is providing police protection to carry the goods to and from Chittagong port to keep export and import businesses normal, but buyers are considering the situation abnormal,” he said.He also said that if the situation continues, the export target would not be achieved.The garments export target has been fixed at $26.9 billion, up 10 per cent from previous year’s $24.5 billion when shipment surged by 14 per cent.Atiqul Islam urged the political parties to declare the readymade garment (RMG) sector and its forward and backward linkage industries, and export import supply chain, free from strike or blockade.Dr SA Samad, Vice-Chairman of Board of Investment (BoI) and Abdul Huq, Director of FBCCI, also spoke on the occasion.   The speakers said that inadequate Infrastructure and political instability are two major constraints for the country’s investment growth.”Increasing investment to the desired level appears to be a formidable challenge and requires major effort to improve the investment climate, especially to attract more FDI,” they added.

Top eleven foreign buyers, being worried about the ongoing blockade and political unrest, have urged the RMG exporters to push the political leaders and civil society members to raise voice for immediate restoration of a business-friendly atmosphere in the country. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Md Atiqul Islam informed this at a roundtable held at the Policy Research Institute (PRI) auditorium in the city Tuesday. Top retailers are calling me and asking what’s going on here. They are worried,” Islam said. They (retailers) will not speak in public—they will not issue any press release. But, they will quit business from Bangladesh slowly,” the BGMEA president added. He said top eleven global retailers (RMG product buyers) import a significant portion of Bangladesh’s RMG goods, which is around 50 percent of the annual RMG export. They are big. We won’t be able to recover if anything happens,” he said without disclosing the names of top buyers He said he received phone calls from buyers in the morning and promised the buyers to get back to them to update them about the political climate here after completing his speech at the PRI roundtable Islam maintained, “However, we should not ignore the small buyers. We must take care of all the buyers to achieve the target of $50 billion export by 2021. He said Bangladesh needs to export $90 crore (Tk 690 crore) worth of RMG goods every single day to achieve the target set by the government and RMG entrepreneurs to lead the country towards graduating to a middle-income nation by 2021. So, every single day is important and we already lost 14 days,” the BGMEA chief said. He alleged that political leaders are not paying heed to their woes. Atiqul Islam said the RMG exporters have been facing a lot of pressures domestically and internationally. According to him, domestic pressures including higher cost of production in the backdrop of higher compliance demand, wage hike, hike in the price of raw materials, land and utility services along with external pressures including loss of competitiveness in the international market due to political instability at home and rapid rise of Cambodia as a RMG exporter among the least-developed countries after Bangladesh. Political leaders are not trying to understand our problems,” he said. Islam said Bangladesh is the only country in the world where two international buyers’ platforms —Alliance and Accord – have been working to enhance skills, compliance and productivity of the RMG industry with the goal to ensure development and improve living standards of people. We need to look at building high-tech infrastructures and add higher value to RMG products but we are facing political hurdles. It is destructive for us. We are in real trouble. Please raise your voice and speak for us,” a helpless Islam made the call upon academics, economists, former diplomats, researchers and head of different international agencies and prominent civil society members present at the PRI roundtable. He said the government can play much pro-active role to flourish the RMG export. Suppose, in Russia, the government can seek for duty-free exports of RMG products as we have given them the work of establishing a nuke power plant and accelerate bi-lateral relations. But, the government is not doing so,” he said. In reality, the government rather has set higher price of land at proposed Bausia Garment Village where the entrepreneurs will need to develop land, which is now under water, and get ready other arrangements to connect with infrastructures facilities provided by the government. On the other hand, buyers have given us a five-year timeframe for shifting factories located at shared building to own-buildings. Already two years passed. You can see that how much pressure is on us,” Atiqul Islam said. He said an Indian buyer had imported RMG goods worth of $5.5 million from a Bangladeshi exporters few years back but didn’t make the payment. The issue has been raised at different forums even with representatives of Indian government. But, all attempts went in vain. Our government can play a strong role in realizing the genuine claim of our exporter, who is now suffering with huge burden of bank loans, while the relations between Bangladesh and India gets better than before,” the BGMEA president said. He said international retailers have found only 2 percent factories non-compliant and it means that the current prospective of Bangladesh’s RMG industry is bright if there is no political problem. The PRI, in collaboration with DFID, had organized the roundtable on “Regulatory Challenges for Trade and Investment in Bangladesh”. PRI chairperson Dr Zaidi Sattar presided over the function. PRI vice chairman Dr Sadiq Ahmed presented a key-note paper on the topic. Executive Chairman of Board of Investment Dr S.A Samad spoke as chief guest while former ambassador Farooq Sobhan, PRI executive director Dr Ahsan H Mansur, director of Bangladesh Foreign Trade Institute Mostafa Abid Khan, BIDS director general Mustafa Kamal Mujeri, Monem Group managing director Moinuddin Monem and FBCCI director Abdul Huque addressed, among others.