The ongoing political turmoil has been disrupting production and supply chain of basic raw materials in the country’s apparel industry, putting attainment of the sector’s targeted export earnings at great risk, industry insiders said. According to them, the country’s largest foreign currency-earning sector has already suffered a 20-25 per cent production loss  over the last 20 days of non-stop blockade and political impasses. They, however, feared that if the situation prolongs further, it would lead to huge losses for the sector on account of shipment delay and cancellation of orders thus affecting overall export earnings.  “To meet the apparel export target of US$26.89 billion, we will have to ensure shipment of the RMG products worth about Tk 7.0 billion a day. But shipment of products worth about Tk 2.15 billion is being hampered each day due to production disruption following the political impass,” Md Atiqul Islam, president of the Bangladesh Garment Manufacturers and Exporters Association (BMGEA) told the FE. Exporters could not carry their products, both raw and finished ones, smoothly from different ports due to the ongoing transport blockade and hartals, he said. The sector requires various accessories like button, zipper and yarn that are sourced from different parts of the country, he said adding if any component fails to  reach the machine timely, it will not be possible to give  final shape to the finished products. Echoing Mr Islam, Rafez Alam Chowdhury, president of the Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) said, “We did not get the required number of trucks or covered vans as they are not willing to go out in such a unstable situation.” Moreover, the carrying cost has also significantly gone up, he said adding that sometimes it is difficult to manage a transport offering a high price as the owner of the trucks or covered vans do not want to take risk following previous and recent arson attacks and vandalism. Though police are providing escorts in transporting goods to and from the Chittagong port, BGMEA vice president Md Shahidullah Azim said transportation of export goods under police protection is a piecemeal solution but the export business as a whole requires a stable situation. Production of apparel products fell by 20 to 25 per cent in recent times, he said adding buyers do not feel confident about coming to Dhaka and placing orders during any political instability. They (buyers), in view of such unstable political situation, are cutting both orders and prices of locally-made apparel products, said vice chairman and chief executive officer of DBL Md Abdul Rahim. His company has slowed down production by 10 per cent as its stock is about to be exhausted. The global buyers are now planning to shift some of their future orders to other competitor countries like Vietnam though it costs higher for them but they are managing it with price cut here in orders, he explained. Local manufacturers are now negotiating future orders with buyers outside the country, Mr Azim said. After Christmas vacation, this is the peak season for global retailers to place orders for autumn wears but the ongoing political unrest has frightened them for which the RMG industry could face fresh order crisis like the previous year. Meanwhile, 11 garment factories have suffered loss worth $15.11 million including order cancellation, discount, air shipment charges, delayed shipment and additional transportation cost from January 14 to 24 due to the ongoing blockade, according to the BGMEA. Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said apparel exports to traditional markets, especially US and Canada, fell significantly while it slowed down in the European Union. “But it will have a negative impact on new and emerging markets which are not familiar with such a situation,” he warned. Locally-made apparel export (woven and knit) witnessed a 0.77 per cent growth during the first half of the current fiscal year.  Knit products failed to achieve the target by 2.41 per cent and woven by 7.27 per cent during the period.

Garment exports to the US, Bangladesh’s single largest export destination, declined 3.17 percent year-on-year to $4.64 billion during January-November last year, due to a slowdown in work orders after the Rana Plaza building collapse.Bangladesh was the sixth largest sourcing country for the US during the period though Bangladesh’s position was third even a few months ago, according to the US Department of Commerce.Exports to the US started declining when retailers from North American countries took a wait-and-see approach after the Rana Plaza disaster, said Atiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association.“Buyers were also cautious in placing orders with the factories housed in shared buildings. This is the main reason behind the fall in exports,” he said.But, it is the current political deadlock that will harm exports the most,” Islam said. Everybody should come forward to resolve the problems so that exports remain unscathed, he added.Exports declined not only to the US, but also to other destinations such as Canada and the Netherlands, the BGMEA president said.On the other hand, Bangladesh’s competitors are performing better in major markets.In the US market, China remained on the top of the list with apparel exports worth $38.85 billion, followed by India, Vietnam, Pakistan and Mexico.Apart from India and Pakistan, now Cambodia, Vietnam and Indonesia are becoming major competitors of Bangladesh in the US market.“If Bangladesh’s political situation does not improve soon, even Sri Lanka and Myanmar may emerge as new competitors as the two countries are performing better after overcoming their domestic political crises,” Islam said.Previously many people used to think that buyers are bound to come to Bangladesh with handful of orders. “This is not the case anymore,” he said.Reaching the $50-billion export target by 2021 might not be possible if the political crisis is not resolved as soon as possible,” Islam said.

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.