Garment industry is the most important sector in the economy of Bangladesh. In addition to the highest export earnings, the sector has been making a major contribution to the employment of millions of people for the last four decades. In the field of women’s empowerment, the garment industry is ahead of any other sector. Due to the versatile facilities of the government, cheap labor and the hard work of the entrepreneurs, Bangladesh has been able to occupy the second position in the export of readymade garments.
After the collapse of Rana Plaza in Savar, the garment industry of Bangladesh suffered a major blow. However, in the last seven years, due to various initiatives, it has turned out quite well. However, in the ongoing coronavirus epidemic, the country’s highest export earnings sector is once again facing a major catastrophe. Many entrepreneurs in the sector were shocked when one purchase after another was canceled and suspended in March when Corona took a terrible turn. However, in a few days the situation improved a bit. Exports continue to grow slowly. However, even if the situation improves temporarily, Corona will have to face various challenges in order to survive in the garment export business in the future. It will take initiative of the entrepreneurs as well as the concerned departments of the government. The point is, we need to be quick to adapt to changing circumstances.In today’s report, we will discuss the challenges and challenges of the next garment sector. But before that I will know some information about the basics of the garment sector. So that a complete picture of the garment sector is available.
The story of the beginning of the garment industry
Desh Garments started its journey of exporting 198 garments. After retiring from government service, Mohammad Nurul Quader established a factory called Desh Garments at Kalurghat in Chittagong. At that time no worker-owner in Bangladesh had any experience in ready-made garment factory. So in the beginning, he tied the knot with the South Korean company Daeyu.
At that time, Nurul Quader sent 130 people from Desh Garments to South Korea to teach them work. Among them were workers and officials. Many of whom later became owners of garment factories themselves. As a result, it would not be an exaggeration to call the country’s garment mogul Mohammad Nurul Quader the pioneer of Bangladesh’s garment industry. Desh Garments was the proponent of everything from back to back LC, Bonded Ware House as the first garment factory in the country.
One after another garment factories have sprung up in Bangladesh following the path shown by Nurul Quader. Many of the entrepreneurs who started their journey with their own houses or rented small factories at different times in the nineties now own many garment factories. Many have started in garment factories and have become commercially successful in other sectors as well. At this stage we can talk a little bit about the success of Dulal Brothers or DBL Group.
The four brothers converted their old house into a small factory with a capital of Tk 60 lakh given by their father. Bought 36 sewing machines. For a few days in the morning and afternoon, hundreds of workers gathered at the gates of various factories in the area. Brought contract work (subcontracting) from another factory. After making the dress, the delivery is done. This went on for a couple of years. But despite their hard work, the four brothers did not see any profit in two years.
Although it was not a profit, the four brothers fell in love with two or four buyers in a few days by explaining the quality and time of the product. As a result, in 1993, they received a direct purchase order from a UK buyer. Three thousand piece polo shirts. Then the four brothers did not have to look back. They have been one of the top garment exporter industry for 29 years.
The company that started in 1991 with a small factory on 102 Green Road in Dhaka is today’s Dulal DBL Group. And those four brothers are Abdul Wahed, MA Jabbar, MA Rahim and MA Quader. They are the Chairman, Managing Director (MD), Vice Chairman and Deputy Managing Director (DMD) of DBL Group respectively.
Although it started with clothing, DBL has entered the business of ceramic tiles, information technology, telecommunication and dredging for the last 29 years. Soon they are also coming to the drug business in the country. In all, there are currently 24 DBL Group companies. 36,000 employees work in these organizations. In the 2018-19 financial year, the group’s annual turnover was about US Core 600 million, which is equivalent to Tk 5,100 crore in the domestic currency. Of this, 90 per cent came from the ready-made garment business. In all, the group has invested more than Tk 6,000 crore.
According to BGMEA, an association of ready-made garment owners, they currently have 4,621 member factories. 44 lakh workers work in these factories. A few days ago, the leaders of the organization gave this information, but now they say that last July, 1,926 garment factories.Directly garment exporter. 20-22 lakh workers work in these factories. On the other hand, the number of member factories of BKMEA, an association of net garment industry owners, is 2,263. However, the leaders of the organization have been saying for the last few months that the number of factories that directly export among the members is 636. Most of the remaining factories are closed. BKMEA cannot say the exact number of workers in the factory. As a result, there is confusion about the exact number of factories in the garment industry and the exact number of workers employed there.
Growing up with government facilities
Cheaper labor than other countries, quotas as well as government benefits i.e. duty free imports, 25 per cent cash assistance, back-to-back LCs, bondedware house facilities and the attraction of the protected market have led many entrepreneurs to venture into the garment business without prior experience. On the other hand, Sri Lanka started before Bangladesh but fell behind due to civil war in the early eighties. Then the buyers of developed countries choose Bangladesh as a good alternative. As a result, garment exports continue to grow rapidly.
The first major benefit to the garment sector was given by the HM Ershad government in 1982. The garment exporter-oriented strategy was adopted under the structural reform program directed by the World Bank and the International Monetary Fund (IMF). In this, the private sector is encouraged through contraction of the state sector and the industrial sector is given priority to the export oriented industrial sector. The Duty Draw Back (Dedo) system was introduced. It is said that even if the entrepreneurs pay duty at the time of importing the raw material, they will get it back after exporting. But due to delays and corruption, the system was discontinued and the bond facility was introduced. This opens the door for the garment owners to import raw materials for making garments duty free.
Another big advantage was given towards the end of Ershad government. Arrangement of local debentures or back-to-back debentures (LCs). As a result, the entrepreneurs did not have to spend any money on importing raw materials. Entrepreneurs then only had to bring garment exporter orders. And the responsibility of money belongs to the bank. Yet many garment owners feel that bond-backing and back-to-back LCs play a key role in the sector’s massive growth.
In that continuity, the Awami League government of 1996-2001 gave another big advantage to the garment sector. The textile and garment sector was given 25 per cent cash facility in 1996. However, the BNP government reduced it to 15 percent in the 2002-03 financial year. There is still cash assistance. There are also new facilities. Opportunity The latest example is the first incentive package (Rs 5,000 crore) announced after the launch of Corona with the garment industry in mind.garment exporter have increased 6 times
The garment sector, which did not exist at the time of independence, now accounts for 80 per cent of the country’s total export revenue. In the financial year 1983-84, the amount of garment exporter was 3 crore 15 lakh dollars. In the just outgoing financial year, the export has been 2 thousand 795 crore dollars. This means that exports have increased 6 times in 36 years.
As a single country, the major markets for Bangladeshi readymade garments are United States, Germany, United Kingdom, Spain, France, Italy, Japan, Netherlands, Canada, Denmark, Australia, Belgium etc. As an alliance, the European Union (EU) is a big destination for Bangladeshi clothing. In the last 2019-20 fiscal year, the total garment exporter to the EU was 1,614 crore dollars or 61.35 percent. After that, the highest export to the United States was 514 crore dollars or 16.6 percent. The main reason for the increase in exports to the EU is that Bangladesh has been getting GSP facility in the market for a long time. That is why EU buyers and brands can take products from Bangladesh to their own country with duty free facility.
At one time the main markets for Bangladeshi clothing were the EU, the United States and Canada. However, even though it is late, the export of Bangladeshi made garments is increasing in the new or unconventional markets outside these three markets. Although it still has less to say than expected. In the last 2019-20 financial year, 18.10 percent of the total garment exporter or garments worth ৭৮ 480 million went to the new or obsolete market. Among the new markets, garments worth ৬ 960 million were exported to Japan, Core 600 million to Australia, Core 440 million to Russia, Core 420 million to India, 320 million to China and Core 290 million to South Korea.
Entrepreneurs in Bangladesh mostly export more than 5 types of garments. They are – shirts, trousers, jackets, t-shirts and sweaters. In the last fiscal year 2019-20, out of 2,795 crore, 81 percent or 1,993 crore came to these five garments. Among them, shirts worth 160 million, trousers worth ৪ 544 million, jackets worth 351 million, T-shirts worth 571 million and sweaters worth 359 million were garment exporter .
Push Rana Plaza and turn around
The Rana Plaza collapse has hit Bangladesh’s garment sector hardest (it is not clear how far-reaching the effects of the epidemic will be as Corona is now underway). The nine-storey Rana Plaza in Savar collapsed on April 24, 2013 at 9.45 am. 1,137 workers of five garment factories of the building died in the incident. Thousands of workers were injured. 26 of them lost limbs.
After the collapse of Rana Plaza, there was a worldwide boycott of Bangladeshi clothes. Many big brands and buyers stopped buying garments from Bangladesh on the grounds that garment factories were not safe. The European Buyers’ Alliance Accord and the North American Buyers’ Alliance were formed at the initiative of the Buyers’ Organization and the International Labor Organization to improve the working environment of the factory. Under them, extensive work was started to improve the working environment of more than 2,000 factories. Many factories invest huge sums of money to improve the working environment. Capitalizing on this improvement in the factory working environment, Bangladesh’s garment exports have increased by US 9.10 billion or Tk 8,000 crore in the last six years.
Work began under the National Tripartite Action Plan (NTAP) for the renovation of factories that do not work for Accord and Alliance member brands and buyers. The Correction Coordination Cell (RCC) was later formed under the auspices of the ILO and supervised by the Department of Inspection of Factories and Establishments (DIFE). However, in the beginning there was some speed but now the work of RCC is going on slowly. The renovation work of the factories under NTAP was not even half done. Despite repeated urgings, the factory owners could not complete the renovation work. As a result, 700-800 factories could not be completely secured.
Meanwhile, after working for five years, the Alliance has closed its activities. On the other hand, the Accord has also left this year. The RMG Sustainability Council (RSC) has been formed at the initiative of BGMEA, an association of garment industry owners, to take the reform work forward. However, due to Corona, its activities have taken a turn for the worse in the last few months. The epidemic has plunged the garment sector into a new crisis, raising questions about how far the factory will go in the future. Because new challenges are coming. There is skepticism about how much attention entrepreneurs will pay to tackling old challenges. There is no accord and alliance in it.
At the top of the eco-friendly factory
There have been a number of great things that have happened since the tragedy, just as the Rana Plaza has shaken the apparel sector. One of them is the focus of entrepreneurs to build environmentally friendly factories. Even before that, eco-friendly factories were established in the country.
Sajjadur Rahman Mridha, an entrepreneur in the garment industry, started the journey of the first eco-friendly factory in Bangladesh in 2012. He set up a vintage denim studio at Ishwardi EPZ in Pabna. There have been 94 eco-friendly garment factories and textile mills along the path shown by him. There are others behind. There are also eco-friendly factories manufacturing shipyards, shoes, and electronic products. There are also commercial buildings. However, Bangladesh currently has the most environmentally friendly garments and textile mills than any other country.
Although there are more than one eco-friendly factories in the country, they are not of quality. Giving an example will make the matter clear. Envoy Textile is the first eco-friendly factory in the world to produce jeans or denim fabrics in Bhaluka, Mymensingh, Bangladesh. Remy Holdings at Adamjee EPZ in Narayanganj, the second largest eco-friendly garment factory in the world. Plummy Fashions, North Narsinghpur, Narayanganj is the world’s first and top eco-friendly factory for making knitwear.
Several organizations around the world have certificates of eco-friendly installation. One of them is the US Green Building Council (USGBC). They carry a certificate of eco-friendly installation called ‘Lead’. The full form of Lead is Leadership in Energy and Environmental Design. To get the certificate, a project has to maintain the highest standards in everything from construction to production under the supervision of USGBC. You can apply for a USGBC certificate once the building is completed or the old building is renovated.
USGBC was established in 1993. Under the company, factories as well as commercial buildings, schools, hospitals, houses, sales outlets, prayer centers, etc. can be built as eco-friendly facilities. At present, the number of installations with lead certificate in 16 countries of the world is more than 92,000. There are total 110 points for fulfilling 9 conditions for lead certificate. If it is above 60 points, it is ‘Lead Platinum’, if it is above 60-69, it is ‘Lead Gold’, if it is 50-59, it is ‘Lead Silver’ and if it is 40-49, it is ‘Lead Certified’.
All but one of the eco-friendly installations in Bangladesh are certified under the USGBC. According to the company’s website, as of September 2019, 108 installations in Bangladesh have received lead certificates. Among them, Lead Platinum got 26, Gold got 7, Silver got 11 and 2 got certified certificates. Out of 108 eco-friendly establishments, 95 are garment and textile factories. Currently, more than 500 projects are being implemented under USGBC to be environmentally friendly. Apart from that, the only eco-friendly shipbreaking yard in the country is PHP Ship Breaking and Recycling Industries. This yard of PHP Group in Sitakunda, Chittagong got the status of environment friendly ship yard in 2017 according to the Hong Kong International Convention.
The Pacific Jeans Factory in Chittagong has received the Lead Gold Certificate. Syed Mohammad Tanvir, director of the company, said, “After the Rana Plaza collapse, we built the old factory as environmentally friendly out of a commitment to improve the quality of the factory and our commitment to the environment.” Many entrepreneurs are doing eco-friendly factories. That is why our factories are now much safer than any other country in the world. ‘
Corona Cope in garment exports
A lockdown was imposed in Europe and America last March to prevent the spread of the virus after the corona spread rapidly. The shops were closed. Buyers and brands have started canceling and suspending their purchases one after another due to lack of sales. Day by day it takes on horrible shapes. With that, new purchase orders also stopped coming. As a result, the entrepreneurs became anxious.
According to BGMEA, the 316 million garment export order in Corona was initially canceled and suspended. Of these, Primemark 33 crore, Inditex 68 crore, Bestseller 63 crore, Mothercare 56 crore, Kohls 5 crore 40 lakh, Gap 38 crore, Jesse Penny 3.5 crore, Walmart 19 crore, Debenham 1 crore. 6 million and Ralph Lauren canceled and suspended the purchase order of 10 million dollars (the estimate is estimated). However, due to various pressures, most of the buyers later agreed to take the product. However, many people want up to six months to pay.
Meanwhile, a general holiday was declared in the last week of March to prevent the spread of the virus in Bangladesh. Then most of the garment factories are closed for a month. It exported only ৭ 360 million worth of clothing in April, the lowest in two decades. The next month, garments worth ১২ 123 crore were exported. However, in June, it increased to ৫ 225 million. Even then, in the outgoing 2019-20 fiscal year, garment exports amounted to ৭ 2,795 crore, which is ৮ 617 crore less than the previous fiscal year 2018-19.
In July, the entrepreneurs said that 70-80 percent of the purchase orders are coming in compared to last time, which is giving them the courage to survive in the current situation. Garment exports have taken a turn for the worse in June as many big brands have started accepting suspended and canceled products. However, there will be a kind of uncertainty as the risk of global corona infection is reduced and vaccines are not discovered.
In March, the government announced an incentive package of Rs 5,000 crore to pay wages to export-oriented workers after the owners panicked over the cancellation and suspension of garment purchases. From that fund, about 1,600 factory owners have taken loans for 2 per cent service charge and paid three months’ wages. Later, the entrepreneurs also paid the July wages with a loan at 4.5 percent interest. In this case, the government has given 6 percent interest subsidy in the first three months and 4.5 percent in the next one month.
A number of entrepreneurs in the garment industry have admitted that government loan assistance in paying wages has greatly helped them to survive in the business. Without help, many would have lost their business. However, despite getting loan assistance, a part of the entrepreneurs are treating the workers cruelly. Many lay off workers immediately after the lockdown began. In all, several thousand workers were laid off in two to three months. Entrepreneurs paid 75 percent of the workers’ wages during the factory shutdown last April. Most of the owners have even handed over the workers’ Eid bonus. That means half gave the Eid bonus.
The challenge of the future
The whole world has entered a new normal or new normal time with the first push of the corona. Naturally, the garment sector will not be the same the next day. So what are the challenges in the coming days? The challenges are not clear right now. However, some ignition may be going on. But keep in mind, the more the day goes on, the clearer the challenges will be. We asked a few entrepreneurs and buyers about the matter. Let’s listen to them.
Mostafiz Uddin, managing director of Denim Expert Limited in Chittagong, said corona purchases would naturally decline somewhat in the future. At present, many of us get orders for 1 to 2 lakh garments of each design. A quantity order will not match in the future. For that you have to take mental preparation to order small quantity. We must move towards fast delivery of goods. Because buyers don’t have to invest four or five months in advance to get the product. Their mentality has changed. We need to emphasize online. Although there are many possibilities here, but no one is paying attention.
At the beginning of the Corona, buyers arbitrarily canceled and suspended purchases. As a result, Mostafiz Uddin, a young entrepreneur, thinks that it is necessary to change the payment terms with the buyer. He said, “Since 2014, many of us have been buying on contract instead of LC. If he breaks the contract, there is less opportunity to take legal action. The terms of the agreement need to be specified by the concerned government department.
Mostafiz Uddin, managing director of Denim Expert Limited, thinks that it is necessary to bring insurance facilities for factories to deal with sudden disasters. He added, “Every buyer needs to get a business license from the government or BGMEA or BKMEA.” Because many small buyers from all over the world come to Bangladesh to buy cheap clothes. They need to be given clearance after checking their financial capacity. Otherwise, they will endanger our entrepreneurs by not paying for minor disasters or accidents. Basically, such an initiative is needed to save the land from the buyers.
Fazlul Haque, managing director of Plummy Fashions, an eco-friendly garment factory in Narayanganj, said some buyers would have higher orders from companies and brands. However, many brands and buyers will be reduced to the organization. The result is to be able to make many styles of products at once. In addition to compliance, the emphasis will be on health protection. The cost may increase.
Fazlul Haque is a former president of BKMEA. He added that Corona needs to focus on other markets besides the conventional ones to meet the challenges of the future. Need to make new products every day. You need to focus on selling products online. Our entrepreneurs pay very little attention to this. If necessary, a few initiatives can be invested online. In that case, small and medium entrepreneurs will find a way.
H&M is one of the largest buyers of Bangladeshi clothing. The Sweden-based brand buys about Core 300 million (25.5 billion) worth of clothing from Bangladesh annually. As such, H&M is the buyer of 10 percent Bangladeshi clothes.
Ziaur Rahman, head of H&M’s Bangladesh, Pakistan, Ethiopia, said, “Last May and June, we placed a 500 million purchase order in Bangladesh. All our 300 supplier factories have received orders. Bangladesh has a better position than other competitors in terms of H&M purchases. A portion of the purchasing orders from China and Turkey are coming to Bangladesh. Because the cost of production in Bangladesh is relatively low. Moreover, the suppliers of Bangladesh are quite mature. ‘
Ziaur Rahman, head of H&M’s Bangladesh, Pakistan and Ethiopia, said productive growth and product diversification would be the key to survival in the future. He said 72 per cent of Bangladesh’s garment exports come from only five types of products. This place must change.
Another major buyer of Bangladeshi clothing is the UK-based brand Marks & Spencer (M&S). Last year, about Core 1 billion worth of garments went from Bangladesh to 1,463 sales outlets of the brand. At present, there are 55 suppliers of M&S garments in the country. Number of factories 73.
Swapna Bhowmik, Bangladesh head of M&S, said yesterday, “We have changed the way we work in Corona.” I am ordering the quantity that is being sold in the sales center. I am not giving more than eight weeks for a new purchase order. We have started to approve clothing locally for fast delivery. At the same time, attempts are being made to produce cloth in the country by importing synthetic yarn from China. Entrepreneurs are quickly adapting to the current challenges, he said. As a result, Bangladesh’s garment export sector will soon turn around.
After hearing about Sapna Bhowmik Asha, Bangladesh’s second position in the export of garments in Damadole of Corona has become very turbulent. Vietnam is breathing down its neck. According to BGMEA, in the first five months of this year (January-May), Bangladesh garment exporter worth 98.49 crore. In contrast, Vietnam has exported 1,050.91 million dollars worth of clothing. This means that in five months, Vietnam has exported more garments worth Core 820 million than Bangladesh. Although officially Bangladesh is still the second-largest exporter of garments.
KM Rezaul Hasnat, chairman of the Vialatex Group, a garment company, said, “US President Donald Trump has been investing in Vietnam since the beginning of the war. At present, the Chinese invest 70 percent of their investment in the garment industry in Vietnam. We are basically lagging behind in this place. ‘
KM Rezaul Hasnat thinks that in order to keep Bangladesh in the second position in garment exporter , it is necessary to bring in cheap as well as high cost garment production, increase productivity, foreign investment with technological advancement, especially Chinese investment. He said, ‘There is not much similarity of culture with the Chinese in Bangladesh. There are various obstacles beyond that. That is why the Chinese do not feel so comfortable investing. So the government has to take initiative to create a conducive environment for investment.
Some recommendations to address the challenge
- There are no exact statistics on how many garment exporter there are in the country and how many workers work there. As a result, there are various complications in policy making at the government level. On the other hand, the owners increased the number of factories and workers while taking advantage. Reduce both numbers when in danger. Therefore, initiatives are needed to prepare precise statistics. BGMEA did a database but it was not complete. On the other hand, BKMEA is indifferent in this regard. As a result, the work can be done officially.
The government has been giving various financial benefits and discounts to the garment industry, including cash assistance, year after year. Even then the sector is not becoming self-sufficient. Therefore, the government can take a long-term plan for the technological development of the factory by stopping giving financial benefits and concessions. This will increase the capacity of the factories. They will be ready to stand on their own two feet. On the other hand, the people’s tax money will be able to invest behind other potential sectors.
3. For a long time there has been talk of product diversification and market diversification, but nothing has been done in the beginning. The government can make progress in this regard by taking specific effective initiatives. This is because the export of goods solely on garments is a threat to the economy.
4. In the future buyers will pay less lead time. That is why the capacity of the seaport needs to be increased. So that unnecessary time is not wasted in importing raw materials and exporting goods.
5. Initiatives are needed at the government level to bring in new investments in the garment industry, especially in the textile sector. In this case, special incentives may be announced to encourage foreign investment.
. Despite being four decades old, Bangladeshi entrepreneurs are focusing more on making cheap clothes. Effective initiatives are needed to encourage and support high value products. In this case, if the innovation center can be used. This is because most entrepreneurs do not have the capacity to invest in testing new products.
Entrepreneurs of the country have been engaged in unhealthy competition with the prices of garments. As a result, buyers are able to pay lower prices for clothing. BGMEA and BKMEA, the two owners’ organizations, should take initiative to stop unhealthy competition among themselves.
. Bangladesh will not get GSP benefits in the EU if it is removed from the list of LCD or Least Developed Countries. If you want to maintain duty free facility then you have to take GSP plus facility. That is why the work that needs to be done must be done now with utmost importance. In that case, more emphasis will be laid on ensuring the rights of the workers.
9. The United Kingdom has left the European Union. Effective initiatives at the government level are needed to get duty free facilities in this big market. Otherwise, exports to the important market may decline.
10. The renovation of the factory was not completely completed. On the other hand, the supervision system has also become weak. In this situation, if any new accident happens, the garment industry will face another crisis. Therefore, in addition to completing the renovation work of the garment factory, the supervision work should be carried out with full vigor.
11. Emphasis must be placed on protecting the rights of workers. Trade union registration, harassment, layoffs, violations of labor laws must be stopped. Otherwise, the reputation of Bangladesh’s garment industry will never increase. Even if indirectly, the garment exporter will be affected.
12. Initiatives will be taken to improve the living standards of the workers. Because if the workers are not good, productivity will not increase in any way. If it does not increase, it will be difficult to survive in the future.
