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Direct exports draw huge investments in garment accessories

  • Published at 10:17 pm April 2nd, 2018
Direct exports draw huge investments in garment accessories
Bangladeshi garments accessories and packaging manufacturers have made a massive new investment to seize a larger chunk of the global export market share. According to data from the Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), garments accessories and packaging manufacturers have made an investment of Tk722.5 crore, with more proposals in the pipeline. Sources in the sector said this new investment focuses on producing higher quality garment accessories with an aim to increase exports and establish the sector as a direct export earner instead of just deemed. Since there is more capacity than is currently needed, accessories can be another big export earner, they opined. “Bangladesh is already well established as a sourcing hub for apparel products. Garment accessories and packaging products are key components for competition. The demand of accessories is increasing very fast at home and abroad,” Al- Shahriar Ahmed, Managing Director of Adzi Trims Ltd told Dhaka Tribune. Bangladesh is almost self-sufficient in meeting local demands in the garment accessory manufacturing sector. This direct exporting will open up a new avenue for local manufacturers, said Shahriar. “In order to reach market demands for exports, I have made investment of $3.8 million to produce eco-friendly and high quality value added products, which is what global fashion brands prefer,” continued Shahriar. “I have another investment of $6 million which is aimed to increase my production capacity, since I plan to increase my yearly turnover to $18 million in 2018 from the existing $12 million,” he added. BGAPMEA president Abdul Kader Khan told the Dhaka Tribune: “If the government provides logistic support including gas and electricity connections, the investment will increase further. “Manufacturers are using coal instead of gas to run boilers due to a gas shortage. This is costly due to a higher import duty on coal. If the government allows duty free coal import, manufacturers will be more price-competitive,” he also said. Currently, manufacturers have to pay about a 45% tax on import of coal.

Direct export opportunity

According to BGAPMEA’s latest data, garment accessories and packaging products earned $6.7 billion in the last fiscal year, of which over $1 billion came from direct exports. Usually, accessory products are exported with finished products and termed deemed exports. Now, they are being separately exported to several countries as direct exports. “For the last four years, we have been exporting garment accessories to Indonesia and Malaysia. Bangladesh has enormous opportunities as we have the ability to execute bulk export orders in terms of quantity and quality,” Zahir Uddin Haidar, chairman of Cosmos Group told Dhaka Tribune. Last year, the company earned $200,000 and has set a target to export products worth $350,000 in 2018. “The value addition of garment accessories is over 30%, which is increasing day by day. If the government provides proper policy support, the sector can earn as much as the apparel sector itself in future,” said Zahir. According to industry insiders, India, Vietnam, Indonesia, Malaysia, Pakistan, Sri Lanka, Finland, Myanmar, and other apparel manufacturing countries are all potential markets for Bangladesh. “There is no doubt that Bangladesh will turn into a global leader in accessory export very soon as it has already established an international standard in manufacturing the products,” Exporters Association of Bangladesh (EAB) President Abdus Salam Murshedy told Dhaka Tribune. “It is my earnest urge to the government to let the sector bloom by providing all out cooperation, which is what they need right now.” According to people of the sector, accessories contribute to 15% to 18% of a finished garment product.

Challenges for the industry

Since there is a huge opportunity to grow in the local market as well as in the export market, investors want to pour funds. However, a lack of policy support including gas and electricity connections and tax burdens hinders the inflow of investments, with port congestion being another issue. “As an exporter of garment accessories and packaging products, we are receiving good response from global buyers. But for executing the orders, uninterrupted gas connections for existing as well as new investors is an important requirement,” Md Tanvir Soyed Islam, Manager (Sales) of Montrims Limited told Dhaka Tribune. “Import dependency for raw materials is another challenge. Due to this import dependency, production becomes more time-consuming and expensive. If the government paves the way for local industries to produce raw materials required for accessories, it will help to save foreign currency,” continued Tanvir, “Due to a high price of raw materials, we are unable to beat foreign companies,” he adds “In tapping opportunities and grabbing export market shares so Bangladesh can establish a strong foothold in the global market, the sector needs tax rebates and cash incentives towards the direct export of accessories and packaging products,” he added. “As it takes time to import raw materials, buyers choose finished goods instead. To ensure timely deliveries, the government should increase port efficiency,” KM Shahidullah, Senior Manager (Credit) of Dekko accessories told Dhaka Tribune. “Manufacturers of apparel products choose China for sourcing accessory products as they offer lower prices than us. "This is because of a higher price of raw materials caused by import duty combined with the delay of importing,” said Shahidullah.