Amid this Covid-19 pandemic and war-torn affected global economy, how is our RMG sector faring?
The readymade garment (RMG) industry of Bangladesh is a time-tested industry after facing and overcoming many obstacles since the beginning.
In recent years, we have been facing unprecedented challenges due to the pandemic and the current Russia–Ukraine conflict while the advanced economies are projecting a slowdown in their economic growth.
However, thanks to the effort of our manufacturers, workers and development partners; we are slowly but steadily turning around from the catastrophic impact.
Since we are part of the global fashion industry, it will undoubtedly create some impact on our industry accordingly.
In this situation, we have multidimensional challenges including struggling to cope with the damage caused by the pandemic, the abnormal increase in raw materials, fuel, and freight costs which led to the rise in production costs, and our export basket has always been limited to a few products mostly concentrated in cotton.
Moreover, with high concentration in Europe and the USA, our export market is also not that diversified.
What is your expectation for the upcoming national budget, as the chief representative of the RMG sector?
While we are going through a volatile situation, our main goal is to retain our export earnings so that the lives and livelihoods of 4 million workers, who are the heart of the industry, can be ensured.
As far as the global economy is concerned, more importance on foreign currency reserves is required and we believe we can contribute regarding this with our export earnings.
Considering the overall situation, policy stability is what we need the most at this moment.
If the policies including monetary, fiscal, and others are stabilized for a longer period; at least for a period of 5 years, it increases the confidence of investors and manufacturers.
Moreover, ease of doing business is also another priority for our industry.
We also expect that from the upcoming budget, we will get a direction regarding simplifying the business and HS code inclusion in the permissible list.
With the fourth industrial revolution, the demand for sustainable products from the customer's end is increasing.
We need policy interventions from the government, which will allow our business to move towards further excellence.
The government may plan to double the source tax on export earnings from 0.5% to 1%, what are your thoughts?
If we consider the current challenges and overall scenario, we will humbly urge them to keep this rate unchanged.
Considering the multiple challenges associated with Covid-19, ongoing war and increased price of raw materials, we are already in an uphill struggle to maintain the bare minimum.
Our competitiveness is already being hampered under the global circumstances, further blow might create adverse impact on our industry and as a result, on overall economy.
However, if we look at the growth curve of our industry even during the Covid-19, our clothing export in FY20 was $28billion, and in FY21 it was $31.45 billion.
Towards the end of current FY22, we are expecting to reach the milestone of $41 billion of apparel export and in upcoming FY23, it may even reach $45billion.
With the rise of export earnings, the revenue of the government will eventually grow.
At the same time, due to the recent currency movement of the Bangladeshi currency against the US dollar, the export earnings in the Bangladeshi taka is in a more favorable position.
Therefore, we believe that, since the RMG sector is slowly turning around from the difficult time, that too, with a notable tone, the government can earn more revenue from this sector without increasing the current rate of sourcing tax.
What type of policies does the government need to implement regarding MMF/non-cotton?
In the past 40 years, the local RMG sector has reached a certain level but we are still lagging behind if we consider diversification.
Thirty years ago, the global ratio of cotton-made yarn and artificial one was about 75:25 but the current global ratio of cotton to MMF apparel is about 26:74.
Globally, the demand for MMF has been increasing due to a number of factors.
But, when 74% of international apparel markets have been captured by MMF-based products, still 75% of our apparel industry is cotton made.
As we have reached the peak of cotton made products, it is time for us to diversify in the MMF segment and where any kind of assistance from the government will come handy.
Lack of large-scale investments, technology, higher marginal cost, and unavailability of raw materials like petrochemicals are reasons why non-cotton has not flourished in our country.
In this context, we need a special 10% incentive on the export of non-cotton apparel exports to encourage investment and exports in this sector, especially to maintain competitiveness.
It would add an extra edge for the industry to support the initial growth phase.
What policy support does the sector need regarding its vast personnel from the budget?
In our journey of almost four decades, we have not only been able to satisfy our customers with products at a competitive price and quality, but also, we have achieved a better position in terms of safety and sustainability.
With 161 green garment factories, Bangladesh is home to the highest LEED certified factories in the world.
But in the coming days, if we want to set a goal for this industry, we have to focus on some specific areas.
We need to increase our competitiveness along with extra focus on product and market diversification, innovation, technology upgrades, and skills development.
In this respect, we need some special support from our government to encourage our entrepreneurs.
One of the major determinants of the growth is the productivity of workers including their physical and mental well-being.
By considering the contribution of garment workers to the economy and export earnings, the government should provide special support to ensure the health, accommodation, education, and nutrition of the workers.
If special health cards can be assigned for the workers, they will be able to avail services from public and private hospitals and diagnostic centers at a subsidized or free cost, which in terms will enable them to contribute more in the economy with an advanced level of productivity and efficiency.