Business leaders set goals for next govt.
December 26, 2008
The ability of the next government to attain 8 percent economic growth depends on efforts to tackle the power crisis, increased private-sector investment, greater foreign direct investment inflows and an effective strategy to brand Bangladesh, said business leaders and economists yesterday.
They spoke at a seminar, organised by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) at Bangladesh-China Friendship Conference Centre, which was attended by Finance Adviser AB Mirza Azizul Islam as chief guest.
The adviser said there is no alternative to rental power plants to generate electricity within a short time.
“This is the reason the government has made agreements with several companies to buy electricity,” Aziz said.
The economists, chamber leaders, political leaders, development experts and CEOs of companies stressed the need for skills development, more access to finance and an effective diaspora strategy.
They also underscored efforts to create a dynamic SME sector, increase exports of high value-added products, improve the legal system, focus on environmentally-sustainable growth and improve regional infrastructure.
They also suggested the Board of Investment continue reform programmes.
The government should set up a ‘Brand Bangladesh’ taskforce with a core committee, comprising the heads of the BoI, Export Promotion Bureau, the foreign ministry, FBCCI and non-resident Bangladeshis, professional groups from Europe and the US, the speakers emphasised.
Dr Wahiduddin Mahmud, former caretaker government adviser, moderated the seminar, “Maximising Growth for Bangladesh: A Private Sector Vision”, chaired by FBCCI President Annisul Huq.
“Bangladesh is the only nation in South Asia, which maintained 5 percent GDP growth rate in five successive years, despite some major obstacles,” Wahiduddin Mahmud said.
Latifur Rahman, president of the Metropolitan Chamber of Commerce and Industry, said the country should be free from hartals and blockades. “Workers have every right to strike, but hartrals or blockades are unacceptable.”
Centre for Policy Dialogue Chairman Dr Rehman Sobhan said measures to develop the skills if the workforce should be taken.
Ifty Islam, managing partner of Asian Tiger Capital Partners, presented the keynote paper at the seminar.
Bangladesh Bank Governor snubs WB report
December 26, 2008
Bangladesh Bank Governor Salehuddin Ahmed yesterday dismissed a World Bank projection on the country’s economic growth saying that the lending agency’s report was not pragmatic and lacked rigorous analysis.
“I think the projections made by the World Bank, which states that the Bangladesh economy will grow by 4.8 percent (in the worst-case scenario), is grossly underestimated and is not backed by rigorous analysis,” he said.
“Please do not relay on numbers alone. Do some value judgement,” he said. Projections were made based only on numbers, not on proper value-judgement.
“Only numbers cannot be the way for financial judgement,” he said.
The central bank chief made the remarks, a day after the World Bank (WB) said economic growth would fall by about 2 percentage points to 4.8 percent in fiscal 2008-09, from the government’s projection of 6.5 percent, as exports and remittance inflows would suffer amid the global economic crisis.
Citing the growth of exports, remittances and agricultural output, and ease of inflation, the BB governor said economic fundamentals are strong.
“The major strength of the Bangladesh economy is its strong macro economic fundamentals. Events occurring in the global scenario may have an impact in the long run. For now, our potential and productive capacity is such that the economy will not really go downstream,” he said.
Ahmed’s statement came at a seminar on the prospects and challenges of the Bangladesh economy, organised by Citibank NA Bangladesh at Spectra Convention Centre. Citi South Asia economist Anushka Shah presented a paper on the future of Bangladesh economy in the backdrop of global economic turmoil.
Economists, businessmen and bankers attended the discussion.
Shah observed that the global recession might lead to economic growth of 5.1 percent this fiscal year, if exports suffer from a fall in consumer spending in the EU and USA.
While remittance, coming in mainly from the Middle East, is also likely to take a hit from the recent slide in oil prices and a possible slump in construction in the Gulf, she pointed.
The Citi economist also highlighted some bright areas, such as the nation’s low exposure to global financial markets.
“Bangladesh has an adequate reserve position, which is a bright spot,” she said in her presentation.
The Bangladesh Bank governor and other discussants were optimistic about economic growth and argued that negative impacts of the recession would be at a minimum as Bangladesh caters to lower echelons of the EU and USA markets.
“As Bangladesh produces low-end garment products, the sector may not be affected,” said Salehuddin Ahmed of the central bank in an echo of what Brac Executive Director Mahabub Hossain observed in his earlier speech.
Ahmed said exports grew by 42.39 percent in the first three months of this fiscal year, while remittances inflows were about $3 billion in the July to October period of fiscal 2008-09.
“But we have kept our eyes open,” he said.
He suggested that exporters should improve competitiveness by improving productivity and efficiency, instead of seeking a favourable exchange rate.
“The rate of exchange is an important factor for competitiveness. But it’s not the only factor. Competitiveness depends on several factors, such as the effectiveness of the port facilities,” Ahmed said.
“Basically, in the wake of the financial and global crisis, the challenge for Bangladesh is to maintain price stability and maintain growth,” Ahmed said.
The central banker stressed three things that are required to maintain the economic growth momentum; maintain price stability, invigorate economic activities by developing adequate infrastructure and support services.
Latifur Rahman, president of the Metro-politan Chamber of Commerce and Industry (MCCI), said improvements in infrastructure, particularly in electricity, gas and road communications, are crucial to boosting economic growth.
“Given proper infrastructure developments, I think, the nation is going to see rapid industrial growth,” said the MCCI president.
“We have to wait and watch the next three or four months to see if there is any sign of a slowdown.”
Rahman, referring to the export of garments, said buyers might cut prices instead of demonstrating a slowdown in the volume of orders.
“That, of course, could have some impact. But it may not be as dramatic as what we are currently apprehending,” he said.
Rahman expected that domestic consumption would not slow down. On the contrary, it might rise due to a growing level of people’s income. About 70 percent of Bangladesh economy is driven by domestic consumption.
“I believe domestic consumption will rise and that is a strength,” Rahman added.
Bangladesh Foreign Trade Institute Chief Executive Officer MA Taslim also spoke.
Multiple factors blamed for sluggish RMG sector.
December 26, 2008
Bangladesh was facing almost a similar situation in 2005 also, when China was given full access to the US and European markets. As China was scoring a stunning 1,000 percent growth in some export areas, much to the comfort of the countries like Bangladesh, the US imposed a cap on China’s export growth rate at 7.5 percent till January 2008.
“That restriction had saved Bangladesh and helped its export growth at the time. But as the date of lifting the restrictions is coming near, a large number of buyers are switching to China, Vietnam and other regional countries. Besides, Bangladesh depends on import of a huge amount of raw materials from China, the price of which is going up now,” said an industry owner.
Another exporter agreed to the point of view saying that a number of age-old problems, which discourage investors, remain unresolved, contributing to the present situation.
“The truth is, buyers come to Bangladesh because of cheap labour. Almost everything else in garments production is imported. Our lead time is very long. Whereas a buyer can have his order ready to be shipped within 20 days of an order somewhere else, we need 90 days to 120 days,” said the exporter who has more than 15 years of experience in the business. He said this is the first time in 15 years he does not have any order for October-November onwards.
“Political unrest is another area that worries the buyers. There is a high degree of uncertainty and our country is considered as a high risk country abroad. Buyers don’t want to take unnecessary risks,” he added.
“More disconcerting is the repeated labour unrest. This is directly pushing the buyers out, giving us a bad name as a nation,” he pointed out. “The most disconcerting is that we could not address the grievances of the garment workers in the last one year although we have all become aware of the volatile situation among them.”
“Despite adequate warnings about making our industry self-reliant, we still depend on some basic imports. For instance, we don’t have a cotton industry. During the Pakistan period, we grew cotton and now we don’t,” he pointed out adding, “Then there are some basic infrastructural problems like load shedding.”
Another investor having stakes in Dhaka Export Processing Zone (DEPZ) categorically blames a US labour rights group for instigating labour unrest, taking advantage of the grievances of the workers of several sick industries in industrial belts. He believes that the rights group is serving the interest of competitor countries.
An exporter who mainly supplies to the European market said there are reasons to believe in ‘conspiracy theories’ where the image of Bangladesh is being deliberately tarnished for some competitors’ gains. “But this has been possible because we also do have some weaknesses,” he added.
According to him, some leading media outlets in the UK are frequently reporting on Bangladeshi garment sector’s non-compliance with international standards, by selectively exhibiting the sick industries in Narayanganj. “Whereas more than 70 percent of the factories are compliant, the media outlets are only showing the problem factories,” he said.
And there is a British non-government organisation (NGO), War on Want, which campaigns that Bangladesh pays an exploitative hourly wage of only 5 cents to its workers, in contrast to the 5 pounds in the UK, encouraging Britons not to buy clothes from stores that sell Bangladeshi made garments. International Labour Rights (ILR) in Brussels also has a similar campaign.
“This is causing, for instance, major retailers like Tesco, Prima, or Ultra (UK) to reduce their buying from Bangladesh. Other major retailers are also shying away,” he pointed out, however adding that the trend is not the only reason for the bearish garment exports of the country.
The other reasons include the major recession that the US and world economy is currently going through, while China is emerging as the biggest ever exporter of finished garments and raw materials. “In woven garments, we don’t even have 20 percent backward linkages. We import raw materials heavily from China. But in the recent months, Chinese raw materials have become costly, making our production cost very high,” he said.
“Besides, some major retailers are having their own business problems. Wal-Mart is a major buyer of products manufactured in Bangladesh. But its profit marked a sharp 50 percent drop last year, forcing the departmental store giant to buy less,” he added.
Meanwhile, countries like Vietnam are offering high incentives to investors and the investors are drawing in an ever increasing number of buyers. “Vietnam has better business environment and it is really giving Bangladesh a run for the money. Vietnam is marking 20 to 25 percent export growth and we must do something to catch up,” he noted. Other countries that are giving high incentives to investors are China, Cambodia, and Sri Lanka, resulting in high export growths there.
The exporter was also critical about the cost of doing business in Bangladesh, which is a contributing factor in the problem.
“If you want to start a business in Bangladesh, you need permissions from 30 different agencies. On top of that one has to pay a huge amount of bribe. The interest rate on capital investment is also as high as 16 percent, making our products non-competitive,” he quipped.
The phenomenon puts the burden of cost cutting in production on the workers.
other industrialist pointed out, in August-September 2006, he had six months’ orders till March 2007 in advance, but this year he had orders worth 60 percent of his factory’s capacity for the month of September, 25 percent for October and none for November onwards.
“I have invested 10 million US dollars to set up my fully compliant high-end factory. To break even I must have orders worth a million dollars each month for the next seven years. I pay 1,20,000 dollars to my 1,600 employees, their average pay is Tk 4,600. But every month I have net expenditure of 0.9 million dollars, including loan repayment of 1,00,000 dollars to banks,” he explained.
Given the current situation, buyers are taking undue advantage of the situation, the exporter complained. “We are now taking orders for less profit. Many buyers are also deferring the payments by several months making things worse,” he said.
“We don’t know how we will get out of this situation. But the government can take some steps immediately to provide some breathing space for the exporters,” he added.
Exporters suggested that the government may consider giving cash incentives to exporters to cover the losses.
“Bank interest must be reduced for export oriented industries. 16 percent interest is incredibly high, which should be drastically cut down to 10 percent, at least for a short period,” said another exporter.
“The government can also cut down the cost of doing business in Bangladesh. Every year an industrialist-exporter must take permissions from 30 different authorities, most of whom demand bribes,” he said. Required permission has to be reduced to just one, cutting down the ‘hidden’ cost of doing business by at least two percent, the exporter suggested.
Garment leaders want food rationing for workers
December 26, 2008
Garment manufacturers and exporters yesterday demanded Finance Adviser AB Mirza Azizul Islam introduce a food rationing system for garment workers to calm labour unrest in the country’s most important export sector.
The call from the Bangladesh Garment Manufactures and Exporters Association (BGMEA) came after the industry has been rocked in recent weeks by a renewed wave of industrial disputes that many believe have been sparked by the rocketing price of essential foods and oil.
Some economists estimate that just the cost of rice accounts for 60 per cent of the salary of a garment worker in Dhaka receiving the minimum wage in the sector.
The BGMEA leaders made their demand in a meeting with the finance adviser at his Secretariat office. BGMEA President Anwar-Ul-Alam Chowdhury (Parvez) led the team in the meeting.
After the meeting, Parvez said the recent labour unrest at the city’s Mirpur area was not prompted by a failure to implement the minimum wage, but rather by the price hike of the essential commodities in the local markets.
This meant workers could hardly afford to buy basic essentials, he said.
Recently the BGMEA claimed that more than 95 percent of garment factories have been paying their workers in line with the minimum wage board at Tk 1662 per month.
“The government should introduce the rationing system such as subsidising the workers’ foodstuffs. The sector is the largest employment generator, as well as the largest export earner,” Parvez said.
Last year garments accounted for 75 percent of the country’s export earnings.
When asked how the rationing system would work, he said this had not yet been fixed as the initiative was still at the primary stage.
However last night the idea received the support of some workers leaders. Nazma Akter, President of Sammilito Garment Workers’ Federation, welcomed the BGMEA move.
“But, the ration should go to the workers’ welfare, not for the welfare of others,” she told The Daily Star.
Thanking the move of the BGMEA, Nazma urged the finance adviser to implement the proposed rationing system for the garment workers as early as possible.
Parvez quoted Azizul Islam as saying that he assured the BGMEA leaders that welfare programmes would be introduced for the workers.
Talking to The Daily Star, economist and a professor of the Department of Economics of the University of Dhaka, MM Akash said the move is good as it could be made successful.
He said a garment worker paid 60 percent of his total salary buying rice.
“The prices of commodities did not remain at the level at which the minimum wage was based. So essential commodities could be supplied to the workers at a cheaper price,” he said.
During the discussion meeting with the finance adviser the BGMEA also demanded a reduction in bank interest rates and the rehabilitation of the sick garment industries.
Parvez said at present, the local garment factory owners can hardly make a profit after paying 17 percent bank interest rate whereas in the competing countries including India and China the bank interest rates range between 3 and 4 percent.
Bangladesh shielded from direct effects of global meltdown
December 26, 2008
However the nation’s exposure to real economic effects of the financial crisis is likely to be greater through exports, remittances and foreign capital inflow channels, said Annisul Huq, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).
He was speaking at the annual general meeting (AGM) of the trade body, said a statement.
Huq presided over the meeting, while FBCCI First Vice President Abul Kashem Ahmed and Vice President Abu Alam Chowdhury, among others, were present.
The president said the federation received Tk 20 crore from the government for infrastructure development of the district chambers.
He said the price monitoring activities of the FBCCI have been appreciated by the civil society.
FBCCI is also working towards reducing bank interest rate and service charges, Huq added.
The FBCCI president said the world economy for the year 2008 is very important for two reasons. The first half of the year witnessed unprecedented price hikes in oil and other commodities, which increased inflation, and the last quarter experienced credit crisis in the United States, which took a heavy toll on all major economies.
In Bangladesh context, he said in fiscal year 2007-08 economic performance was better than expected considering the effects of natural disasters in the first half of the fiscal year and higher international commodity prices.
The recovery in agriculture and services, and the rebound in exports in the second half of the fiscal year contributed to the reasonable 6.2 percent growth, he added.
The FBCCI president said the private sector is playing a significant role in the fields of investment, employment generation and savings of the country.
The private sector is also working successfully under public-private partnerships in many regulatory bodies such as Bangladesh Better Business Forum and Bangladesh Regulatory Reforms Commission, he added.
“A new generation of private sector entrepreneurs has emerged in Bangladesh who are well educated, hard-working, capable and eager to face the challenges of the globalised competitive market.”
Total exports during fiscal year 2007-08 increased by 15.9 percent to US$ 14.11 billion compared to $ 12.18 billion during the previous fiscal year, Huq said.
He said in the first seven months of FY 2008, exports showed single-digit growth, but rebounded strongly during the end of the fiscal, driven by a rise in knitwear and woven garment exports.
“Knitwear export rose by 21.50 percent, while woven garment export increased by 10.90 percent.”
With the economic slowdown in the US and the European Union, the garment sector in Bangladesh is under growing pressure to augment productivity to stay competitive, the FBCCI chief warned.
Garment waste processing now job provider for thousands
December 26, 2008
Recycling of waste raw materials left by garment factories has emerged as a good income generating source for many people in recent times.
As the informal sector requires small investment, it attracts a good number of investors who are employing thousands of people, mostly from under-privileged classes.
The garment leftovers, called jhoot by the people involved in the trade, are virtually turned into useful materials.
Every bits and pieces of waste raw materials starting from cut-pieces of clothes, zippers, buttons, thread, elastic fasteners, used plastic packets, broken cloth hangers, empty bobbins to rejected pants, shirts and t-shirts are sold from the garment factories.
Md Abdur Rashid Sheikh, secretary of Al-Amin Bahumukhi Babosayee Samobai Samiti, a garment waste traders association in Mirpur 10 Jhutpatti, said, “Rags discarded by one are treasure for another. We are helping to relieve the garment industry of a huge burden that was once thrown away in dumpsters.”
Rashid said each garment factory announces an auction for waste raw materials in every alternate week. The best quality waste cloths sells at Tk 35-40 per kg while the price for one kg low quality clothe can be as low as one taka.
Prices also change along with the market price of fabric and other products. Cotton clothes and white clothes cost more as these are widely used to reproduce cotton and yarn.
First stage of recycling starts with sorting, which is usually done by colours, type of fabric and its condition. The usable clothes are bought by small garment factories with one or two machines reproducing clothes with it. Children’s frocks, skirts, shirts, pyjamas, pillow cases are produced with this usable portion of the wastage.
Rashid said these reproduced items are mostly sold in street side stalls all around the city. A large amount goes to Bangabazar, Doza market and New Market extension.
“Because of the jhoot trade the poor segment of the society can buy clothes at a cheaper prices”, said Rashid
The unusable parts and extremely shredded clothes are recycled into waste cotton. Dhaka’s bedding industry is dependent on these shredded clothes. Mattress, pillows, cushions, seat stuffing and padding in cars, public buses and rickshaws are usually done with these recycled clothes and processed cotton.
In the market one kg recycled cotton costs around Tk 20 per kg.
One of the jhoot traders claimed that even bandages are being reproduced with leftover white cotton fabrics.
While buttons, zippers, elastic fastener, hangers and plastic bags are resold to mini garment accessory sellers. These are sold at Tk 40 to Tk 80 per kg.
Buttons, zipper, elastics fasteners are mostly purchased by local tailors, said an accessory seller.
According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA) there are about 4,500 units of garment factories in Bangladesh.
Around 500 textiles and garments waste processor units are currently under operation in the country and they produce around 500 tonnes of processed waste cotton every day, said sources at Bangladesh Textile and Garments Waste Processors and Exporters Association.
However, there has not been any proper survey on the industry throughout the country.
Largest garment waste processing zones have developed in and around Dhaka surrounding garment industry belts like Mirpur, Tongi, Gazipur, Savar and Narayanganj.
The largest jhootpatti (area for jhoot trade) is located at Mirpur Section 10 where around 400 stores have employed around 10,000 people for collecting and sorting of the jhoot items. Most of the workers are women.
With flourishing of garment sector in early 1980s, some people got interested in the trade. Before that these waste materials were simply thrown away polluting land and waters around the factory zones.
Jhoot traders said, while the trade of garment waste is thriving with the pace of the garment industry, problems related to this informal sector are many.
“Since the sector is still informal and runs with small investment without a strong foundation, harassment by police and local goons for toll collection is regular,” said Md Abul Hashem, auditor of Mirpur Kata Kapor Babosayee Somobai Samity Ltd (Mirpur Garment Wastage Business Owners Association).
“These jhootpattis do not have land to set up suitable establishments. So almost all the stores are located at encroached government lands. Fear of eviction always remains,” said a trader of the area requesting anonymity.
Clashes among local musclemen over control of the trade occur frequently, sometimes leading to even murder, he added.
Md Rabiul Islam, a trader at Mirpur 10 Jhootpatti, however, said, “The negative notion about the jhoot trade is slowly fading away. It would even be quite possible to earn a huge amount of foreign exchange with these wastes. Dear items like carpets and rugs can be produced if a modern mechanism can be developed to process this jhoot.”
Access of RMGs to be discussed with US Senators
December 25, 2008
Foreign Adviser Iftekhar Ahmed Chowdhury said that the visit of the three senior US senators to Bangladesh reflected strong ties and shared values between the two countries, reports UNB.
He said that the senior senators visiting Bangladesh Tuesday would be ‘welcome guests’. The US Senators are John Mc Cain, Senator Joseph Liberman and Senator Lindsey Graham, said a press release.
“Each of them is a legislator of the highest stature. Their visit is also an acknowledgement of the internationally recognised position of Bangladesh as a peace loving, peaceful and stable State heading for a free, fair and credible elections”, he added.
Iftekhar Chowdhury said that this visit would provide an excellent opportunity to discuss other issues of interest, primary among which was the market access for Bangladeshi manufacturers, particularly RMGs.
He further said, “They will see for themselves that Bangladesh is truly an oasis of stability in a turbulent region. Such deserving trade facilities to Bangladesh will help sustain this stability in our society.”
Demand for Bangladeshi RMG Growing in Sweden
December 25, 2008
Demand for Bangladeshi garments in Sweden is growing gradually as the consumers, facing hardship following the financial downturn in Europe, are preferring cheaper goods, businessmen said.
“Now-a-days consumers look for cheap garments. Since the Bangladeshi products are cheaper than that of other countries like China, they prefer that,” Ms. Halen Agervi, a manager of the H&M’s showroom in Stockholm told the FE.
Though the flow of customers has recently shrunk due to the financial dip, those who come to the shops are usually preferring cheap garments, she said.
The Swedish H&M (Hennes & Mauritz AB), Europe’s second largest buyer of Bangladeshi garments, imports apparel from different countries including China, Mauritius and Turkey for selling those to more than 1000 H&M retail shops in 34 countries across the globe.
Bangladesh has so far this year supplied some 120 million pieces of knit products worth about $300 million and 50 million pieces of woven worth about $250 million to the H&M, said Iqbal Khan, a senior executive of the H&M Dhaka office.
“Due to financial meltdown our headquarters has asked us to offer less prices to the suppliers. But the volume of orders to Bangladesh will not lessen,” Mr. Khan who was visiting their Stockholm headquarters told the FE.
H&M pays US$2.5 per unit to the Bangladeshi knitwear products and $4.5 per unit for the woven goods on an average.
“The orders from the H&M is increasing day by day even during this global recession,” Amal Poddar, Managing Director of Metro Knitting and Dying Ltd, a major knitwear supplier to the Swedish company told the FE Friday.
As the developed world is facing the financial meltdown, they are preferring Bangladeshi products for its competitive price than products from China and Turkey, he added.
Mr. Poddar said Bangladesh is slowly nudging China as the preferred choice for medium-to-low priced ready-made garments in European markets.
“And recession in the wealthiest countries would hasten that process, as the top retailers would desperately hunt for factories, which can offer bargain prices,” he said.
The H&M have been giving a lot of orders of knit garments especially sweater for acute cold weather in the Scandinavian countries, Mr. Poddar who supplies about 2 million pieces of garments per month to H&M said.
“I don’t think that our supply volume to the European market will shrink. The H&M has recently shown us that it had a target of 150 per cent business growth during 2008-2013. The projection has made us more bullish,” he said.
“Chinese apparels were occupying the H&M retail shops in Stockholm before the global recession. But after the plunge, the consumers are now preferring low-valued apparel. It has made a room for the Bangladeshi products again,” said Nahid Hossain, a Bangladeshi born Swedish citizen.
H&M Dhaka office’s Iqbal Khan said they are bullish about Bangladesh as they see the country’s shipments gain on cheap labour and declining Chinese competitiveness despite its major markets are on the brink of recession.
Amal Poddar said: “Bangladesh is the third largest supplier of H&M at this moment. I think it will be able to occupy first position within 2-3 years as our supply volume to the company is growing every month.”
He said some 32 per cent of Bangladeshi exportable knit products are imported by the Swedish company — H&M.
The US and the EU are the major destinations of Bangladeshi garment exports, accounting for some 90 per cent of the country’s US$10.7 billion garment shipments last year.
RMG Current month to be wary of the export prospects
December 25, 2008
In a sharp contrast to their previous upbeat mood about the prospect of business in Bangladesh in the face of global recession, a recent official data prepared by the Export Promotion Bureau (EPB) has rung alarm bell among the business community, especially the exporters of the country. The data released by the EPB shows that the volume of export by the garment industry in last October fell by 8 per cent compared to what it was in the same month a year before.
Though the export performance of the Readymade Garment (RMG) in a single month cannot be any measure of its overall performance, which is still on the higher side as revealed by the data from the same official source, the October data has become an issue of concern for the chief foreign currency earner for the country. However, there are also other indicators that have provided the apparel sector with reasons to be justifiably concerned. In fact, it is the behaviour of the overseas importers of our export items that has forced the local exporters to become more circumspect about the trend of the trade in the days to come.
Is there really any reason for the export trading community to be overly concerned about the performance of the apparel sector in a single month? The leaders of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), on the other hand, differ on the interpretation of a single month’s performance of the export sector in question. The BGMEA president is of the view that since the celebration of the Eid-ul-Fitr were held in the month of October, it might have left an impact on the export business. The BKMEA president, on the other hand, is wont to take the development more seriously and relate it to the overall situation of economic recession in the developed world.
In fact, it is too early to scream blue murder about the decline in the performance of the apparel sector in a single month seeing that the general trend is still favourable for Bangladesh export. But as it has been said in this column more than once in the past, there never was any room for complacency over the performance of overseas trade in export by any sector of the industry, let alone the apparel. That the developments in the rest of the world, especially in the highly industrialised nations in Europe and North America, will finally leave their harmful impact even on a least developed economy like ours, is a conclusion derived from common sense. And neither the government, nor the section of the business community engaged in export was ready to accept the reality even a month back.
One can, however, understand the stake of the government on the issue, for expressions of unnecessary concern on the global recession might have pressed the panic button among the local business community and the people in general. And we know too well who gains most from the rumours and speculations in the market at the expense of the common people’s purse. That is why a note of reassurance about the robustness of our business and the financial system was welcome from the government as well as the businesses. It is one thing to be self-confident; but it is another to be smug and oblivious of the hard facts around. For if one is talking about export and that too in the European Union (EU) and North American markets, then how can anyone ignore the basic fact that the consumer demand in those markets are on a steeply declining curve? What is happening in Europe, America and other advanced nations is tantamount to a global sink. The emerging economies are emerging, because there is the existence of the strong western economies to absorb the commodities produced by them. But as the demand for consumer goods has fallen drastically due to the crisis of credit in the advanced economies, the fast growing economies of China, India, Brazil and others in the second and the third world have naturally their back to the wall. With their exports curtailed, their industries geared mainly to export are to certain to face the consequences. So, the economic slowdown in the West means a slowdown of the global economy. And there is no escape from this stark reality, whichever country one may be talking about on this planet. And, Bangladesh is certainly no favoured island immune from the developments in the rest of the world.
Against this backdrop, Bangladesh, especially its trading community has to consider the issues in their correct perspective. True we have certain advantages so far as our foreign currency earning is concerned. Firstly, the kinds of products our apparel industries export are the least competitive ones in the global market. The western buyers can still afford to buy those low-end apparel products. But does this fact provide any strong reasons for jubilation? It does not. And that is for the simple reason that the retail chains that buy our products cannot run their business basing on these low-end products alone. So, if their overall business is affected, many of these importers will be forced to close their business and reports are there that some of them have already done so. In that event, supply orders from those prospective buyers will fall off affecting our volume of export in those countries.
The president of BKMEA has pointed exactly to this side of the problem when he expressed his concern over the delayed placement of purchase orders and deferred orders for shipment by the overseas importers from Bangladesh. Such behaviours demonstrated by the Western buyers do not certainly bode well for the country’s export, at least for now. That a more cautious outlook for the export sector is necessary should be evident from the continuing trend in the economies of the Western world. In reality, the crisis in the western economies is not showing any sign of early recovery. On the contrary, it is deepening further. From the perspective of the least developed economies, this is disconcerting for its exporters of garments, knitwear and agro-based products.
The Executive Director of the policy think tank, the Centre for Policy Dialogue (CPD), too, spoke in a similar vein and called for more synergy between the industry and the government in the fight against the encroaching global recession. Regarding export, he however recommended more watchfulness on the part of the government and the business to track the evolving scenario on the global theatre. The export sector, on its part, will have also to improve its performance in the meanwhile. For example, our products have to be more competitive, the products should have more value added to them and the operators of the export business have to be more competent in the marketing of their merchandise if they want to survive in the competitive marketplace. Or in other words, dependence on the low-end products is no guarantee for survival in the marketplace that is getting more unpredictable with the passage of time
So, cautiousness and preparations should be in place in the face of the turmoil in the economic world. Such preparedness will provide the business community with the strength they need to prevail over the tougher days lying ahead. Otherwise, the local business will at times remain too complacent, while panicky at others. And either of theses states of mind has the potential to spell disaster for the economy.
GDP growth 6 PC attainable if next govt takes cautious steps
December 25, 2008
Bangladesh may achieve six per cent economic growth in the current fiscal if the next elected government takes cautious steps to confront the prevailing global financial meltdown, a local research firm Centre for Policy Dialogue (CPD) said.
“Present economic scenario shows that six per cent gross domestic product (GDP) growth is attainable if the new elected political government can take some perfect steps to overcome the financial dip,” said CPD executive director Mustafizur Rahman at a press conference in Dhaka Tuesday.
The CPD, a local think-tank, has made the observation in its analysis on the “state of Bangladesh economy in the run-up to the national election 2008″.
A debate on the government’s 6.5 per cent GDP growth target for current FY09 has recently been emerged after World Bank projection of 5.4 per cent growth considering possible impact of global financial crisis on the economy.
The Bangladesh Bank (BB), however, criticised the forecast and said the country would achieve 6.5 per cent growth target overcoming the impact of meltdown.
“Macroeconomic performance will depend on how the economic scenarios in the second half of FY09 and global recession will impact on export, remittance, domestic resources mobilisation, capital market, foreign aid and foreign direct investment,” said CPD chief Mr. Rahman.
CPD said 3.70 per cent growth target in agriculture sector and 6.5 per cent in service sector are achievable while 11.70 per cent in industrial sector could be affected due to absence of inadequate infrastructure development, especially for the ailing energy sector.
About the export earnings, the CPD said, export particularly from the ready-made garments (RMG) has demonstrated a dynamic performance, excepting in October.
“The orders in November for RMG indicate that the target of $16.5 billion export earnings in FY09 is achievable,” Rahman said adding, “Much will depend on how Christmas sales go, whether the retailers are left with large inventories.”
On the remittance target, the think-tank said there is uncertainties about sustaining the current buoyant remittance flow from US and European countries, moderate growth projection (5.3 per cent) in Middle-eastern countries could help achieve the target.
The “comfortable foreign financing position” in FY09 and “pick up of foreign direct investment (FDI)” have showed positive indications towards achieving the GDP growth, it said.
The country received US$395 million in net FDI and $5.0 million portfolio investment in the first quarter (July-September) of current FY09, which is higher than the corresponding period of last FY08.
CPD, on the contrary, has termed the declining public investment and falling trend in capital machinery import as setback for the targeted GDP growth achievement.
Thanking to the central bank’s “accommodate monetary policy”, the local research institution said BB has to craft a monetary policy that takes cognizance of inflationary pressure and provides required liquidity and incentives to stimulate production and growth for vibrant economic activities.
Mr. Mustafizur also emphasised on providing fiscal incentives to the farmers in next Boro season to engage them in rice cultivation for ensuring future food security.
“I think there will be a need for re-rationalisation of the fuel oil price in January-February period when a newly elected government will be in power,” he said analysing the government’s small cut in fuel prices on December 22
Mr. Rahman further said if the next elected government addressed the emerging economic challenges from the day-one, the country could overcome the external and internal shocks.
The CPD executive director identified 10 challenges that have to be faced by the next elected government in achieving the desirable economic growth.
The next government will need to facilitate next Boro rice production through providing fiscal incentives to the farmers, address the energy crisis, tame the inflation, keep the monetary sector under constant vigilance, he said.
“Besides, the government has to manage the impact of global financial crisis, monitor the NBR revenue earnings, revitalise the annual development programme, revisit the current national budget, clear the political stance on PRSP and continue with the institutional and regulatory reforms,” he said.
Analysing the election manifestos of the political parties, the CPD chief said: “I don’t think that it is impossible to execute the manifestos by the political parties. Those are possible and they will have to execute.”
Mr. Rahman, however, said if the political parties explain their development programmes providing cost and sources of funds those will be more computable.