Apparel industry unveils ambitious target for export
November 9, 2008
Bangladesh apparel-industry leaders yesterday unveiled an ambitious export target of US $ 25 billion and additional 2 million jobs in next five years, keeping well in mind the impacts of possible long-term recession following the recent global financial crisis.
“ We have proved ourselves as a strong player in the apparel sector so far and have been branded among the best competitive RMG producers,” President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Anwar-Ul-Alam Chowdhury told members of the Overseas Corespondents Association, Bangladesh (OCAB) at his office ahead of their mega-event Batexpo-2008.
He said the ready made garment (RMG) exports rose to US$ 10.7 billion in the last fiscal year and the first month of present fiscal recorded a 71 percent growth, which he said not only impressive but also reflects the industry’s strength and capability.
Chowdhury, however, did not rule out any adverse impact of a possible longer recession due to the global economic recession and urged government policymakers to evolve immediate action plans to face the future challenges.
The BGMEA president said Bangladesh’s competitors like India, Pakistan, Vietnam, Thailand and even China already devalued their currencies. Without wasting time, policymakers and economic experts should work out effective measures to protect the industry, the “backbone” of the national economy.
He said the BGMEA is making relentless effort to promote the market of the garment industry.
Batexpo 2008, the 19th Bangladesh Apparel and Textile Exposition, will be held November 6-8 at Sonargaon Hotel.
Chief Adviser Dr Fakhruddin Ahmed would inaugurate the exposition as chief guest, while Chief of Army Staff General Moeen U Ahmed will attend the closing ceremony as chief guest.
Batexpo, the largest clothing exposition in the Asia-Pacific region, will enable foreign buyers and their representatives to see Bangladeshi textiles, clothing and accessories.
This year the organisers expect more buyers as 65 different organisations have already registered to display their products in 75 stalls.
Army Chief urges saving RMG sector from ‘vested quarters’
November 9, 2008
He said vested quarters tried to destroy the garment sector, but the government, army, owners of factories and workers foiled their bid.
ss”The army will continue its support for sustaining the growth of the country’s garment sector. Let us protect the garment industry from destruction by vested quarters,” Moeen said at the closing ceremony of BATEXPO-2008 at the city’s Sonargaon Hotel.
He asked the owners of ready-made garment (RMG) factories to make the workers understand that they are also partners of the production units. “If the workers are aware of their partnership of the factories, they will not destroy those,” said the army chief who was the chief guest at the function.
Moeen stressed united efforts to help the garment sector thrive, which fetched foreign currency worth $10.7 billion in fiscal 2007-08.
Terming the garment sector ‘lifeline’ of the national economy, Moeen also said turn around time of ships at Chittagong port shortened to 2.9 days where efficiency increased by more than 40 percent since the caretaker government took over. “We have helped save 30 percent cost in Chittagong port through enhancing efficiency,” he said.
Suggesting that garment exporters should prepare to absorb the probable shock due to the global financial recession, Moeen said the government, workers, entrepreneurs and exporters have to work together to achieve RMG export target.
He called for turning the country’s huge population into human resources so that it is no longer viewed as a curse.
The closing ceremony of BATEXPO (Bangladesh Apparel and Textile Exposition) was also addressed by Stefan Frowein, head of Delegation of the European Commission, and US Ambassador James F Moriarty as special guests.
Frowein gave assurance of continued EU support to Bangladeshi RMG exporters even in a changed situation. “Any change in GSP (Generalised System of Preference) in EU will be development friendly,” he said.
Moriarty said two factors helped thriving of Bangladeshi garment products. The factors are export of high quality products with cheaper prices, and Bangladeshi exporters’ eagerness to take higher risks. He said 30 percent of Bangladesh’s total garment items is exported to USA.
Later, Moeen distributed awards among some entrepreneurs and organisations for their outstanding contribution in their respective fields.
Those who received awards include Benajir Ahmed, Hafizur Rahman, Nazmul Hasan, Rafiz Alam Chowdhury, Syed Fariduddin Ahmed, Kutubuddin Ahmed, Tarique Rahman Milon, Deepak Adhikary of IFC-SEDF and GTZ.
BGMEA President Anwar-Ul-Alam Chowdhury chaired the closing ceremony. BGMEA vice-presidents were also present.
Meanwhile, a total of 82 stalls from home and abroad took part in the 19th BATEXPO to showcase their products.
BGMEA held some important seminars relating to RMG sector on the sidelines of the three-day BATEXPO.
Bangladeshi garment show in Denmark gets good response
November 7, 2008
Bangladeshi garment show and one-to-one business meeting in Denmark has received a good volume of spot orders and future commitments from the potential buyers, said a press release.
The buyers have expressed their satisfaction and showed keen interest to import Bangladeshi ready-made garments (RMG) in future.
The four-day show began at the Danish Chamber of Commerce at Copenhagen in Denmark Monday.
The show was also organised in two more cities of the country at Jutland and Aarhus — the potential garment and port cities of the business hub of Europe.
Danish Chamber leaders, a good number of garment buyers and businessmen took part in the exhibition.
Garments export to gain from recession in the West!
November 7, 2008
Leaders of the Readymade Garments (RMG) sector are rather upbeat about the prospect of export of garment in the USA and Europe in spite of recession in those countries. Their optimism is largely based on the growing interest of the buyers from Europe and the USA about the cheaper garment products from Bangladesh. It may sound strange that the demand for Bangladeshi garment is increasing in those countries, despite the fact that they are going through the worst kind economic crisis since the Great depression that first struck USA and then the rest of the world in the early thirties of the last century.
Now that a similar situation is prevailing in Northern America and Europe, how would they be able to buy more RMG products from Bangladesh? What does really happen when recession strikes an economy? The first casualty of a country hit by recession is its consumers. The consumers buy less because their income level falls sharply. The banks tighten their credit, the businesses face capital shortage and the industries face production loss due to falling demand for goods. Industries reduce the number of their workers, because they sustain loss as a result of fall in their sales. Retrenchment of workers, cut in production, closing down of businesses and so on accompany such times in the life of a nation during recession. The USA and Europe have been passing through exactly such a situation recently. Under the circumstances, it is natural that those countries will also slash the volume of import of consumer goods from other countries. Surprisingly though, in the face of these difficulties being faced by the overseas markets, both our garment exporters and the representatives of the foreign buyers are still expecting that the recession in the USA and Europe have been a blessing in disguise for the RMG sector of Bangladesh.
What is then the substance of such optimism expressed by the foreign buyers as well as the local exporters of RMG products?
The first point in favour of their position is that with reduced purchasing power, the consumers of the recession-hit countries will look for less expensive goods. And so far it is about apparels, Bangladeshi products fit well to suit their need.
On the other hand, the RMG exporters are also pinning their hope on the increasing competitiveness of the local garment products, because those are far cheaper than those of China and other bigger Asian exporters like Vietnam and Indonesia. On this score, a highly-placed representative of the largest retailer in Germany, Metro, was of the view that Bangladesh was the cheapest manufacturer of garment in the world and he dismissed the possibility that China, Vietnam or Indonesia could ever come near to Bangladesh as regards the cheapness of the RMG products. Similar are the views expressed by the representatives of the big European buyers of RMG products of Bangladesh-origin like H&M of EU and KappAhl of Sweden. Five of such top overseas buyers told this paper that despite the fall in retail sale in those countries, the volume of their orders from Bangladesh will increase, rather than decrease in the coming months. It may be mentioned here that annually those countries import RMG products to the tune of US$1 billion from Bangladesh.
It is, therefore, a strange twist of luck for Bangladesh that it might be gaining out of the reduced buying power of the consumers in the European and the North American markets. This is certainly a heartening piece of news for Bangladeshi garments industries.
Such rosy scenario of the RMG sector, however, was contradicted by another leader of the apparel sector, the president of the Bangladesh Knitwear Manufacturers and Exporters’ Association (BKMEA). The BKMEA leader, Mr. Fozlul Haque, drew a rather very bleak picture of the situation pointing to the 10 per cent fall in overseas orders for local garments products last September. What is more, he was not even ready to take the July figure of garments export, which demonstrated a 75 per cent increase over the previous year, as any indication of a future growth of the RMG sector and dismissed it as something accidental.
The contradiction in the views of the leaders of the RMG and knitwear sectors of the apparel industry cannot be taken lightly. Optimism is always welcome. But one has also to be very cautious of becoming overoptimistic about any development in the market. The recessionary storm in the USA and Europe may not subside tomorrow. It may continue longer than being expected by many. So, the exporters of apparel will have to look for other markets in Asia and Europe.
As it has often been suggested by the well-meaning section of society as well as in this column that for the sake of long-time survival in the export market, the local export-oriented industries should not place all their eggs in a single basket. This is true both of the export destinations and of the type products being exported abroad.
There is another side of the story regarding the comparative competitiveness of the Bangladesh-origin garment products vis-à-vis those of China. The success, if any, in this respect would hinge on the cheapness of Bangladeshi garment workers. The Chinese garment products have, of late, become costlier than before. What is reason for the apparel products of China-origin getting more expensive? This is because the cost of labour has increased in that country.
Should it really be an occasion to exult over? It is certainly not. In this context, one has to look only at the volatile situation in the garment industries in and around the capital city. And the reason for those sporadic incidents of violence in the garment industries is also well-known. So, the bragging over the cheap labour in the garment sector in Bangladesh loses all its meaning when the factory owners are living in fear of workers’ violence accompanied by destruction and ransacking of the valuable machines and other properties of the factories. So, before claiming that we have the cheapest labour in the garment sector, it is very necessary to first address the problems that lie at the root of workers’ violence. In fact, cheapness of labour in a stable industry should be the standard. If we mean competitiveness, we need also to take care so that it is not being earned by depriving the workers. A competitiveness that is well-earned should be the aim of our industries, garments or otherwise.
While striving to achieve competitiveness, our garment industries must also focus on producing quality goods that China, Vietnam or Indonesia excel in. In fact, competitiveness should also be about producing quality products at a lower cost. That will need investment in the workers of the garment industries so that their skills and efficiency level are increased through training. Their working and living conditions also have to be improved. These are the ways to keep our garment industries at a sustainable level. Otherwise, any success would be contingent and temporary.
To boost export, too much dependency on a single item needs to be avoided. To this end, it would be necessary to include more items in the export basket, for which overseas markets should be vehemently explored. Expansion of the number of exportable items is the only safeguard against aggression of more powerful competitors out to grab our overseas markets for a particular item.
Making the most of a special situation in the market is no doubt a very smart policy. However, one cannot expect that such a situation would continue for an indefinite period of time. The more sustainable policy, therefore, would be to develop the capacity to survive and even excel one’s competitor under the normal market conditions.
Power cuts cost economy 2pc in lost national growth: World Bank
November 7, 2008
Electricity shortage is a ‘critical’ drag on private sector growth as an estimated 2.0 per cent of the country’s economic output is frittered away due to erratic power supply, says a new World Bank report.
Since 2003, the investment climate assessment report, second in a series, figured out that sales losses from power blackout on part of firms swelled to 12 per cent from 3.0 per cent.
“Electricity shortages remain a critical barrier to private sector growth and a source of major expense to firms,” Tatiana Nenova, who co-authored the report with other bank staffers, said.
Nenova, also the bank’s senior economist, added the private ‘productive sector’ such as garments, chemicals and pharmaceuticals reports significant losses as a result of power scarcity.
Bangladesh’s per capita electricity generation, at 155 megawatt last year, is one of the lowest in the world and official figures put households’ access to electricity at 44 per cent in 2005.
While the country’s overall generation is a little over 5,000 MW, Bangladesh can use only 4400 MW. Peak demand consistently exceeds 5000 MW, with load shedding peaking at 1000MW in warmer months.
Even in low demand seasons, load shedding is usually not less than 300MW.
The report is an outcome of a comprehensive survey which found that as many as 76 per cent urban enterprises termed electricity supply a “major or severe” obstacle.
“On an average, a metropolitan firm faced 98.5 power blackouts in a month and the total annual incidence of power outages comes to 1105 hours.”
“The issue (power outage) is particularly detrimental to smaller enterprises that cannot afford generators,” she said, adding manufacturing firms blame low capacity utilisation primarily on scarce power. “On an average, firms can only use 80 per cent of their capacity.”
Ms Nenova has noted that heavy reliance on generators in Bangladesh means the reported losses “seriously understate the true costs of the poorly performing electricity grid.”
Sectors with critical reliance on power such as garments, chemicals and pharmaceuticals use generators, she said.
She added that less successful industries including textile, leather and light engineering industries with less access to investment cash were the hardest hit by their dependence on electricity.
The report’s author praised private power producers, who control more than 30 per cent of generation, and said they are “more efficient and cost-effective, whereas state provision suffers from problems in governance, accountability, financial management, bad debt and collection rates.”
But Ms Nenova said new investment in the power sector has been hampered by rent-seeking and poorly transparent bidding procedures, resulting in ‘no substantive’ addition to the national grid in the past five years.
As power generation relies on five major power plants, she said public-private partnership for generation and distribution is important to help foster higher economic growth.
Referring to tariffs, the bank economist said the last hike in March 2007, which increased urban electricity prices by 5 per cent, leaving the ‘lifeline’ or first tariff block of 100kwh unaltered.
Helping the competitiveness of garments industries
November 7, 2008
THE banks in Bangladesh do need to be persuaded to support the readymade garments (RMG) sector in its specially bad patch –caused by the global financial turmoil — by lowering interest rate on loans and working capital. They will have to lower other service charges also for their RMG customers. The banks will have to look at their longer term interest of keeping alive the RMG industries in these difficult times. If the banks may decide not to adopt such a helpful role they would be undermining their own longer term interest opting for shorter term gains.
To make the RMG exports more competitive, the government needs to further improve port conditions to facilitate faster handling of garment cargoes, both raw materials and finished products. It would stop the loss of precious time in garment manufacture and export. The loss of time caused by red-tape also needs to come to an end for the same objective.
Meeting shipment schedules is essential for the success of RMG business. As buyers want, RMG products at lower and lower prices is one side to retaining competitiveness by the sellers. To retain their competitiveness, the Bangladeshi exporters have to cut down delays in shipment to the buyers. The government of Bangladesh ought to do everything possible to support the exporters in this regard. It should also take a firm stand on countering the menace of any unwelcome labour unrest in the sector while the legitimate interests of the workers do need to be promoted, any recourse to acts of vandalism, at the instigation of extraneous forces, must not be tolerated.
The proposal for maintaining two different exchange rates — one for the garment sector and the other for the rest of the economy - may deserve some consideration here, though such a proposal, if accepted, may lead to distortions in exchange rate management and also create scope for many irregularities. As such, it is not clearly known how the dual system of exchange rate under which Taka will depreciate against dollar for the garment sector to make garments export more competitive unlike the case with any other economic activities involving the use of foreign exchange, will ultimately benefit the economy. However, the Indian rupee has already depreciated notably against US dollar and this will help the Indian exporters. Similarly, in Pakistan and Vietnam, competitors of Bangladesh in garments export, their currencies have also depreciated against the US dollar. In this context, the competitiveness of our RMG exports may suffer.
Meanwhile, the government of Bangladesh should also take steps immediately to ensure steady supply gas and power to RMG industries - and if possible, at some concessional rates. The competitiveness of this pivotal sector of the national economy in these difficult times will then be promoted.
Global financial crisis a boon for Bangladesh!
November 7, 2008
The most talked about issue in the recent financial arena is the global financial crisis which started to show its effect in the middle of the year. The turmoil, however, is rooted in the sub-prime mortgage crisis that began in mid 2007 when two Bear Stearns hedge funds collapsed. During boom times, mortgage brokers were tempted by big commissions, talked with buyers with poor creditworthiness into accepting housing mortgages with little or no down payment and without credit checks. Banks and financial institutions often repackaged these debts with other high-risk debts and sold those to world-wide investors creating financial instruments called CDOs or collateralized debt obligations. The turmoil started with the collapse of Lehman Brothers which was heavily dependent on mortgage market and relied on repurchase market for short-term financing. Shortly after Lehman Brothers, Merrill Lynch filed for bankruptcy which was suffering from the same disease. The rising defaults on subprime mortgages in the US triggered a global crisis for the money markets. Consequently, the world stock markets have fallen, many of the world’s leading investment banks and financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems.
Bangladesh is a developing country and globalization integrates us with the global market in diverse areas. The recent table talks of different formal bodies presumed that Bangladesh will likely to be equally affected by the global turmoil in the short run as well as in the long run. It is very difficult to predict the scenario in the long term; however, short term impacts should duly be taken into consideration. It is imprudent to consider the economy of Bangladesh as ‘vulnerable’ as US economy which is basically ‘credit oriented’ rather than ’savings oriented’ that ultimately results in enhancement of debt burden on individuals and the country as a whole. As a consequence, the economy is poised towards vulnerability. The above is eventually the outcome of the deregulations of the so-called regulated countries. However, in the case of Bangladesh, it is unlikely to experience such debacle as our regulatory bodies including Bangladesh Bank (BB) regulates and supervises the financial market strictly. The overall financial leverage in Bangladesh is low and unlike the global financial institutions, Bangladesh’s banking system has no toxic derivative engagements that could make overnight default of the financial sector. Even we don’t have severe liquidity problem that could lead to a credit squeeze. Moreover, prudential regulations and monitoring by BB has kept the lending-deposit ratio of private banks within a tolerable limit.
However, the most likely affected sector is the export which is heavily dependent on ready made garments (RMG) and jointly with woven and knitwear, it contributes more than 75 per cent to our export. As a matter of fact, our garments exports depend mostly on US and EU markets which are acutely suffering from the turmoil. Different trade bodies expressed their deep concern regarding export orders for garments due to reported decrease in volume as well as delay in shipment. They are also trying to influence the government to rationalise the exchange rate to make export more attractive for the foreign buyers. It is true that our export volume of garments will dwindle for the time being but the situation will not continue for long as most of our export items have low price elasticity and targeted towards relatively lower income group. Moreover, if the condition continues for long, it is expected that our export volume will increase as there might have a paradigm shift of the behaviour of the foreign consumers from costly goods to relatively cheap and quality garments of Bangladesh. We are definitely at the competitive edge over our competitor and can explore new business opportunities through product and regional diversification. However, the government along with the trade bodies should have a keen watch over the issue so that foreign buyers cannot capitalise on the existing global market scenario.
It will not at all be a right move to intervene in the exchange rate in favour of the exporters as ours is an import-oriented country. After a continuous increase in the global price level, the prices of most of our imported goods and commodities started declining for the last couple of months. Oil and commodity prices are expected to remain at their current lows and Bangladesh will definitely get a relief from the sizzling heat of inflation. Moreover, lower imports prices will help improve the terms of trade with favourable implications for the current account of our balance of payments. The likely benefit derived from reduction of the global price level will be eaten up if the government intervenes in the exchange rate policy. But it is a matter of concern that the rate of cancellation of Letter of Credit (LC) for import of essential items has significantly increased due to the substantial erosion of the global commodity prices and put the banks into perplexing position. Proper steps are to be taken to address the issue. The flow of remittance is also not likely to be adversely affected shortly as the lion’s share (more than 60 per cent) of remittances comes from the Middle East and less than one-third from US, UK and Germany. It is noteworthy that the first three months of the current fiscal reported remittance flow of TK. 163.57 billion registering 43.38 per cent growth compared to that of the previous year. Even after the recent labour dispute in the Middle East, the remittance flow is likely to continue at an accelerated rate as the infrastructure development projects still continues in those countries.
The two bourses of our capital market continue to register their sharp decline for the last couple of months. The prime bourse of the country Dhaka Stock Exchange (DSE) ended with 2228.21 points in ‘DSE Index’ and 2684.68 points in ‘General Index’ as of November 2, 2008.
The trade volume also dwindled and stood at TK. 2490.51 million as on the same day. On the other hand, the ‘CSE Selective Categories Index’ went down to stand at 5334.05 points while ‘CSE All Share Price Index’ to 8233.62 points. However, there is no direct relationship between the global financial crisis and our capital market as we all know the foreign investment contribute less than 2.0 per cent of the total equity investment. The situation is driven by the panic behaviour of the market participants which is partially alleged to be transmitted by some top merchant banks in the form of heavy selling. Consequently, individual investors are withdrawing their money from the capital market and bear losses to protect the expected more losses in future. Many of the institutional investors are capitalising on the same by taking possession of the lower priced securities. Instead of being frightened, investors should keep patience in the context of present market scenario.
Considering all pros and cons, Bangladesh is expected to retain its competitive position in the global market in days to come. However, it will be dependent on sensible and timely policy decision which will mostly lie on the newly elected government. If we can avail ourselves of the opportunities and prudently confront the challenges, the global financial crisis will not be a bane for us rather may turn into a boon.
Country’s exports grow 42.85pc in two months
November 7, 2008
The country’s exports in the first two months of the current fiscal marked a hefty 42.85 per cent growth compared to the corresponding period of the previous fiscal despite the global financial tsunami that hit many developed economies.
According to officials of the Export Promotion Bureau (EPB), the country fetched over $2.903 billion from exports of primary and manufactured goods in July and August of the current (2008-09) fiscal year.
The first two months’ earning was also 3.95 per cent more than the target set for the period, they said, adding that the export target for the first two months was $2.793 billion.
In the first month of the current fiscal, the country shipped goods worth around US$1.54 billion including garments belying the apprehension that financial market meltdown in the United States and the European Union, Bangladesh’s major markets, would drag down exports.
The EPB officials said knitwear and woven garments grew more than 44.20 per cent to $2.243 billion, with knit items such as T-shirts growing 52.84 per cent and woven items such as jeans 35.55 per cent in July and August.
In the first two months, the country’s earning from shipments of knitwear garments export stood at $1210.14 million while woven at $1033.20 million.
However, the export earning from frozen foods, marking 4.84 per cent growth, stood at $104.25 million in July-August of the current fiscal.
Vice Chairman of Export Promotion Bureau (EPB) Shahab Ullah had earlier told the FE that exports in the first quarter of the current fiscal would set a new record as all indicators showed signs of “impressive growth” of major export items, such as woven and knitwear garments, frozen food and footwear.
The EPB officials, however, expressed the fear whether the country’s export could continue its growth in the next months as the global financial crisis had started taking its toll on many developed economies.
The country’s exports fell by 5.37 per cent in the July-September quarter of last fiscal year as garment exports nose-dived due to protracted impact of the emergency and labour unrest on the garment industry.
But shipments staged a comeback in the last nine months as top global garment buyers increased their orders to Bangladeshi, finding its products cheapest in the world.
The country exported goods worth $14.11 billion against an ambitious target of $14.50 billion.
In the last fiscal, the EPB said, knitwear and woven garments grew more than 16 per cent to $10.7 billions, with knit items growing 21.50 per cent and woven items 11 per cent.
270 garment units to be back in business
October 12, 2008
Dhaka, Aug 12 (bdnews24.com) – As many as 270 now-closed sick garment factories may reopen soon after a government decision to facilitate their quick return to business.
An inter-ministerial meeting decided Tuesday that the finance ministry would “issue an instruction” for state-owned banks to write off interests on debts owed by these factory owners and re-schedule the repayment under a 10-year scheme.
After the meeting, bdnews24.com learnt from both commerce adviser Hossain Zillur Rahman, who chaired the meeting, and BGMEA president Anwar-ul-Alam Chowdhury Parvez that the finance ministry would take the step in two weeks.
“In a day or two, BGMEA will send the list of the 270,” Parvez said.
“We have taken into consideration the contribution these factories have made to our exports, economy and employment,” the adviser said.
They said a Bangladesh Bank directive would the follow the finance ministry notification.
In addition, the commerce ministry would ask the law and finance ministries to expedite disposal of cases lying with the bankruptcy and loan recovery courts.
The NBR would also be asked to waive long unpaid taxes by these companies.
Parvez said the BGMEA had decided to plead for these 270 out of 1900 factories gone out of business “due to national, international problems and various other reasons”.
Those who also took part in the meeting included additional commerce secretary Golam Mostakim, joint secretary (export) Mostafa Mohiuddin, officials from the finance ministry, EPB, Bangladesh Bank, National Board of Revenue.
Clothing with a conscience
October 12, 2008
Look inside any TAC Social garment on sale in the group’s Gulshan store, be it a designer t-shirt or a pair of ladies trousers and you will find a label with a unique number.
Type the number into the company’s website and you will see a picture of the worker who has put the garment together, along with details about how old she or he is and some of the conditions under which they work.
“The workers’ conditions are not bad, but we want to improve them further,” said David Mayor, the Spaniard behind TAC. “As we do this we will be able to be more transparent on the website, give details of wages, of what the workers actually do and how they live.”
David Mayor came to Bangladesh several years ago, working as an auditor for garment buyers. “On several occasions, I found working conditions not so good and I thought it was possible to make them better.”
Set up with a local partner, TAC began exporting clothes to the Spanish market, but realised that it was difficult for a small supplier to compete simply on price.
“Margins are very small if you are a straight forward supplier. It is very easy to set up a factory if you have money, and there is always someone who is willing to charge less than you.” Mayor said.
The group started designing its own range to add value, bringing in a designer from Spain, and tried to profile its clothes as being manufactured in a socially responsible way. But they soon discovered that selling clothes with a social conscience was not that easy and the company needed something more to attract buyers.
“You will get some people who are very committed to socially responsible clothing, but they are not enough. By using the numbered label we give more than this. We give the idea of exclusivity and in a way you are selling an experience,” Mayor added.
“Everybody has a nice design and a good price, but we have something else,” he said.
In addition to this, around five percent of the sale price of each item goes to a school for garment workers in Dinajpur.
Last week the group opened its first retail store in Gulshan’s road 72 underneath the Café Mango. The group’s first outlet in Spain is due to open in September.
“We know a lot about manufacturing, but not so much about retailing. To start with we thought a shop in Dhaka would be a good way of learning the trade and testing out designs.
“Initially the idea was to aim the shop at expats but the response has been so good from Bangladeshis as well that we can see it as a business in own right.”
TAC is now considering setting up other stores in Dhaka, joining a growing group of locally produced brands, such as Cats Eye, Yellow and Ecstasy who are benefiting from the expanding local market.
To supply the stores, the group is building a new factory in Savar that will allow it to increase production from around 1,000 pieces a day to 6,000.
Controlling the whole chain from design through manufacture to retail is also a key means to improving workers’ conditions, David said.
“We looked at this issue carefully and worked out that we would have to charge an extra 10 cents a piece to improve conditions, but when you are a manufacturer negotiating orders with buyers that 10 cents becomes very important, it is very competitive and 10 cents becomes a lot,” he said.
“However when you look at 10 cents on a retail price, it is nothing,” he added.