$30b garment exports hinge on tech upgrade
Bangladesh will not be able to raise its garment exports to $30 billion by 2015 and $50 billion by 2021 without improving workers' productivity and upgrading technology, analysts said yesterday.
"The garment sector is going through a transition. Its restructure has become very essential," said Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue.
"Developing the capacity of workers would play a key role in this restructure and modernisation process. It will strengthen the country's competitiveness, helping the sector advance further in the coming days."
His suggestions were endorsed by Ludovico Alcorta, a director of the United Nations Industrial Development Organisation, and Christopher M Woodruff, an economics professor at University of Warwick in the UK.
Alcorta said Bangladesh should focus on technology upgrades not only for the textile sector but also for other potential sectors within the next one decade.
"Since Bangladesh's economy is growing, the industrial structure has to change," he said.
Prof Woodruff said Bangladesh is gradually moving up the ladder from low-end to high-end garment segment. “So the country will have to focus more on innovations and increase the productivity rate.”
They spoke at a dialogue on "Bangladesh's garments sector: upgradation and structural transformation" at Ruposhi Bangla Hotel in the capital.
The CPD, a think-tank, organised the event in association with the DFID-ESRC Growth Research Programme.
Garment exports accounted for 80 percent or $21.5 billion of the country's total overseas sales of $27 billion in fiscal 2012-13, according to Export Promotion Bureau.
Commerce Minister Tofail Ahmed said Bangladesh needs to go for high-end products as part of its transformation process, as the country has targeted to earn $30 billion from garment exports by 2015 and $50 billion by 2021.
He, however, stressed the importance of low-end products, saying the cheap garments had helped Bangladesh keep up its healthy export growth during the recent economic meltdown.
"The demand for this type of products never goes," he said.
Bhattacharya said choosing between high-end and low-end products would turn out to be a key important policy decision.
"It's true that during the recession, the demand for the low-end products did not fall as we have seen in case of high-end products. But with the economic recovery in the developed world, the demand for high-end products will increase again."
Besides, the competition in the low-end segment will also go up, as Bangladesh is not the only country in the category, Bhattacharya said.
"New countries such as Myanmar are coming in full force, while some African countries will come in the scene with lower wage."
The availability of gas and electricity has to be increased and swift steps have to be taken to improve roads and sort out traffic jam, he said.
The former ambassador and permanent representative of Bangladesh to the WTO and UN offices in Geneva also called for effective coordination in policymaking.
"This has become more essential after the Tazreen Fashions fire and Rana Plaza building collapse as the twin accidents dented the country's image."
On winning back the generalised system of preferences (GSP) from the US, the commerce minister said Bangladesh would meet all the conditions by this March and send a report to the US in April.
Ahmed said the industries are not willing to contribute more than Tk 100 crore out of Tk 800 crore to be needed for setting up the proposed garment village in Gozaria, although the government is giving the land.
Abdul Moyeen Khan, a senior leader of BNP and also a former minister, advised the garment makers to continue technological upgradation and structural transformation on their own.
Khan also said it baffles him how garment entrepreneurs make profit despite borrowing from banks at an 18 percent rate of interest.
Bangladesh is the second largest garment exporter after China. Currently, China's market share is around 31 percent of the total global garment market of $450 billion, where Bangladesh's share is 5 percent.
“There is a lot of space for further growth. We have to go through a significant transformation to tap the growth potential,” said Mustafizur Rahman, executive director of CPD.
Atiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), acknowledged that the apparel sector has a significant deficiency in productivity.
He said the minimum monthly wage in Bangladesh is $69, and the productivity of workers stands at 77 percent. On the other hand, Vietnam pays $78 as minimum wage while their workers' productivity is 90 percent. The minimum wage and the productivity in Pakistan stand at $79 and 88 percent respectively.
“So we have no other alternative to upgrading the industrial process,” he said, adding that the government should set a separate fund for technology upgrades.
Azam Mohammed, an additional commerce minister of Pakistan, said financial assistance is a must for technological upgrades.
He said Pakistan imposes a tax of 0.25 percent on all its exports, with the fund being used for technology upgrades, human resource development and resolving infrastructures deficit.
Anwar-ul-Alam Chowdhury Parvez, a former president of the BGMEA, said regaining the GSP from the US and ensuring workplace safety are the biggest challenges for the garment sector.
He also criticised the inspection standards of international brands and retailers, saying if those are implemented, around 90 percent factories will be shut.
Dirk Willem te Velde, head of programme at UK-based International Economic Development Group, and Khondaker Golam Moazzem, additional research director of CPD, also spoke.