H&M has big sourcing plan for Bangladesh
H&M has a big plan for sourcing for Bangladesh although the price will increase by up to 12 per cent following the country's graduation from the grouping of the least-developed countries in 2026, said a senior official of the Swedish retail giant yesterday.
After becoming a developing nation, Bangladesh will lose its preferential market access and face 10 to 12 per cent duty on its exports. However, it will enjoy the duty preference in the European Union up to 2029 as the trade bloc has extended a three-year grace period.
"We are committed to our suppliers. And Bangladesh is the safest sourcing destination among all 19 sourcing destinations of H&M," said Ziaur Rahman, regional country manager for production at H&M for Bangladesh, Pakistan and Ethiopia.
"We will be staying here."
Rahman was speaking as one of the panellists at a discussion on "Bangladesh's LDC graduation-Impediments and Way Forward" at the Made in Bangladesh Week at the International Convention City, Bashundhara in Dhaka.
H&M is the single largest foreign clothing buyer in Bangladesh, sourcing more than $3.50 billion worth of apparel last year. The Swedish clothing retailer sources 20 per cent of its products from the country.
The comment from Rahman comes as the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has set a target to raise the nation's share in the global apparel market to double-digit in three years and earn $100 billion by 2030.
The country, which raked in $42.61 billion in garment exports in the last financial year that ended in June despite economic slowdown across the world, has a 6.8 per cent market share in the global apparel supply chain.
Rahman, however, noted that 18 per cent to 20 per cent of products that his company sources from Bangladesh would be affected by the duty imposition after graduation.
He suggested Bangladesh improve product diversity as more than 75 per cent of exported garment items are confined to the top five products although the country is the second-largest apparel supplier in the world.
"Improvement of efficiency and making more garments from the manmade fibre can help overcome the challenges of the duty imposition after the LDC graduation," he said.
In another assurance, Rahman said if the wages of garment workers in Bangladesh go up, H&M would also increase the prices of products sourced from the country to help manufacturers compensate for additional expenses.
Bangladesh is the largest sourcing destination for British multinational retailer Marks and Spencer Group. And its regional head for Bangladesh and India Shwapna Bhowmick said local manufacturers need to use more manmade fibre (MMF) to increase garment exports.
Globally, the use of artificial fibre is rising.
MMF apparel items accounted for $222 billion of the $440 billion global garments market last year when cotton-based products contributed $190 billion.
Apparel exports from Bangladesh will cross $95 billion by 2030 if the country can expand its share in the global market for MMF to 12 per cent from less than 5 per cent at present, according to a recent study.
Worldwide, almost half of all apparel exports are of MMF products while 42 per cent are cotton-based garment items. In Bangladesh, 72 per cent of the garment exports are cotton-based apparel and just 24 per cent are MMF.
Speaking at the event, Sharifa Khan, secretary of the Economic Relations Division, also suggested local manufacturers ship more garment items produced from MMF to secure better prices.
She said Bangladesh has already secured five years as the transition period when it comes to duty benefits instead of three years supposed to be granted.
Another review is going on at the United Nations Conference on Trade and Development for further extension of the transition period. But she said Bangladesh is not expecting any further extension.
"Bangladesh has always been a resilient economy and we will need to stand on our own feet."
She suggested aligning the Generalised System of Preferences with the Sustainable Development Goals so that all the LDCs benefit.
The ERD secretary also alleged that international retailers and brands always put pressure on increasing conditions for local suppliers.
For instance, previously it was said that Bangladesh would have to comply with 27 international conventions to obtain the GSP Plus status in the EU market. Now, the number of conventions has been raised to 32 conventions, said Khan.
Ahmad Kaikaus, principal secretary of the prime minister, said Bangladesh is the largest denim supplier to the United States despite a 16.50 per cent duty.
"This indicates that the export of garments will not be affected after the LDC graduation."
Kaikaus also said a team from the International Monetary Fund (IMF) that visited the country recently did not come to rescue Bangladesh by providing loans.
Rather it was a regular visit and they wanted to know about the government's preparation for the LDC graduation, he said.
The IMF has agreed to provide $4.5 billion in loans to Bangladesh.
The IMF team also did not attach any condition to the loan except for enquiring about the situation of the Export Development Fund (EDF), according to Kaikaus.
The IMF has long been prescribing Bangladesh calculate and regularly publish the net foreign currency reserves.
The central bank currently shows gross foreign currency reserves by including $7 billion of the EDF.
"LDC graduation is a challenge but it is possible to overcome it and grow," Kaikaus said.
Nazneen Ahmed, the country economist of the UNDP, said if Bangladesh can continue its manufacturing growth even after the LDC graduation, it will not fall into the middle-income trap.
"The conventional country branding will not do. Branding should include all of the potential sectors," said Riaz Hamidullah, Bangladesh's ambassador to the Netherlands.
He called for using technology, innovation and design in products.
Asif Ibrahim, a director of the BGMEA, demanded signing trade deals with major trading partners to avail more market access after graduation.
In another session styled "Responsible Business Needs Global Alliance on Due Diligence - the Perspective of Manufacturers & the Western Buyers", Senior Commerce Secretary Tapan Kanti Ghosh said Bangladesh signed the Global Sustainability Compact a long ago that called for shared responsibility. But it is not discussed with importance, he said.
The senior secretary said Bangladesh has improved a lot in line with EU due diligence over the past decade.
He is worried that the EU due diligence may be used as a non-tariff barrier.
The BGMEA and the Bangladesh Apparel Expo jointly organised the Made in Bangladesh Week, which ends tomorrow.