Learn from Vietnam to offset export shocks | The Daily Star
12:00 AM, July 21, 2020 / LAST MODIFIED: 01:31 AM, July 21, 2020

Learn from Vietnam to offset export shocks

Experts discuss ways to boost shipment to France, other countries

Bangladesh should take Vietnam's lead on how to cope with challenges in export brought about by the coronavirus fallout while attracting more foreign direct investment (FDI), according to Kihak Sung, chairman Youngone Corporation.

"Vietnam did not lose much business even amid the peak pandemic time but on the other hand, Bangladesh's economy endured a considerable impact," Sung, also CEO of the leading garment exporter based in South Korea, said yesterday.

Sung made these comments while speaking on the impacts of the Covid-19 pandemic on Bangladesh's garment sector at a discussion jointly organised by the France Bangladesh Chamber of Commerce and Industry (CCIFB) and Policy Research Institute (PRI).

"I have never lost business. But this year, I lost 25 per cent of business due to Covid-19," said Sung, adding that most of his losses were incurred by the company's Bangladesh units.

However, the losses incurred by Youngone's Vietnam unit were not that high as cancellations of work orders and late payments from international buyers was not as frequent for the country as it was for Bangladesh, where these issues are currently a major challenge, he said.

Vietnam managed the coronavirus fallout as well as its production, export and logistics sectors quite well compared to other parts of the world.

And so, Bangladesh should evaluate the pros and cons of Vietnam's approach so that it can develop its own plan of action to tackle the situation and attract FDI.

Besides, another important fact is that Vietnam does not discriminate against any foreign investor, said the South Korean multi-billionaire.

Youngone exports nearly $850 million in garment and footwear products manufactured at its factories in Bangladesh, where 70,000 people are employed by the corporation across 28 industrial units.

Sung suggested that local producers develop more man-made fibre garment items as the demand for such goods is increasing worldwide.

The South Korean also said his company exports more than $100 million in garment and footwear items, most of which comprise man-made fibres, to France each year.

It will be a tough task for businesses to make a full recovery as the global demand for garment products decreased by 30 per cent following the Covid-19 outbreak, he added.

Productivity levels at Youngone's Vietnam factory is currently 20 per cent higher than that of its Bangladesh counterpart as the former's logistics and policy support are comparatively superior to that of the latter.

Moderated by PRI Executive Director Ahsan H Mansur, the meeting featured various market researchers, exporters, diplomats and trade body representatives.

Bangladesh's overdependence on cotton fibres for garment production is a major impediment to the country's plans to diversify its export basket, said Mansur.

More than 74 per cent of the country's garment shipments are made of cotton.

Besides, another challenge for export diversification is the fact that almost all of the Bangladeshi apparels are shipped mainly to the US and EU markets.

Of the country's total garment exports each year, about 83 per cent are destined for the aforementioned markets, he added.

Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the situation may not return to normal until halfway through next year.

However, amid the ongoing pandemic, the use of online retail platforms has soared worldwide.

"We need to quickly adopt policies in this regard in order to hold a greater market presence in the global online retail sector," Huq said.

France is a market with huge potential for Bangladesh but local garment manufacturers are already far behind on shipments of several major export items that have high demand in the European nation.

As far as foreign buyers go though, French companies are comparatively a cut above as only two small firms cancelled their work orders amid the pandemic situation, Huq added.

The government is pulling out all the stops to connect with its counterparts worldwide so that business eventually returns to normal in line with the global economy, said Masud bin Momen, secretary to the Ministry of Foreign Affairs.

Momen also suggested that suppliers maintain business etiquette and be held responsible for upholding their end of any bargain.

Dilara Begum, commercial counsellor to the Bangladesh Embassy in Paris, said Covid-19 was not the only reason behind low exports from Bangladesh to France.

"Exports from Bangladesh to France were low well before the pandemic began," said Begum, adding that garment shipments to the European nation from Myanmar and Vietnam were on the rise.

France is the fifth largest export destination for Bangladeshi products after the US, Germany, UK and Spain.

"We are hopeful that France's economy will return to its pre-pandemic condition by the end of this year as the country is opening up now," said Kazi Imtiaz Hossain, Bangladesh's ambassador to France.

Mahbubul Anam, the preceding president of Bangladesh Freight Forwarders Association, said more than 70 per cent of Bangladesh's logistics sector was related to the garment industry.

Solely in the transport sector, where more than 35 lakh people are employed, around five lakh jobs have been lost already while a further five lakh are precariously positioned due to the ongoing coronavirus crisis.

The logistics business is now 30 per cent lower than business in normal times, Anam said.

Bangladesh's rank in the global logistics index is the lowest among other South Asian countries while the cost of logistics in the country is 20 per cent more than its South Asian peers.

Added with Covid-19, the price of logistics has increased by between 25 per cent and 40 per cent in comparison to the before-pandemic era, he added.

Deepak Dsouza, CEO of Decathlon Bangladesh, said his France-based company has purchased garment and footwear items from Bangladesh for over the past 15 years. His company did not cancel any work orders amid the pandemic.

Dsouza also suggested that producing synthetic items to reduce dependence on imported raw materials for garment products.

About 40 per cent of all materials used in manufacturing garment items are imported and as a result, value retention from Bangladesh's export receipts is low, he said.

Andalib Elias, director general of the West Europe and EU Wing at the Ministry of Foreign Affairs of Bangladesh, said the government has been contacting the heads of various countries in Europe to encourage foreign retailers and brands to pay local producers for cancelled work orders. 

 

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