Act before EU cancels GSP
Garment exports will take a serious hit if factory safety and compliance are not enhanced by next June, when the European Union will review Bangladesh's trade privileges, the World Bank said yesterday.
Johannes Zutt, WB's country director for Bangladesh, said the country's “dynamic” readymade garment sector is at a “critical crossroad” now after the recent spate of industrial accidents which have exposed the hazards workers face and “severely” tarnished the industry's image.
“Bangladesh must act now to articulate and enforce improved standards for building safety and worker health and safety, so that the garments industry can continue to grow and other industries can follow its example.”
The most immediate priority for the government is to ensure enforcement of the steps suggested by foreign buyers, international agencies and domestic regulatory bodies, the WB said in its quarterly development update.
The European and American buyers' consortiums have already announced separate initiatives to improve compliance over the next five years, while the EU and Bangladesh have agreed to a time bound “Sustainability Compact” which is broadly consistent with the action plan provided by the US.
“Effective implementation of planned actions through coordinated efforts is the need of the hour,” the report said, adding that the cost of inaction could be high.
Withdrawal of trade benefits to the US market under the Generalised System of Preferences (GSP) programme “may not hurt the country's garment industry unduly”, as the benefits to the industry were non-existent.
“But if the EU were to suspend Bangladesh's favoured access to its markets, the country could see its total exports fall by as much as 4.1 to 8 percent,” Zahid Hussain, lead economist of WB Bangladesh, said.
The EU is the destination for 58.1 percent of the country's apparel products, thanks to duty-free and quota-free access under the GSP and the 'Everything But Arms' scheme.
If the EU, the bloc of 27 countries, withdraws the GSP facilities on garment imports from Bangladesh, the exporters will have to pay 12.50 percent duty on apparel items.
Meanwhile, Zutt said many development partners and private companies that are sourcing from Bangladesh want to see the country's RMG industry triumph.
China will be shedding about 80 million jobs over the next ten years and some of the jobs will be from the RMG sector, according to the WB country director. “Bangladesh is in a terrific position to capture some of these jobs that will shift from China.”
“But it will only be possible if the buyers in other countries are confident that the industry in Bangladesh is operating at acceptable international standards,” he added.
Between the July-June period of fiscal 2012-13, the country exported knitwear products worth $10.47 billion and woven garments of $11.03 billion, according to Export Promotion Bureau.