What will kill RMG: TPP or Fear?
What will kill RMG in Bangladesh? Trans-Pacific Partnership or security fears? It may certainly be the second one and not the first. To begin with, the full text of the TPP is not yet available. Thanks to WikiLeaks, Chapter Five, pertaining to Intellectual Property Rights is out while the rest is not. The whole deal in Atlanta has been negotiated with extreme caution and discretion and though there have been some leaks, the full text of the proposed agreement is still out of the hands of the public.
While champagne corks have been strewn all over Vietnam, it perhaps has to wait for at least 10 years to reap the full benefit of TPP. Bangladesh is still way ahead of this game in the RMG sector. Why do we forget, in 2001 Vietnam was awarded most favoured nation (MFN) status by the US which entitled them to half the tariff of what Bangladesh has to pay, an almost 16 percent on all exports to America? In spite of that, haven't we still fared well? In spite of all that, hasn't Bangladesh experienced an almost 13 percent year on year growth on exports compared to less than 10 percent in Vietnam? So, even if Vietnam dreams of surpassing Bangladesh, it has to wait for another decade to do so. Even if The New York Times calls TPP the "the largest regional trade accord in history" and even if The Washington Post calls it "the largest free-trade accord in a generation", should we be shedding tears? NO. A simple example will clarify.
The US and Japan have lower trade barriers but in cases where substantial barriers exist, they are highly unlikely to be removed overnight because of TPP. For instance, the US will only phase out its tariffs on Japanese trucks by 2045, 30 years from now. Moreover, the leaked chapter on IPR indicates that prices of protected items (drugs, for instance) can rise by almost many thousand percent, which will pose far deeper economic complications than usual trade barriers. The textile advantage is also highly restrictive and subject to a yarn-forward policy, meaning TPP will consider rules of origin strictly, so that a TPP nation will have to use TPP member produced yarn in textiles, in order to get the duty free access. This too is a hindrance that will ultimately affect trade.
So, if you ask me, what will kill RMG in Bangladesh? It's certainly not TPP. It's the westerners' fears of the apparent deterioration of the law and order situation of the country that will dash all our RMG hopes.
Kunio Hoshi was buried yesterday in Rangpur. Cesare Tavella, the Italian citizen was shot thrice, according to the autopsy report. The government ruled out the presence of IS in Bangladesh. Foreign missions are waiting for the swift conclusion of the investigation. The BGB and other law enforcing forces are going around Gulshan and Baridhara area on full swing with special sirens on. Buyers are cancelling trips to Bangladesh. Design teams scheduled to visit Bangladesh are indefinitely postponing their engagements.
These are all happening now. We are living in times riddled with panic and confusion. In my landscape, the most discussed questions over the last fifteen days have been: Who murdered these two foreign nationals? Has their been a panic overdrive? Will business be affected by buyers cancelling their trips this month? The fact that the government denied the presence of the IS is, perhaps understandable. No one wants to live with terrorists and in terror in the same land. On top of that, a secular government will always officially tend to nullify any terrorist claim. But the denial could have come after a few days, after having at least begun the investigation. An outright denial raises eyebrows and only adds to suspicion in the eyes of the foreigners. After all, they are the ones who are "apparently" targeted. After all, they are the ones, who have to cancel trips and are letting go of their placement budgets of Autumn/Winter 2016. After all, the readymade garment sector is losing out on business, and after all, the economy will suffer at the end. After all, the $50 billion dream will finally turn out to be a pipedream for the country if we finally fail to assure the rest of the world that we are safe for business.
The fact that Bangladesh has been left out of the GSP privileges because of more reasons other than simply not doing enough for the labour sector is not news for any rational citizen of this country. The fact that two murder stories can actually impact the foreigners living in Dhaka to the extent that it has, speaks of nothing short of an unsafe image of Bangladesh. So at the end, the few foreigners living in this country, especially the small number of Europeans and Americans impact the western opinion and they matter, however few they may be in number. The tight Western community in this country has a right to react, irrespective of the nature and degree of the tragic events.
Unfortunately, with so many uncertainties in hand, it is a time to wonder. It is a time to think whether it's worth relocating to brand new factories. My son, last afternoon, looked straight into my eyes and asked. "Do you think it makes sense to construct a world class factory with a bank interest standing at 13 percent? Till I have a clear picture of which direction business is heading for, I don't want to risk this investment." I had no answers to offer. Just the other day, my partner looked at me and almost asked the same question, "Why are you still in this business? Does it make sense for you to be in it anymore? What is the future of placement of better products anyway?" I had answers to the first two, but I had none for the third. I stay in this business, because I have 9000 people to take care of. Business ceased being just business right after Rana Plaza happened. I continue being in this trade, because I want to contribute to making things right in this sector, and not because it just supports my lifestyle or profit. That garments sector is more complicated is not news; that margins have dramatically dropped lately is not a surprise statement; that garments come with a thankless tag of being an abusive business community is not shocking anymore. But what shocks is the indifference of the government towards the sector coupled with relative insensitiveness of the third parties who raise questions on ethical supply chain and often do nothing beyond critiquing the audit findings.
It takes a lot to remediate an industry. The two hour fire resistive walls, the sprinklers, the fire hydrants are merely accents of the main frame. It is almost like landscaping a dry terrain in futility. Unless there is a basic understanding and empathy for labour, we may all end up with cosmetically treated infrastructure and a great report card at the end of 2017, but walls will crumble, hydrants will rot, unless the government engages with the sector in a more aggressive manner and ensure optimum performance with safety, justice and pride. At the end of it all, we need to earn the image of a safe nation; we need to be dependable sourcing partners who will not have to have law enforcing agencies patrolling residential areas just to assure that the maximum is being done to provide a safe haven for them. It's not the presence of the troops that soothe insecure hearts, it's rather the feeling of being happy and safe that matters most. Asking foreigners not to walk on streets is not a good approach, guarding them in private and not creating alarm would rather help.
So if Bangladesh wants the RMG sector to survive, all we need the government to do is just to mitigate the western fears instead of going into a general denial of the existence of the terrorists. At the end, no matter how many multilateral treaties we are left out of, no matter how deprived we feel over the absence of GSP, our workers make products, which have taken the world by storm. And at our end, all we need to do is to project a little more humanity in our businesses. That's all.
The writer is Managing Director, Mohammadi Group.