THE ready-made garment [RMG] sector has been bearing brunt of 18 percent additional production cost for the last two years. It is not the end! The overseas buyers are now offering reduced price while the demand of Bangladeshi products has dropped too. Fact is that, the RMG owners are now facing buyers who are reducing purchase prices while factory costs are rising for wages, energy, transportation and higher taxes.
‘The RMG industry has hit hard and Bangladesh is losing ground in the global market’, according to a report ran by The New Nation on Sunday. It said production cost rises due to mounting power and energy cost, longer lead-time, poor infrastructure and port facilities, low worker productivity and sluggish demands from overseas buyers.
It is not too far, when Bangladesh had obtained the second place in producing garments just after China in 2016 and got the status of the world’s second-largest apparel exporter of Western fashion brands. Sixty percent of the export contracts of Western brands were with European buyers and about forty percent with American buyers. In the 2016-2017 fiscal, the RMG industry generated US$28.14 billion, which was 80.7% of the total export earnings and 12.36% of the GDP.
Pointing the present miserable condition, the report said ‘prices of Bangladeshi apparel items dropped by 3.30 percent in the US market and 4.71 percent in the EU market last year. This is an unbelievable situation! We cannot forget, the sector spread so fast that exports of textiles, clothing, and RMG had reached 77 per cent of country’s total merchandise exports by 2002 and became the single source of growth in the economy.
The report mentioned another reason for increasing production cost, that was huge expenditure to implement fire and building safety action plan. It is true sub-contracting has earned a bad name nowadays. Many buyers believe factory compliance is not met by sub-contractors. It is admitted the demands for compliance have many impacts on RMG costs. But at the same time, we will say there is no alternative but to fulfil the norms of compliance to attract the foreign buyers and also for the safety of workers. Especially, the small factories – who take sub-contracts — are not able to manage compliance often.
We think, the government can do a great deal more to support the growth of the RMG sector and to increase exports. Here, the government must take initiatives to improve services of Chittagong Port, Benapole land port and the air cargo handling at Hazrat Shahjalal International Airport in Dhaka to ensure smooth transportation. But first of all, it needs policy supports both fiscal and non-fiscal from the government along with necessary incentives in an emergency basis to save the sector.
