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Apparel exporters plead for lower interest rates

Sixth from right, Commerce Minister Tofail Ahmed receives a crest from BGMEA President Atiqul Islam at Dhaka Apparel Summit that began at Bangabandhu International Conference Centre in the capital yesterday (7 December 2014). Photo: Star

Sixth from right, Commerce Minister Tofail Ahmed receives a crest from BGMEA President Atiqul Islam at Dhaka Apparel Summit that began at Bangabandhu International Conference Centre in the capital yesterday (7 December 2014). Photo: Star

Apparel  entrepreneurs yesterday (7 December 2014) demanded a reduction in lending rates along with other measures to help manufacturers grab a larger slice of the global apparel market.

“If interest rates are not reduced, many factories would fold,” Atiqul Islam, president of the Bangladesh Garment Manufacturers and Exporters Association, said.

Islam’s comment came at a panel discussion during the Dhaka Apparel Summit, organised by the BGMEA at the Bangabandhu International Conference Centre in Dhaka.

He was backed by Mostafa Golam Quddus, a former president of the BGMEA, who disclosed that over 500 garment factories have already been closed because of high interest rates.

Another 500 factories are on the brink of closure if the existing interest rates go on, he said.

Quddus, however, acknowledged the contribution of the banking sector, particularly the state-run banks, in helping the garment sector reach where it is at present.

“But we are now inside the banks’ belly — they are eating us.”

Interest rates range between 14 and 18 percent for exporters, said the former BGMEA president, adding banks charge between 6 to 9 percent in India, 6 percent in China, 9 percent in Cambodia, 5.9 percent in Pakistan, 6.9 percent in Sri Lanka and 7.9 percent in Thailand.

Some assurance from the government was on hand though, as Commerce Minister Tofail Ahmed said the government is seriously looking into the matter.

“I have spoken to the prime minister and the finance minister about the issue. It is also being discussed in the parliament.”

The minister said the present government is very serious about the growth potential of the sector and the problems it faces, citing the elimination of duties on import of fire safety equipment as an example.

A comprehensive plan of action has been drafted to take the garment sector forward, he said. “I know there are problems, but I hope within next three years almost all the garment factories will be compliant.”

“At the same time, our entrepreneurs will have to look into the wellbeing of their factory workers by ensuring fire, electrical and building safety.”

Ahmed went on to urge international retailers to place more orders with Bangladeshi manufacturers and raise the prices of the garment items.

In an instant SMS poll during the session, 56.9 percent of the participants identified infrastructure deficit as the key barrier for the garment sector.

Workers’ skills development came in at second place with 22.41 percent of the votes. The remaining problems, in descending order, are: land, new market, banks’ interest rate and politics.

Ellen O’Kane Tauscher, chair of the board of directors of the Alliance for Bangladesh Worker Safety, the platform of mainly North American retailers, said a number of things have to be done to restore the brand of Bangladesh, which was terribly damaged by the twin disasters of Tazreen fire and Rana Plaza collapse.

“No one should risk their lives while working in the sector — and there should be a certainty and credibility about this.”

The Alliance and others finish their stipulated programmes in the country in three and a half years’ time and after that, the government should take it forward, she said.

She said they are working with the government to reassure the world community that Bangladesh is a country where people can go and work safely, where the infrastructure investment by the government has been made, and where people get a living wage.

Tauscher said all garment factories should be inspected for building integrity and fire safety. Besides, both workers and management have to be trained.

Wajed-ul Islam Khan, general secretary of the Bangladesh Trade Union Centre, said the roles of workers and trade unions in achieving the $50 billion garment export target have to be spelled out.

Workers would have to work responsibly to help the country achieve the $50 billion garment export target, he said, while urging the employers not to consider workers as enemies.

Rick Darling, executive director of government and public affairs division at Li & Fung (Trading) Ltd, said what is happening in China is the biggest opportunity for Bangladesh.

The world’s second largest economy has decided to graduate from being the world’s factory to the world’s consumer.

“The opportunity is glaring at Bangladesh. This is a huge labour market — the market is incredibly competitive and productive and I am sure it will be even more productive.”

He said Bangladesh will have to “compete tough” as Cambodia, Vietnam and Myanmar are seriously looking to make a move in grabbing China’s market share.

“So, safety, fire, electrical, building and labour improvement would be critical if Bangladesh wants to reach the apparel export target set for 2021,” he said, adding that the country will have to continue the progress it has made in the last 18 months.

Kihak Sung, founder chairman and chief executive officer of Youngone Corporation, however said the garment exporters should also target how to ensure better business outcome and provide better livelihood for the workers.

The manufacturers can improve the efficiency of their factories by 10 percent a year, according to Sung. “This is possible — I have increased the efficiency by 200 percent in the last few years.”

The existing infrastructure can support export of $16 billion — and not $24 billion that the country is currently exporting. “We have to make big effort when it comes to improving infrastructure.”

Sung, also the chairman of Korea Federation of Textile Industries, urged the government to preannounce the timing of power cuts so that resources are not wasted.

“In Vietnam, the government power agency informs us about the timing of the power cuts. But in Bangladesh, we don’t know when the power will go. You can do it with very little investment.”

Francois de Maricourt, CEO of HSBC Bangladesh, urged the government to work on brand Bangladesh, as the image and perception about the country are not that good outside of its borders.

Syed Ferhat Anwar, professor of the Institute of Business Administration at the University of Dhaka, said enhancing productivity, reducing interest rates and fixing infrastructure bottlenecks are the challenges that can be sorted out with serious effort.

He also said Bangladesh should set its strategies to grab the businesses leaving China, and it should not be restricted to just the lower segment of the market.

Kyle Kelhofer, country manager of the International Finance Corporation for Bangladesh, Nepal and Bhutan, said they are helping the country’s garment and textile factories with funds to make their factory energy-efficient.

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Source: Daily Star

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