Two developments in the ready-made garment (RMG) sector, one structural and the other, representing a breakthrough, at a crunch time, merit instant attention and reflective analysis. That is because: a) the tidings are inter-related and intertwined; and b) the positive spins will have to be translated into tangible results.
In fact, a two-pronged approach has to be taken to traditional and non-traditional export destinations if the top-most foreign exchange earning sector is to be placed firmly on an incremental growth path.
As for facilitating exports to traditional markets we keep facing newer challenges. On the back of the troubled Apparel Summit ending in December on a reconciled note, the government has formed a 20-member Tripartite council to address labour issues that exacerbate from time to time.
The latest spate of volatility in the sector was caused by the Ashulia incident where 35 workers and unionists were arrested leaving the buyers reluctant to attend the summit. However, on an assurance by the government and factory owners to release the detained workers, and presumably put in place a regular structure for dialogue, the buyers saw fit to attend the international conference.
Actually, there has been a long-felt demand from the industry to have an institutional forum on a permanent, legal footing as opposed to ad hoc ones cobbled post-haste in the context of a factory disaster or crisis. The 20-member advisory and trouble-shooting council would include six representatives from each of the three categories of stakeholders, the government, workers and factory owners. Since it has been formed by a gazette notification, one should assume that the council is institutionalized.
The garment and knitwear manufacturers and exporters have urged the buyers to factor remediation and compliance costs into the pricing of their exports. It is a legitimate demand. They want a fair competition with other exporting countries to be ensured by the buyers providing a level playing field.
That is all about persisting with the traditional garments export markets. But as far as new pastures go, the grass indeed seems greener on the other side. According to data from the Export Promotion Bureau, garment exports to non-traditional markets increased 3.4 per cent year-on-year to $2.08 billion in July-December of the current fiscal year.
To the exception of the European Union, the US and Canada, Bangladesh regards all other countries as non-traditional markets. The government's cash incentives on export to newer countries since the global financial meltdown in 2007 and 2009 propelled over time the growth in exports to non-traditional markets. Beginning with 5.0 per cent in 2009-10 the incentive has been sustained, though pared down to 2.0 per cent as of now.
The export reach includes India, China, Russia, Japan, South Africa, Turkey, Brazil, Chile, Mexico ,South Korea, Malaysia, Australia and New Zealand. Consequently, while in 2008 the export to non-traditional importers stood at $800 million, the figure surpassed $3.90 billion in 2015-16.
Japan is the only destination in Asia where Bangladesh's overall export crossed the $1.0 billion mark last fiscal. Apparel shipment to Japan is set to surpass $1.0 billion mark at the end of current fiscal due to Tokyo's relaxation of the Rules of Origin (RoO). Significantly, Japan has adopted 'China plus one' importing quality products at competitive prices.
Two things are worth mentioning to gauge the full potential of the RoO. First, the Japanese government has relaxed the rules of origin for garments products from the LDCs in both woven and knitwear categories. While lowering import tariff this has enhanced admissibility of merchandise into the market.
The second chunk of potential for Bangladesh lies in the fact that Japan imports apparel products worth $40 billion a year, more than 80 per cent of which is supplied by China. And, Japan has started reducing its dependence on China. We can berth in there. Indeed, it augurs well that Japanese retailers are approaching us with inquiries. We need aggressive marketing coupled with increasing product range and qualities.