Bangladesh garment going high-end

With an increased number of orders from international buyers, Bangladesh is graduating

from basic garment production to high-end products. The manufacturers are taking orders
from the renowned fashion brands worldwide, industry insiders said.

There are signs of the local garment makers gradually shifting to high-end products,
because they can now choose from abundant orders. Earlier, the manufacturers had
limited scope for bargaining as the buyers' orders were tight.

Fashion is always changing and clothing brands have to change to survive to keep up
with the latest fashion trends and designs, because people love to wear the latest fashion
and purchase the trendiest outfit.

Demand for high-end garment items is higher because of their combination of great
designs, flawless craftsmanship, high quality and meticulous attention to details, experts
said.

Sector people said high-end products take up at least 20 percent of the total exports of
garment products from Bangladesh, and the percentage is increasing.

But many manufacturers are not aware that they are exporting the garment items to some
world-class fashion brands as the buyers always put pressure for lower prices.

They said many producers do not know their products are going to a high-valued clothing
brand store as they are not selling the products directly, and they also lack of negotiation
skills.

Bangladesh is still a popular spot for low-priced basic garment items thanks to cheap
labour.

Bangladesh's competing countries are shifting their focus to high-end garments, which is
a blessing for local manufacturers.

The buyers are flocking to Bangladesh as China, the largest supplier of apparel items
worldwide, has higher cost of production.

"As a result, some garment manufacturers, especially big groups are going for high-end
production from the basic garment items," said Asif Zahir, a director of Ananta Group, a
leading garment group.

He said his group is also setting up a plant at Adamjee Export Processing Zone to
produce high-end male suit from next June. "Manufacturers need a lot of investments in
machinery, technologies and in quality improvement to produce high-end garment
items," he said.
Some of the high-end fashion brands like Puma, Tommy Hilfiger, G-Star, Diesel, Ralph
Lauren, Calvin Klein, DKNY, Nike, Benetton and Mango have been outsourcing garment
products from Bangladesh over the last few years.

Hugo Boss and Adidas are also coming here to outsource high quality garment items
from Bangladesh, industry people said.

China, Hong Kong and Turkey were favourite destinations for high-end clothing items to
the international buyers, but apparel companies and retailers are already feeling the pinch
from higher wages in China and shifting to countries like Bangladesh.

Shakhawat Hossain, chairman of Paramount Textiles, said his group has been supplying
fabrics to some world-renowned clothing brands over the years.

"My group supplies fabrics to Hugo Boss, Austin Reed, C and A, Massimo Dutti, Marks
and Spencer and Yamaki of Japan, some high-end clothing brands worldwide," he said.

reefat@thedailystar.net

BGMEA gets new president

Shafiul Islam Mohiuddin has been elected president of Bangladesh Garment
Manufacturers and Exporters Association for the next two years.

Mohiuddin, managing director of Onus Apparels, contested the election from Sammilito
Parishad Panel that won all the 27 posts of director of the trade body. The election was
held on Sunday. He is also the incumbent vice president of BGMEA.

Among other elected members, Nasir Uddin Chowdhury, managing director of Eastern
Apparels, has been elected first vice-president and Siddiqur Rahman, chairman of
Sterling Group, second vice-president.

Faruque Hassan, managing director of Giant Group, has been elected vice-president for
finance and SM Mannan Kochi, director of Sheha Design (BD) Ltd, also got the post of
vice-president.

All the elected members will take their charges on March 27 at the BGMEA's annual
general meeting, said a statement yesterday.

Forum panel leader Anwar-Ul-Alam Chowdhury Parvez who boycotted the polls
appealed to the BGMEA election appeal board on Monday to hold the polls again
canceling the faulty voter list. His panel threatened to take the polls to court.
Bangladesh turns into highly lucrative
market for US cotton
Sales of US cotton to local spinners rise by 400pc in July-Feb

Kazi Azizul Islam

Bangladesh, the world’s second largest importer of cotton, has turned into a most
lucrative market for US cotton, industry sources said.

Sales of cotton imported from the United States of America, the world’s number one
exporter of the fibre, to Bangladeshi spinners have increased by more than 400 per cent
over the first eight months of July to February of the current cotton-marketing year
compared to that in the corresponding period of the previous year, importers said.

According to Cotton Council International reports, Bangladeshi importers have already

booked more than one lakh tonnes of US cotton of different varieties.

The latest CCI report also shows that Bangladeshi importers have procured the highest
volume of US upland cotton so far in the current marketing year.

‘The volume of US cotton imported in the current marketing year is going to be the
highest in recent decades,’ said Deepak K Baral, a leading international cotton-broker.

Less than a dozen of the local spinning units had been using US cotton only a couple of
years back, said Deepak. But now around one-third of the country’s nearly 300 spinning
mills, most of which feed the export-oriented knitwear and denim fabric manufacturing
sectors, are using US cotton, he told New Age.

Deepak said Bangladeshi spinners were going for upland cotton of medium grade and
medium length staple suitable for making yarns for knitwear items like T-shirts, polo
shirts, etc. Importers are also procuring a huge quantity of coarser-grade Pima cotton
suitable for making yarns for production of denim fabrics.

Denim wear, especially jeans, is the major item in Bangladesh’s garment shipments to the
USA. US retailers and importers procured made-in-Bangladesh garments worth more
than $3.5 billion in last year.

However, Europe continues to be the main market of Bangladeshi knitwear, accounting

for the lion’s share of the country’s $15 billion apparel export turnover. The USA is still
a minor market for Bangladeshi knitwear items as exporters here find the duty-free
European market more lucrative and the high duty imposed by the USA bars the market
of the items from expanding in that country.
Bangladesh’s cotton procurement in the current cotton marketing year has been projected
at nearly nine lakh tonnes, generating more than $2 billion revenue for global cotton-
growers and -exporters.

A disruption in supply of cotton from India and its growing unavailability in other
sources are diverting Bangladeshi cotton-importers to the USA, explained Bangladesh
Cotton Association president Mohammed Ayub.

Uzbekistan, India, and West Africa had been the major sources of cotton for Bangladesh
for many years since the emergence of export-oriented garment industry here.

Informed sources told New Age that a growing reluctance of some western retailers to
accept products made of Uzbek cotton had also been forcing Bangladeshi spinners to use
yarns made from US cotton.

Many retailers and brands, including H&M, Tesco, VF Corporation, and GAP, have
already warned Bangladeshi suppliers that they would have to boycott products made
with Uzbek cotton due to use of child labour by the Uzbek cotton industry.

‘Bangladesh’s garment industry is traditionally cotton-dominated,’ a top executive at a

US retailer’s Dhaka sourcing office said. ‘With a further expansion of the garment
industry, which also implies a corresponding growth of the spinning sector, a cotton
market worth $1 billion for the USA in Bangladesh is very much in the offing,’ he added.

Many key players in the cotton sector, including Deepak Baral, feel that the government
and spinning and garment industries of the country should make efforts now to cement a
benefiting cotton relationship with the USA.

They said if the government gave them the necessary guarantee, local importers could
avail low-cost cotton-import financing from the US Department of Agriculture.

Besides, if bonded cotton warehouses are set up at Mongla and Chittagong ports, US
suppliers can bring and store their cotton there and local spinners can buy that escaping
the delay caused by shipments of cotton to arrive at the ports by sea, they pointed out.

Growth in RMG shipment to Japan slows

March 02, 2011 NewAge
Kazi Azizul Islam

The country’s garments export to Japan amounted worth $210 million last year, growing
by 53 percent year-on-year.

But the growth in shipment decelerated compared to that of the previous year, a Japanese
official report showed.

A recent report of the Japanese ministry of finance revealed that its imports of clothing
and accessories from Bangladesh amounted to 17.3 billion yen or (US$ 210 million) in
2010.

The amount of imports had been recorded at 11.3 billion yen for the year 2009, 4.7
billion yen for 2008 and 3.5 billion yen for 2007.

Industry insiders, however, said demand from Japanese buyers was there, but supply
constraints were hindering the growth potentials.

‘Japanese importers are still interested in procuring garments from Bangladesh but supply
side constraints here are hindering the growth potentials,’ said one official of the Japan
Bangladesh Chamber of Commerce and Industry.

He pointed out that Bangladeshi manufacturers are not much responsive to the
requirements of the Japanese importers.

‘Japanese importers are very sensitive to quality aspects of the garments and they prefer
to increase the volume of business gradually after being confident on the suppliers’
capability,’ he added.

One export service enterprise owner said recently industry here is having increased orders
from EU buyers and hence many Bangladeshi manufacturers are not so interested about
the Japanese, who are relatively new here.
‘Japanese importers have many small and medium sized orders but many Bangladeshi
manufacturers, who are used to work on large volume orders from US and EU retailers,
appeared reluctant to serve such orders,’ he said.

With only US$ 200 million worth of sales there, Bangladesh’s share in the vast in $28.5
billion (as of last year) worth Japanese market of imported clothing and accessories is
still very tiny.

China had $26.7 billion market share in Japan while Vietnam followed with sales worth
$1.28 billion in that market.

In terms of the value of clothing and accessories shipment to Japan in 2010, Bangladesh
stood sixth, outpacing Myanmar, after Thailand, Malaysia, Indonesia and India whose
export amounts ranged between $210 million and $320 million.

Bangladesh’s garment shipment to Japan started to increase sharply from the year 2008
as recession-hit Japanese importers started looking at Bangladesh as a source cheaper
than China.

International trade analyst Khondaker Golam Moazzem said that Japanese strategy,
“China plus One”, designed by the government and private sector businesses there,
categorically opened scopes for Bangladesh.

Moazzem said Bangladesh industry should not let this new market opportunity slip out,
adding that sustained growths in new markets will bring long-term benefits for
Bangladeshi exporters.

He suggested that the exporters’ associations, BGMEA and BKMEA, should help the
exporters by providing information and promotional supports on the new markets.

Bilateral linkage programes should be initiated as local suppliers develop their capability
to feed fit-to-market requirements of new buyers, said the clothing industry expert.

For exploiting growth potentials in the Japanese market, ‘Bangladeshi exporters

associations should design and implement Japan specific strategies which are responsive
to Japanese importers.’

‘The Japanese importers need to be entertained now because some alternative sourcing
markets like Myanmar, Indonesia and India can allure the importers and divert them from
Bangladesh,’ Moazzem cautioned.

Garment entry to EU on the rise

Refayet Ullah Mirdha

The issuance of certificates to gain zero tariff benefits in garment exports to the European
countries increased 37.69 percent in January, compared to the same month last year.

Data shows state-owned Export Promotion Bureau (EPB) issued 33,148 such certificates
in January against 24,073 in the same month last year under Generalised System of
Preferences given by the developed nations to the least developed countries (LDCs).

The boost came due to the rising demands from the EU region under the new regime.

"The issuance of certificates for duty-free benefits increased mainly for relaxation of the
Rules of Origin (RoO) by the EU from January 1 this year," said EPB Vice-Chairman
Jalal Ahmed. He said both the value and volume of exports increased remarkably during
this period.

Being an LDC, Bangladesh now enjoys either duty-free facility for everything but
arms (EBA) or duty-preference for some selected products or duty concession for
exports to 32 countries.

The biggest change under the new regime is that single-stage processing
(manufactured from fabric) will be allowed in many cases, instead of two-stage
processing (manufactured from yarn).

It means most apparel items from the LDCs will get duty-free access, no matter where the
raw materials originate in. The standard import duty for readymade garments in the
EU is 12 percent.

The GSP is a trade arrangement allowing reduced or zero tariff on imports from
developing countries; and the RoO determines whether imported goods really originate in
the countries covered by the GSP.

Under the new GSP rules, exporters will get zero-duty facility even if the products are
made from imported fabrics. Previously, the exporters used to get this benefit if only
local fabrics were used.

reefat@thedailystar.net

Sea freight: income dream sets sail

 Sajjadur Rahman

Sea freight is expected to be a good source of direct foreign currency for Bangladesh in a
few years as big business conglomerates are increasingly buying ocean-going ships
cashing in on the troubled US and European economies.

The sector, which now boasts 70 ocean-going ships, can earn $200-300 million in freight
charges a year, according to industry people. These ships' capacity ranges between
30,000 and 100,000 tonnes.

“The economic crisis in the US and Europe has forced many owners to sell their ships at
low prices. Asians, including Bangladeshi buyers, have been taking the opportunities,”
said Azam J Chowdhury, chairman of East Coast Group, which has bought two such
ships recently.

The company has purchased another tanker ship, which will be delivered next month,
with over one lakh tonne capacity at $22.5 million, to carry oil.

According to businessmen, each ship can earn $2-5 million annually by transporting
goods, depending on the capacity.

“It is a very good business. The increase in fleet will boost foreign currency earnings,”
said AKM Shahidul Islam, managing director of United Sea Liner.

A 30,000-40,000 tonnes-capacity ship now costs $10-12 million, according to the

industry people. Islam, who is in the business for over 30 years, said an investor can get
his money back in just five years.
Top conglomerates and traders have now entered into the lucrative business, which was
earlier dominated by the shipping businessmen only. Major groups including Meghna,
Bashundhara, Akij, Abul Khair, East Coast, HRC and KSRM have bought the ships in
the last few years.

Besides, freight earnings the sector will help Bangladesh create highly-paid jobs.
According to the sector people, a ship employs 25-30 crews who are paid in foreign
currency. Top crews can earn as much as $25,000 per month.

But ship-owners have some reasons to be worried such as high bank interest rates, lack of
crews, rising piracy and the continued volatility and dampness in global freight markets.

“We have serious shortage of crews and often we have to hire people from China and
Taiwan to run the ships,” said Mostofa Kamal, chairman and managing director of
Meghna Group of Industries, who has bought such a ship recently.

Chowdhury of East Coast Group fears more on the growing attacks by Somali pirates.
“Many of our crews do not want to go to the Middle East countries because of the piracy
on the Arabian Sea,” said Chowdhury.

Somali pirates have already hijacked a Bangladeshi-flagged ship -- MV Jahan Moni,

owned by KSRM, in early December last year. The ship, with 25 Bangladeshi crew
members, is still in the pirates' hands.

Chowdhury suggested the government sign a protocol agreement with countries such as
the UAE, Bahrain and India, to protect Bangladesh's ships and crew.

Islam of United Sea Liner believes 15-16 percent bank interests rates are “very high” and
make the business costly at initial stages.

sajjad@thedailystar.net

Bangladesh urges USA for renewal of

GSP facilities
Bangladesh Sangbad Sangstha . Dhaka
Bangladesh ambassador to USA Akramul Qader has called upon the new US Congress
leaders for renewal of the Generalised System of Preferences facilities.

He made the call in separate meetings with two Congressmen- Joseph Crowley and Jim
McDermott- in their respective offices in Washington on Thursday, according to a
message received here on Friday.

The Bangladesh envoy also urged the two congressmen for reintroduction of the New
Partnership for Trade Development Act 2009 bill in the new Congress.

The issues of mutual interests particularly those affecting trade and commercial interests
of Bangladesh came up in the discussion, the release said.

Qader stressed the rationale for re-introduction of NPTDA bill and said the passage of the
bill would convey a positive message about US commitment to the least developed
countries.

He expressed satisfaction over recent introduction of a bill at the US Senate aimed at

extending GSP facilities.

Qader, however, expressed concern over an amendment proposed in the bill which might
have detrimental effect to the export of beneficiary countries in the US market.

He sought support of the US congressmen in this regard.

Joseph Crowley and Jim McDermott assured the envoy of their readiness to help
Bangladesh so that

no harmful step is taken in this regard.

Bolstering export growth

by Shammunul Islam and M Mizanur Rahman

WITH the fetching of $7.94 billion in the export of knitwear and woven garment in July-
December of the current fiscal year and a whopping 1942 per cent growth in shipbuilding
(The Daily Star, January 6), Bangladesh beckons the prospect of becoming an export
giant in the readymade garments sector and shows potential in other sectors too.
It is apparent that although industrial sector saw a decline in growth it was readymade
garments which acted as the savior of the economy, posting a 20.37 per cent growth in
October than the corresponding month in the previous year. It has been possible due to
our entrepreneurs’ ingenuity and innovativeness, low labor costs and due to some
external factors also. Bangladesh is becoming more competitive, because, with the rising
wage, some countries (for example, China) are losing their edge in the market and will
slowly become bound to draw off from the readymade garments. This provides us with
an avalanche of opportunities which should be grasped with both hands.

Our garment sector consumes a great amount of electricity for its production. So, for a
sustainable growth in this sector, smooth supply of power must be ensured. But with an
average 8 to 12 hours of load shedding, the task of maintaining or farther accelerating
power supply becomes daunting. As poor infrastructure, especially inadequate power and
energy supply, is regarded as the main problematical factor by investors, it is crucial that
infrastructure, especially power and energy, is up to the mark.

At present, Bangladesh produces 3800 mega watts against a demand of 5500-5600 MW

per day (as of April, 2010) which means there is a shortage of 1700 MW (The Financial
Express, 14 December, 2010). It is also estimated that demand for electricity will increase
by an average of 8 per cent annually over the next 10 years, meaning that demand after
ten years would be around 12000 MW. Now there comes the major challenge. How can
we generate such a huge amount of electricity for supporting our manufacturing sector
and satisfying our citizen’s demand? To address this, according to our prime minister’s
speech, the government has initiated the work to set up 33 power plants for generating
2,941 MW. There have already been the approvals for eight oil-fuelled rental power
plants over the last seven months, one wind-based power plant (capacity ranging between
153 and 2534 MW) and of some more (Daily Star, 7 December). By doing so, the
government targets to generate 12,000 MW of power within the next five years. Now,
with the limited reserve of gas (projected to be depleted by the year 2015) and with
exorbitant cost associated with wind-based (installation cost is twice that of gas-based)
and oil-based (which will take away 5.2-5.6 billion taka as additional fiscal cost), we
need to consider all the alternatives in our hand, starting from all sorts of alternative
energy to coal-based energy (which has a reserve enough to supply power for 30 years).
That is, we need to diversify our sources of energy for meeting the ever-increasing
demand.

Product diversification and market diversification is a must for sustainable growth and for
immunizing our economy from ‘market failure’ and for reducing vulnerability. Right
now, Bangladesh mainly exports to European Union and the USA. We can look forward
to other markets such as Japan and Latin American countries. This would increase our
market and will increase our revenue earning by a huge amount. We also should look at
strengthening our manufactured food sector as it stands as the third largest export earning
sector. This would help our RMG sector in an indirect way. While our per capita income
would rise as a result of diversification, in the time of market failure it would be easier
for readymade garments sector to cope with or revive.
Ship breaking has the prospect of becoming the next big thing and can generate a lot of
foreign exchanges. The global recession destabilized many developed countries’
economy and forced them to shift their shipbuilding orders to Bangladesh. The shifting of
their attention to our shipbuilder companies resulted in export orders of world-class
seagoing vessels (both small and medium) worth $478 million. If Bangladesh can
consolidate its position now, major competitors for smaller ships (e.g. China, India, and
Vietnam) will strike out of the competition of medium shipbuilding due to their relatively
higher cost. In an article in The Daily Star, it was reported that, if provided with cash
incentive, Bangladesh could easily get one per cent share of the global shipbuilding
market, equivalent to $4 billion (Forum, Daily Star, July 2008).

Our government and central bank has also realised the potential of shipbuilding in
becoming the second biggest sector in export after readymade garments. This is evident
from the fact that Export Promotion Bureau planned to turn it into a billion-dollar
industry and that Bangladesh Bank is planning to provide this sector with a Tk 200 crore
refinancing fund. With the aim of earning $5 billion a year from exports by 2015,
Bangladesh is planning to establish a special shipbuilding zone for bolstering the export-
oriented shipbuilding sector (Daily Star, October 17, 2010). As this sector requires
sophisticated technology and heavy engineering, there has to be collaboration with
countries like South Korea, UK, and Netherlands for technology transfer and for building
a skilled labour pool.

There is another major obstacle in accelerating and sustaining our export as Bangladesh
faces some competitive disadvantage in terms of airport density, quality of air transport,
railroads, paved roads, and port infrastructure. When, due to Hajrat Shahjalal Airport’s
inability in cargo-handling and poor warehouse facilities, garment exporters become
compelled to leave their goods on pallets outdoors, our government took a decision to
make a new airport. This can’t be a prudent decision when our country needs so much of
investment in the development of other infrastructures. So the government should rather
concentrate on improving the capacity of our present airports. Inefficient management in
the Chittagong Port also needs to be corrected, which, along with improved roads can
give rise to a further growth in this sector. If we want to increase our competitiveness, we
need to lower the import cost of raw materials, remove tariffs and improve infrastructure
(for example, by strengthening transportation network).

In recent days, there is a very alarming development which is garment unrest in the form
of angry workers demonstrating all over Dhaka and Chittagong and vandalising various
constructions. This indeed bore an ominous sign for our industry and the reason of this
unrest becomes more pronounced when a global survey released on June 29 last year
branded our workers as ‘most poorly paid’ who earn only $43 a month. This is exerting a
negative influence on foreign buyers and could lead to a decline in orders. So, our
government and the agencies concerned, such as BGMEA and BKMEA need to take this
into account and try to minimize workers’ dissatisfaction and distrust and take concerted
efforts without any further ado.
The government’s target to achieve an 8 per cent growth can only be realized if they also
take actions in line with their emphasis on promoting garments sector, shipbuilding sector
and other industrial sectors. This requires our government to take prudent decisions
regarding promotion of industry, fulfillment of demand for increasing energy, exploration
of different markets and products and at the same time management of workers by
providing them with skills and arranging technology transfer. Bangladesh now depends
less on aid and aims at attaining self-sufficiency. The onus is on the government to make
the right decisions in stimulating and steering these sectors for attaining a healthy
economic growth and for uplifting us to a middle income country.