Germany now Bangladesh’s largest RMG market in Europe

Among the European Union (EU) countries, Germany alone has become a rising market for Bangladesh’s readymade garments (RMG) in recent years, next to the largest market in USA, according to apparel exporters.

BGMEA data show more than US$3.1 billion apparel exports to the largest economy of Europe last fiscal year, a sharp rise with 56 percent growth over $2 billion exports a year earlier (FY 2009-10). Meantime, RMG exports to the USA reached $4.6 billion in FY 2010-11, about 27 percent growth over the total RMG exports worth $3.6 billion in FY 2009-10.

“Germany ranked top among 26 European countries by importing record quantity of RMG goods from us last year,” said Abdus Salam Murshedy, owner of the Envoy Group, a large RMG exporter of Bangladesh.
He said total value of RMG exports to European countries rose to $10.5 billion in 2010-11 from $7.1 billion in 2009-10.

Murshedy, also the former president of Bangladesh Garments Manufacturers and Exporters Association, said the country’s RMG exporters now look forward to fostering RMG market in Germany simultaneously with some emerging markets in Europe and elsewhere in the world. He said the BGMEA is closely working with the Center for Promotion of Imports from Developing Countries, an agency of the Netherlands’ Ministry of Foreign Affairs, to create better understanding between Bangladeshi apparel makers and European buyers to have ideas about EU markets, finding commercial partners for exporters and getting closer on all products and market related issues through direct business contacts with potential buyers.

Murshedy said as a result, Turkey in Europe is becoming a growing market for Bangladesh’s RMG products while export to other EU countries is getting bigger gradually. RMG export to Turkey grew by 69 percent last year, totaling the value $518 million, he said.

RMG exports to the UK rose by 39 percent to $1.7 billion in FY 2010-11 from $1.2 billion a year ago. At the same time, import of RMG products by France grew by 47 percent to $1.4 billion.

Data from the sector’s trade body also show that among the new and emerging markets, value of the country’s RMG exports stood at $247 million in Japan, $192 million in Australia, $94 million in Brazil, $81 million in Mexico, $52 million in China, $51.86 million in Russia, $48 million in South Africa, $47 million in Korea Republic, $35.94 million in India and $12.93 million in Chile.

In Canada, Bangladesh’s RMG export rose to $894 in  FY 2010-11 from $595 million in FY 2009-10.

source :theindependentbd.com

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Fabrics Makers feel Pinch of EU's Relaxed Rules

Local fabrics makers should increase productivity, improve the quality of products and enhance efficiency in production to offset the bad impact of the European Union's relaxed rules of origin on the local textile sector, experts suggest.

The suggestions came when the local textile sector is affected by the relaxed rules of origin (RoO) for the least developed countries (LDCs), including Bangladesh, effective from January 1.

RMG exports to the European Union (EU) increased substantially in the first three months of the year, but the sales of local fabrics, especially woven, have been affected by the move.

The garment manufacturers import fabrics from other countries, such as China, paying less than what they would pay for locally produced fabrics.

MA Taslim, a trade analyst, said the opportunity of producing and selling fabrics locally to the garment makers increased tremendously following the EU's relaxation of the RoO under the generalised system of preferences (GSP).

But many are not purchasing the fabrics from local suppliers, but importing from other countries for lower prices. “As a result, the local fabrics sector is not seeing any boom,” he said.

The previous RoO acted as a protective shield for the local textile sector for decades, because the garment makers had to buy the majority of the fabrics from Bangladeshi textile factories at the time to get zero-tariff benefits from the EU.

Taslim said the garment manufacturers will purchase the fabrics from local manufacturers when they will be able to sell their products at competitive prices.

If the domestic investors cannot supply the fabrics at competitive prices, the foreign investors like Arvind will weigh in. Arvind, the largest denim company in India, is coming here because the company could realise that there is a market in Bangladesh.

"So, the domestic fabrics manufacturers should increase productivity, enhance efficiency and improve the quality of products to avail of the opportunity," said Taslim, who teaches economics at the Dhaka University.

Dr Zaid Bakht, research director of Bangladesh Institute of Development Studies (BIDS), said Bangladesh has no choice but to agree with the policy changes of EU, because it is their decision.

He said no industry can be protected for an unlimited period. Bangladesh's backward linkage industry has been protected for years since the early 1990s. "Now it's time for us to be competitive," Bakht said.

If the garment manufacturers can purchase quality fabrics at competitive prices from the local market, they will not import, he added. He also suggested the local manufacturers enhance their efficiency in production for supplying the fabrics at competitive prices.

He, however, said the capital costs of the fabrics manufacturers should be reduced. The government can supply electricity to them at a subsidised rate to help them or the government can help them in other ways to reduce their cost of capital, he elaborated.

Fahmida Khatun, head of research of the Centre for Policy Dialogue, said maintaining quality and supplying the fabrics at competitive prices are important for the local fabrics makers.

Moreover, they should also persuade the international buyers to specify particular types of fabrics for garment manufacturing which might favour them, she added.

"Since the exporters can avail the zero-duty facility even from the imported fabrics, in many cases the garment manufacturers do not want to purchase fabrics from the local makers. They import the fabrics at lower prices. As a result, the home textile sector is affected," said Jahangir Alamin, president of Bangladesh Textile Mills Association.

News Source: The Daily Star, Mon, 11/04/2011

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New EU rules hit local textile millers hard

Textile millers have been hit hard by the European Union's relaxed import rules, which allows garment exporters to buy fabrics from other nations overlooking the output of about 1,300 local textile plants.

Under the new EU rules of origin, which became effective from January 1 this year, clothing exporters can enjoy duty-free access to 27-nation European Union - the world's largest apparel market --- even if they source fabrics from other countries.

The previous RoO had worked as a protective shield for local textile sector for decades, as it required garment makers to buy bulk of their fabrics from Bangladeshi textile plants in order to enjoy zero-tariff benefit in the EU.

"New EU rules have badly affected our business. Many manufacturers now buy fabrics from abroad, turning blind eyes to local textile plants," A Matin Chowdhury, managing director of Rahim Textiles Mills, said.

While bigger and composite factories have managed to survive the EU policy onslaught, the relaxation has scythed through hundreds of small plants which enjoyed protection under the previous EU rules.

"Three months after the new rules have come into effect, we can see how they have impacted our primary textile sector," said the president of Bangladesh Textile Mills Association (BTMA), Jahangir Alamin.

"Thanks to the relaxed EU rules, many small and medium sized factories are facing a tough test for survival. The ongoing gas and power crises and soaring cotton prices have compounded their woes," he added.

The growth of primary textile mills, mostly export-oriented plants, has been robust for the last two decades due to the previous rules which all but forced garment makers to buy most of their fabrics from local sources, Alamin said.

"The previous EU rules of origin, which was effective from 1990s to December 2010, have been the single most important catalyst to our growth. Many investors set up textile plants just because of the EU rules," he said.

He said some textile mills based at Gazipur, Narayangankj and Chittagong have either been shut down during the last three months or shed workers due to the new rules.

"The EU should have consulted us and studied its impact before imposing such one-sided rules on us," said another textile miller.

Mr. Matin added further said: Thanks to the new relaxed rules, local garment makers are now procuring fabrics from India, Pakistan, China, Turkey and other countries. Textile millers of these nations are undercutting us.

Local primary textile mills produced around 1,700 million kilogram of cotton yarns, 2,000 million metres of woven fabrics and almost 2,000 million metres of dyed and finishing products last year.

Zillul Hye Razi, EU trade advisor in Dhaka, defended the relaxed rules, saying local textile millers were aware of the new RoO for more than 15 years.

"Every textile mill in the country knew that sooner or later we would lift the protection it has been enjoying for decades. They should have been prepared for the new rules," he told the FE.

Mr. Razi said apparel export from Bangladesh got a big boost by the relaxed rules. "Since it came into effect, export volume has increased as many garment makers are making maximum use of the new rules," he said.

"In the ultimate analysis, Bangladesh has been benefited by the new rules. If the textile millers are hurt by the new rules, they should find ways to stay competitive," he added.

BTMA president Mr Alamin said millers need cash incentive to make their products competitive. "We've already appealed to the government to raise cash incentive to 15 per cent from the existing 5.0 per cent."

He said the local textile millers were also hit by soaring prices of cotton. Local mills purchase the entire demand of their cotton from international market, making the country the world's second largest cotton importer.

"We need an extra financial muscle to buy cotton at a hefty price from the international market," he said.

News Source: The Financial Express, Sun, 03/04/2011

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