Bangladesh is not an exception. Accessory makers play a vital role in supporting the garment manufacturers.
According to data from the Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), the number of accessory factories was below 50 in the late ’80s even if most of the essential items used to be imported from India, China, Hong Kong and other destinations.
Today there are more than 1,900 factories that supply the entire garment industry with accessories. In addition, the sector employs more than seven million workers. It has an estimated export value (of accessories), of US$ 7 billion. US$ 6.25 billion is in the form deemed exports. US$ 0.75 billion is in direct exports.
Apparel Resources, (AR) Recently caught up BGAPMEA President Moazzem Hossain Moti at the trade body’s newly-built office in capital city Dhaka to know his thoughts and views on various prospects and challenges of the ever-growing accessory sector, as he sees it.
Below are some excerpts.
AR: The apparel industry needs backward linkage, and accessory manufacturers have an important part to play. Which sector do you envision?
Moazzem Hossain Moti (MHM): Since 1989 when there were only 50 accessory factories, this sector has grown to include over 1,900. We are now able supply nearly all of the accessories required by the garment industry and provide employment for a significant number (seven thousand workers).
Accessory exports are valued at around US$7 billion. US$ 0.75 billion of that is directly exported, and US$ 6.25 billion in deemed export. Prior to the Covid-19 pandemic the sector was experiencing a boom in investment. Many new investors came up with innovative investment strategies, while existing businesses expanded their capabilities. For instance, the number of garment accessories-producing factories with Taka 500 crore in investment has been more than 35, which was non-existent even a few years ago.
There are numerous units that have more than Taka 1.200 crore invested and are performing well both in the domestic as international market.
What’s more, we have managed to drastically reduce the import dependency for accessories as only 10 to 15 per cent of the required accessories are now imported and that too primarily owing to the buyer’s nomination.
AR: Is this a positive scenario?
MHM: After the outbreak of the 2020 pandemic, the flow of investments began to slow down. Recent years have seen the impact of the global healthcare crisis slowly fade. The sector is now suffering from the effects of war (Russia-Ukraine), as investments have fallen.
As we know that after the Covid pandemic and the Russia-Ukraine war, the devaluation of BDT is nearly 25-28 per cent against USD, as a result, entrepreneurs need to spend more money than in the pre-Covid period.
This situation, however, is temporary. The situation will improve quickly as the concerned departments and ministries have taken many steps.
A lot of accessories units were operating at only 75% because of the uncertain global economic environment and the drop in local export demand.
However, investment is essential if Bangladesh wishes to earn US$ 100billion from apparel shipping by 2030. Accessories export will increase to US$ 15billion when garment exports reach US$ 100billion.
AR: Tell me about the trade licence you were referring to.
MHM: Each year, we are required to renew our licenses. The first is a trade license.
We need 32 or more licenses in order to operate the business. Each year, they must be renewed which can cost both time and money. What’s more, we have to get many licenses issued physically as not all have become digital in Bangladesh yet.
Existing import registration certificates (IRC), and export registration certificates (ERC) were extended for five years, instead of one. The same should apply to other licenses. I really don’t understand the logic behind the yearly renewal of licenses.
Entrepreneurs should have the choice to choose the length that is most suitable for them based on both their financial and personal needs.
What’s more, currently when one renews a license, it is not for a calendar year but for the financial year, so if one’s license gets expired in say April or May and he/she has to get it renewed, it would only be till 30th June, the end of the fiscal year and that too after paying charge for the whole fiscal year, which again belies logic according to me.
AR: The previous President of BGAPMEA also talked about the same issues when we interviewed him. Why is this?
MHM: Maybe we failed to make the policymakers understand the problems and even if they did notice, they didn’t pay due attention.
Also, there is the issue of government officials’ mindsets and training. Most of the time, I have seen the concerned officials don’t understand the technicalities of things, which pose a bigger challenge for us to put across our points of concern. Our sector currently provides support for the garment industry at US$ 7 billion. If our sector does not deliver on its promises, then we’ll have to import accessories worth US $7 billion from abroad. Even now 5-10 per cent of accessories are imported from China.
With the LDC graduation coming up, we have been planning to meet with the BGMEA. The BGMEA would be pleased to share their accessory forecast so we can request our accessory entrepreneurs to increase scale accordingly in order to keep the business from moving overseas.
AR: How about the one-window system? Is that of any help to you?
MHM: This certificate is the only one that can be used to register an export or import.
The Government should be considering 364 days for the renewal of licenses, rather than a financial calendar. I have given this recommendation even in last year’s budget presentation but to little avail.
I agree with the idea that utility certificates should be issued by trade associations on behalf of government. It will save the government time and help it concentrate on implementing the rules.
AR: What else do you recommend for the sector’s evolution?
MHM: To find the issues that hinder the growth of the country’s backward linking sector, we should create a task force consisting of both government and private sector representatives. If the government offers support for this industry, we will see a drop in export costs of over 20% and increase value.
We also seek from the Government policy support including those related to National Board of Revenue (NBR), customs and port facilities to increase the sector’s export earnings in line with the US $ 100 billion apparel export target by 2030.
AR: It is reported that the Dominican Republic requested support from BGAPMEA. Do you have any more information?
MHM, Yes. You heard it correctly. MHM: Yes, you heard it right. Recently the Ambassador of Dominican Republic came to visit us in New Delhi to establish better connections and to facilitate investment there.
Even though Dominican Republic exports to the USA without duty, it has a growing garments industry.
At first, I believed the Ambassador might have visited me to assume I was from BGMEA since the names of BGMEA & BGAPMEA were similar. But he assured me that he had come to see the BGAPMEA President.
Additionally, even though the apparel sector is in development, backward linkage support is lacking. They must therefore import nearly all raw materials from overseas. This, in addition to being costly, also slows down production.
So he asked us to think about investing in Dominican Republic as a way to establish an accessory unit. In April, we will be visiting the country together with our team. Let’s see how things proceed.