Seize the day or lose
Youngone chairman explains how Bangladesh can take apparel exports to $30b
Bangladesh might double its apparel exports to $30 billion within three years, but limited capacity and a poor business environment could foil the opportunity, said Kihak Sung, chairman of Youngone.
The Youngone boss talked about Bangladesh’s export potential, in a recent interview with The Daily Star at his Uttara home. He spoke about the speculation of restricting foreign investment in the RMG sector, Bangladesh’s move for duty- and quota-free access to the US market and Korean Export Processing Zone in Chittagong.
Relaxation of generalised system of preferences (GSP) rules by the European Union and access to East Asian markets can become a major springboard for Bangladesh’s garment exports.
“Garment exports to Europe may double to $14 billion due to flexible GSP rules. Another $4 billion income is possible from exports to East Asian countries,” said Sung.
Sung is optimistic, particularly about the export potential in South Korea, Japan and China. However, it will not be easy for Bangladesh to cash in on the opportunity, he said.
Downside risks lie with four core areas: energy constraint, labour issues, port capacity and general law and order situation.
Seoul-based Youngone, the largest manufacturers and exporters of readymade garments in Bangladesh, had a business turnover of $1.2 billion in 2010. Nearly half — 45 percent — of it came from Bangladesh operations.
Youngone started business in Bangladesh in early 1980s and presently, it has 47,000 employees with some 4,500 in officer rank. Ninety-nine percent of them are locals as the company’s philosophy is to run enterprises by local people.
Sung said Bangladesh has an excellent opportunity to increase its garment exports in few years. Besides Europe, he sees East Asia as a major export destination as China gradually shifted to high-end products from low-end ones.
The European Union relaxed rules for the least developed countries (LDC) under GSP in textile trade. The new rules of origin (RoO), effective from January 1, allowed most apparel items from all LDCs would get duty-free access, no matter where the raw materials originated.
Korea has recently allowed Bangladesh duty-free export of some items including jackets. More items will follow, said Sung who is believed to be the main architect behind this duty free access.
“If four issues are resolved, at least reasonably, Bangladesh will have an enormous export opportunity.” They must be addressed simultaneously without specific prioritising, he noted.
Without building capacity in the areas such as energy and infrastructure, including ports, Bangladesh might lose the chance to its competitors, he added.
“The energy problem is looming over and disrupting business seriously,” said Sung. The unnecessary delay in the port cause huge business losses.
On the issue of minimum wage, Sung said: “It’s not enough, but agitation cannot ensure it.” He said his company gives Eid bonuses, rice subsidy and medical services for the workers.
About the recent agitation at Youngone factories in Chittagong, he said the company wanted to merge rice subsidy with the wages, but workers misunderstood it as a cancellation move.
Sung, a Korean national, blamed outsiders for the agitation. “Ninety percent of the agitators were outsiders,” he claimed.
Youngone invested Tk 130 crore to develop Korean EPZ in Chittagong, but the government took almost one decade to issue permit. In the meantime, he shifted some of his planned factories to China and Vietnam. The EPZ, if developed, would employ some 50,000 workers.
Foreigners were given special facilities at the EPZs in Bangladesh so that they would transfer technology and their skills to Bangladeshis but some raised questions about it.
He said technology has been transferred and it is one of the main reasons for flourishing apparel factories in Bangladesh. “Some 50 Bangladeshis run our factories in Vietnam and another five work in China,” he added.
However, the garment maker hailed local entrepreneurs for their relentless efforts to go forward amid lot of limitations.
Restricting foreign investment in garment sector in Bangladesh will not be a wise decision, Sung said. It will give bad signals to the global markets, he added.
The Youngone chairman said it is very unlikely that Bangladesh would get duty- and quota-free market access to the US, which he believes cannot negate the same facilities to Africa, Jordan and Israel.