Category Archives: Economic Growth/GDP/Exports and Foreign Trade

Development cooperation accord with Germany inked

Development cooperation accord with Germany inked
Author / Source : UNB

Dhaka, Dec 19:  Iqbql Mahmood, secretary, Economic Relations Division, Ministry of Finance and Holger Michael, ambassador of  Germany signed an agreement on Sunday between the two governments on projects as well as programmes of financial and technical cooperation. The agreement has an overall financial volume of approximately Tk 632 crore (60.8 million Euro). The funds will mainly be used for programmes and projects in the field of rural and urban governance, including infrastructure improvement measures, for the health sector and for projects to increase energy efficiency and the use of renewable energy.

In addition to these funds Germany has made available an amount of approximately Tk 182 crore (17.6 million Euro) in 2011 for projects to help conserve, maintain and rehabilitate ecosystems such as wetlands and in the field of biodiversity and protection of coastal forests.

“The long lasting friendly relations between Germany and Bangladesh, which have been underlined by the recent visit of the Federal German President to Bangladesh, form a strong foundation on which our development cooperation is built,” they observed.

The Ambassador stressed that Germany is determined to provide further assistance to Bangladesh; Bangladesh continues to be a priority partner country for development cooperation.

McKinsey paints buoyant future for RMG exports

McKinsey paints buoyant future for RMG exports

Star Business Report

Bangladesh’s apparel exports could triple by 2020 as European and US buyers plan to strengthen their presence in the country and new players enter the market seen as ‘next China’, according to a prestigious study.

McKinsey & Company, a global management consulting firm and trusted adviser to the world’s leading businesses, governments and institutions, said Bangladesh’s high growth at the readymade garment sector would continue for a decade.

The country’s sourcing market will get crowded amid incumbents buyers’ plan to stay for long and new markets are increasingly becoming important customers for Bangladesh, said the US-based company.

“Depending on how well the most severe issues can be managed, the market will realistically develop at an annual rate of 7-9 percent within the next ten years, resulting in an export value of

Full report in star business around $36 billion to $42 billion,” it said.

Bangladesh fetched $12.59 billion from garment exports in 2010-2011, accounting for around 80 percent of national exports and 13 percent of gross national product, according to government data.

Recently, McKinsey has conducted a study to review Bangladesh’s RMG growth formula. It is an extensive interview-based survey of chief purchasing officers from leading apparel players in Europe and the US, who account for $46 billion in total apparel sourcing value and covering 66 percent of all apparel exports from Bangladesh.

The study also included telephone-based survey of more than 100 local garment suppliers and in-depth research.

It said, while China is starting to lose its attractiveness due to a rise in costs of doing business, the sourcing caravan is moving on to the next hot spot. Costs have also increased significantly in other key sourcing markets, leading buyers to question their current sourcing strategies.

In 2010, China dominated RMG imports to Europe and the US, accounting for about 40 percent of the import volume in each region. But the McKinsey survey shows that CPOs almost unanimously favour moving some of their sourcing away from China. Fifty-four percent of them shared their plans to decrease their activities in the world’s second largest economy by up to 10 percent, while 23 percent stated that they sought to decrease their share of sourcing by more than 10 percent over the next five years.

“As western buyers search for the ‘next China’, they are evaluating all options to strengthen their proximity sourcing, moving on to Northwest China, Southeast Asia, and other Far East supplier countries. Bangladesh is clearly the preferred next stop for the sourcing caravan.”

It said other markets in Southeast Asia will increase their exports too, but will not be able to replace — at least in the near future — Bangladesh as a viable RMG sourcing hub.

Bangladesh offers the two main “hard” advantages — price and capacity. It also provides satisfactory quality levels, especially in value and entry-level mid-market products, said the research firm.

All CPOs named price attractiveness as the first and foremost reason for purchasing in Bangladesh, and said the country’s price levels will remain highly competitive in the future.

Half of the CPOs mentioned capacity as the second-biggest advantage of Bangladesh. With a current 5,000 RMG factories employing about 3.6 million workers, the country is clearly ahead of Southeast Asian suppliers in terms of capacity offered (e.g., Indonesia has about 2,450 factories, Vietnam 2,000, and Cambodia 260 factories).

Other markets, such as India and Pakistan, would have the potential to be high-volume supply markets, but high risk or structural workforce factors prevent utilisation of their capacity.

A high share of European CPOs strongly emphasise the advantages of sourcing in Bangladesh due to favorable trade agreements, with the broadening of the EU Generalised System of Preferences rules on duty-free imports of garments from the country.

Taking these drivers into account, Bangladesh’s RMG industry will continue to face growing demand. The CPOs of value players want to increase the value of their sourcing in Bangladesh by about a 10 percent annual growth rate, whereas mid-market players plan an annual growth rate of around 14 percent.

While Bangladesh represents some very promising advantages in certain dimensions, a number of challenges could create hurdles for companies seeking to source from the country.

For all business stakeholders, infrastructure (transport and utilities supply) is the single largest issue hampering Bangladesh’s RMG industry. The power supply issue seems more likely solvable within the next two or three years, although 90 percent of local suppliers rate the current energy supply as very poor or poor.

Some 93 percent of the European and US CPOs interviewed agreed that the compliance standard in Bangladesh has somewhat improved (67 percent) or strongly improved (26 percent) within the last five years. However, gaps exist and new risks may be emerging.

A gap between customer requirements and supplier capabilities or investment plans is emerging, as currently only 50 to 100 local garment manufacturers are able to produce at an advanced level in terms of product categories, productivity, services and compliance.

Apart from a lack of investment in new machinery and technologies, the current insufficient size of skilled workforce also impedes an increase in productivity and a move towards more sophisticated products.

Experts estimate that there is currently a 25 percent shortage of skilled workers in Bangladesh’s RMG industry.

Also, existing challenges will multiply if suppliers are not able to fill higher-skill middle management positions, according to McKinsey.

The European and US CPOs say economy and political stability are one of the key areas of risk when sourcing in Bangladesh. About half of them said they would reduce the value of their sourcing in the country if political stability was to decrease. A majority of them sees corruption as a major hurdle for doing business in Bangladesh.

It says productivity needs to improve to close the existing productivity gap in comparison to other sourcing countries.

The McKinsey study said the potential for Bangladesh’s RMG growth can be realised only if the challenges in areas of infrastructure, compliance, supplier performance and workforce supply, raw materials, and economy and political stability are tackled.

The study notes the three main stakeholders — government, suppliers and buyers — can accomplish the development potential and solve Bangladesh’s RMG growth formula. “Only if wholehearted efforts are led by all stakeholders together, will the stage be set to support a future ‘rebranding’ of Bangladesh.”

Bangladesh all set for global outsourcing hub for RMG

Bangladesh all set for global outsourcing hub for RMG

DHAKA, Dec 18 (BSS) – From the today’s position of the world’s second largest apparel exporters, Bangladesh all is set for getting the status of the global outsourcing hub in the next decade.

“With garment buyers moving out of China, the sourcing caravan is moving on to the next hotspot Bangladesh,” the latest report of McKinsey & Company said, providing an overview of the rapid growth of Bangladesh apparel sector with its prospect and areas of concern.

The report, prepared by the highly creditable and trusted German consultant in association with the Bangladesh German Chamber of Commerce and Industry (BGCCI), will be released on Tuesday. But, it is now available on McKinsey’s website.

Citing the trend of global buyers, the report forecast that Bangladesh would fetch up to US$ 42 billion from RMG export in the next 10 years with maintaining an annual growth between 7 and 9 percent.

The report in its near-term estimate also said that the earning would be double by 2015 and triple by 2020.

According to the report, Bangladesh will be able the next hot-spot of RMG outsourcing even though the other countries in Southeast Asia will increase their exports to the global market.

The report said a growing number of chief purchasing officers (CPOs) of Europe and US apparel companies are reviewing their sourcing strategies after margin and supplier capacity pressure promoted them search the next viable source.

With Bangladesh having developed a strong position among Europe and US buyers, many companies from overseas are eagerly evaluating the future potential.

The report said the global buyers once considered China as “the place to be” for outsourcing, but they are now shifting their focus on Bangladesh with bigger target.

In 2010, China dominated RMG imports to Europe and the US with 40 per cent of the import volume in each region. The macro trends of wage increases and capacity pressure, however, have proven to heavy weigh on the Chinese RMG sector.

McKinsey’s survey shows that CPOs of leading apparel buyers in Europe and the US almost unanimously favor moving some of their sourcing away from China.

As western RMG buyers search for the ‘next China’, they are evaluating all options to strengthen their proximity sourcing, moving on to Northwest China, Southeast Asia and Fareast supplier countries. Bangladesh is clearly the preferred next stop for the sourcing caravan.

The report said the advantages in price, capacity, capability and trade regulations provides the base for positive RMG growth in Bangladesh, which will be accelerated further in the future, driven by the increasing demand of international buyers from Europe, US and many emerging markets.

The report, however, said that the country’s RMG sector would face some major challenges to achieve the status of global hub. The challenges include poor infrastructure, limited inland transport alternatives and lack of deep-sea port.

Bangladesh started RMG export in 1978 when the country earned only US$12,000. This earning over the years increased rapidly and stood at US$17.91 million this year.

Presently, the country exports quality garment items to USA, EU, Canada, Germany, France, UK, the Netherlands, Spain and Italy. Russia, Brazil, Mexico, Chile, Japan and India are the potential markets for Bangladesh’s apparels.

Myanmar to import six more items

Myanmar to import six more items
Author / Source : BSS

COX’S BAZAR, Dec 18:  Myanmar has added six Bangladeshi items to its import list.

The decision came from a meeting of the joint working group of Bangladesh and Myanmar Sunday.

The six items are cement, medicine, biscuit, iron, tin and soft drink. Additional divisional commissioner of Cox’s Bazar Nurul Alam Nizami, who led the 15-member home delegation to the meeting, told journalists that the businessmen from Myanmar also expressed their interest in importing more apparel items from Bangladesh.

U Tin, deputy director of Myanmar Border Trade, led a 15- member delegation to the meeting, held at the deputy commissioner’s office in the tourist town.

He said the Bangladeshi businessmen urged the Myanmar authorities to ease the process for importing timber, wood and fish from that country.The official said the Myanmar also agreed to allow Bangladeshi businessmen use their cell phones in Mong Du and Akyab in Myanmar. The next meeting of the working group will be held on February 9 this year.

RMG export earnings may cross $40b by 2020

RMG export earnings may cross $40b by 2020
Nizam Ahmed

The export earnings of the country’s garment sector are likely to cross $40 billion mark by 2020, if few challenges the industry is facing are addressed in the coming years, exporters and global market monitors said on Thursday.

The challenges being faced by Bangladesh garment industry are poor port performance, weak road network, slower transportation, inadequate supply of utilities including electricity, gas and fuel oil and rising labour cost, garment manufacturers and exporters said.

“For next 10 years Bangladesh garment sector is likely to grow by 9.0 percent and by 2020 the export value is likely to touch $42 billion,” said global online business journal McKinsey Quarterly.

According to the Export Promotion Bureau, garments exports rose by 43 percent to more than $17.9 billion in Fiscal Year 2010-11 and in the current FY the export target for garments has been fixed at some $20.29 billion.

“To rapidly increase the export earnings we need further improvement of infrastructure, ports efficiency, road-network and supply of utilities including electricity, natural gas and water,” Syed Nurul Islam, vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) told the FE.

Despite improvement of the situation in the last few years, the authorities concerned should continue the development efforts further, he added.

“With present level of power supply and constraints in other relevant fields we are earning some $20 billion a year. The export can touch $50 billion if facilities are improved,” said Nurul Islam who has been elected President of Bangladesh-Malaysia Chamber of Commerce and Industry recently.

Due to lack of proper port efficiency and wider highways exports are often delayed, other exporters said.

However, the authorities concerned have started upgrading a national highway connecting the country’s main Chittagong port with the capital Dhaka and the project is expected to be completed by early 2014, officials of Roads and Highways Department said.

The power situation also improved but the shortfall still remains at around 2,000 mega watt (mw) as the peak-hour demand rose over 7,000 mw, officials of Bangladesh Power Development Board said.

Authorities concerned are still struggling to augment gas supply through new exploration.

“In the coming years the (garment) industry is likely to face a 30 per cent hike in labour cost, in addition to expenses to be required to increase capability of workers,” McKinsey Quarterly said.

According to BGMEA officials, currently a new entrant earns around taka 3,500 per month. There are more than 5,000 garment factories employing some 4.0 million workers comprising more than 80 per cent female workers.

Prime Minister Sheikh Hasina and the opposition leader Begum Khaleda Zia separately advised the Bangladesh Garment Manufacturers and Exporters Association to look after the needs of workers.

Their advice came when the two leaders attended separate sessions of BGMEA during its recently three-day international exposition in Dhaka.

In addition to the rising labour cost, the garment sector in the country will have to continue to face additional cost for inputs as the country has no base of raw materials.

Moreover the industry is also likely to be adversely affected by political instability as the major parties continue to pursue a confrontational politics, traders said.

However the prospects for the country’s garment sector increased further after India allowed duty-free and quota-free access of Bangladeshi garment products to its market.

Recent closer of many garment factories and shift in investment from garment to other sector in China due to improved socio-economic status and higher labour cost, Bangladesh is getting wider scope to replace China, the world’s largest garment supplier, in the coming days, industry sources said.

Will Bangladesh replace China in low-value manufacturing?

Bangladesh: a Chinese stitch-up?

Bangladesh could be this decade’s great usurper if it manages to sidle into the low-value manufacturing gap China is leaving in its wake as it moves up the value-adding ladder. And if a report by McKinsey, the consultancy, is correct the ready made garment sector is one place where Bangladesh is ready to strike.

Continue reading at:

RMG export may cross $30b in next 3 years

RMG export may cross $30b in next 3 years
Batexpo receives $66.35m spot orders
FE report

Export earnings from country’s ready made garments (RMG) might cross $30 billion within next three calendar years, industry leaders said.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) leaders at a post-BATEXPO-2011 press briefing at BGMEA conference room in the city on Tuesday said that the sector had the capability to earn more than $30 billion subject to having moral support and sufficient infrastructural development.

The audience in the press conference was also informed that the industry has received spot orders over $66.35 million worth of readymade garments in the BATEXPO-2011 which is $1.35 million higher than that of the last year’s fair. In the BATEXPO – 2010, the country had got spot orders worth $65.00 million.

“We are happy to inform that we have succeeded in completing the fair successfully with attractive spot orders worth $66.35 million which is more than our expectation despite the recession in the developed countries,” President of BGMEA, Shafiul Islam (Mohiuddin). said.

Mr Mohiuddin also said, “The number of visitors, including buyers and their representatives, in the fair was beyond our expectation.”

A total of 175 buyers and 3015 representatives of buyers have visited the fair which is also higher than that of last year.

“Besides, a total of 15,690 visitors have visited the fair. In the last year’s BATEXPO fair, a total of 14,990 visitors had visited the fair of which 162 were buyers and 2,870 were their representatives”, the press conference was told.

The BGMEA president also said, “A good number of prospective buyers from Latin from some other new countries have visited the fair and gave orders to some of our local garments owners.”

The BGMEA leaders have emphasized on skill development, infrastructural development and development of compliance for a sustainable growth of the industry.

The sector leaders have also informed that the buyers have emphasized on arranging such fair twice a year. Besides, they have also informed the audience that the buyers have demanded several overseas fashion shows for exposure of Bangladesh garment items.

Prime Minister Sheikh Hasina inaugurated the three-day BATEXPO-2011 fair arranged by BGMEA from December 10 to 12 and leader of the opposition Khaleda Zia attended the concluding ceremony.

Vice -president of BGMEA, Siddiqur Rahman, Director of BGMEA, Atiur Rahman Dipu, chairman and director of BGMEA, Md Nasir Uddin and others were present at the press conference.

Apparel makers get $66.35m export orders from ‘BATEXPO 2011′

Apparel makers get $66.35m export orders from ‘BATEXPO 2011′

DHAKA, Dec 13 (BSS) – The country’s apparel makers got export orders worth 66.35 million US dollars from the just concluded three-day annual exposition ‘BATEXPO 2011′ that ended here on Monday (December 10).

“Bangladesh received spot orders of apparel products worth $66.35 million from foreign buyers,” Shafiul Islam Mohiuddin, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said this at a press briefing in the association’s conference room here today.

Mohiuddin said the country also received $1.58 million as stock lot orders from the mega Readymade Garment (RMG) event.

Last year, the spot and stock lot orders were worth $63.50 million and $1.50 million respectively.

Mohiuddin said as many as 15,690 people visited the fair besides 175 foreign buyers and 3,015 representatives.

BGMEA organized the Bangladesh Apparel and Textile Exposition (BATEXPO) at the Bangabandhu International Conference Centre.

Dhaka prefers economic coop deal to FTA with KL

Dhaka prefers economic coop deal to FTA with KL
Doulot Akter Mala

Dhaka will send a proposal of signing an economic cooperation agreement instead of free trade agreement (FTA) with Kuala Lumpur, considering revenue aspects and incorporating manpower export issue.

The government has estimated a significant amount of revenue loss, if FTA is signed with Malaysia.

“We are working on an economic cooperation agreement. Very soon we will send it to the Malaysian government,” commerce secretary Ghulam Hossain told the FE Tuesday before leaving to Geneva for joining the WTO (World Trade Organisation) conference.

Bangladesh will not be benefited without a service agreement with Malaysia, he added.

According to an estimation of the National Board of Revenue (NBR), if FTA is signed with Malaysia, the government will lose Tk 29.94 billion tax, of which, Tk 9.88 billion as customs revenue and Tk 20.06 billion as supplementary duty (SD).

Earlier, Malaysia sent a template with its proposal of signing FTA with Bangladesh. However, following strong opposition of the revenue board, the Ministry of Commerce has recently taken the move to send a ‘counter template’ to Malaysia, preferring signing of an economic cooperation agreement instead of FTA, a senior NBR official said.

“We have opposed the move of signing FTA with Malaysia, as a large number of importers will be diverted to Kuala Lumpur from China for importing duty-free products,” said a senior revenue board official.

Bangladesh customs will lose a significant amount of revenue, if such an agreement is signed, posing a threat to achieving the import revenue collection target, he also said.

Besides, the NBR is not in favour of signing any trade agreement with Malaysia without incorporating the manpower export issue, he added.

There is a huge trade imbalance between Bangladesh and Malaysia. Bangladesh imported goods worth $1.762 billion from Malaysia in the fiscal year 2010-11, while it exported goods worth $43.87 million in the same fiscal.

Bangladesh mainly imports edible oil, vegetable fat, machinery, mechanical equipments, electrical goods, base metal, wood and wood articles, sulphur, organic chemicals, plastic, textile and textile articles from Malaysia.

On the other hand, major export items from Bangladesh to Malaysia include knitwear, woven garments, tobacco, home textile, raw jute, jute goods, dry food, agro-products and frozen fish.

Export earning posts 17.33pc growth

Export earning posts 17.33pc growth

Country’s export earnings during the first five months (July-Nov) of the current fiscal year stood at $ 9709.75 million, showing a growth of 17.33 percent, driven by good performance of RMG, frozen food, leather and leather products, reports UNB.

The figure is 3.55 percent lower than the strategic target of $ 10067.35 million, according to the latest figures released by the Export Promotion Bureau (EPB).

The export growth in November, however, witnessed a slight growth of 2.40 percent compared to the figure of November last year fetching $ 1591.24 million, but fell 16.95 percent short of the target of $ 1915.95 million.

The total exports during the last fiscal stood at $ 22924.38 million, exceeding the target by 23.92 percent and crossing well over the annual target of $ 18,500 million.

When contacted, Exporters Association of Bangladesh (EAB) president Abdus Salam Murshedy apprehended that the export growth might slow down in the coming months due to the present economic situation in the EU and the USA.

He said the EU and the US accounted for over 80 percent of the country’s total export, but their demand in the recent times has declined so as the price.

He also cited insignificant improvement in power and energy situation, fuel price hike, high bank interest rate and liquidity crisis for which the export-oriented sectors, including RMG, cannot gain their full competitiveness.

Urging the government to give priority to the export-oriented sectors, the former BGMEA president also emphasised the need for forming an immediate task force to face the economic ‘meltdown’.

Murshedy also suggested that the task force should comprise representatives from the export-oriented sectors like RMG, leather and jute.

According to the EPB statistics for the July-November period, knitwear fetched the bulk of the earnings with $ 3997.30 million, representing a 13.14 percent growth over the same period last year while woven garments earned $ 3566.17 million, a growth of 23.64 percent.

The export of home textiles totalled $ 307.71 million with a healthy growth of 37.26 percent; footwear exports earned $ 159.60 million, primary commodities $ 485.02 million, frozen foods, including frozen fish, shrimps and others $ 306.48 million, and agricultural products $ 178.54 million.

The export trend for leather and leather products and plastic products maintained their upward trend during the July-November period.

Leather exports totalled $ 130.70 million, while leather products $ 28.89 million, cotton and cotton products together earned $ 43.06 million, plastic products $ 37.12 million while rubber exports fetched $ 4.18 million.

The country also earned $ 15.02 million from ceramic exports, and clock, watches and parts combined to earn over $ 12.84 million.

The export of jute and jute goods in July-November period declined totaling $ 410.30 million, registering a minus 5.60 percent fall. Raw jute exports fetched $ 113.66 million with a 21.65 percent decline, jute yarn and twine $ 193.24 million, jute sacks and bags $ 84.85 million and other items brought in some $ 18.55 million.

Engineering products, including iron and steel, bicycle and electronic products fetched almost $ 135.33 million.

The export of man-made filaments and staple fibres totalled $ 27.59 million, caps $ 15.17 million while other manufactured products earned the country $ 29.65 million.

The export of ships, boats and floating structures, which notched an eye catching 332.98 percent growth in the last fiscal, bagged $ 22.67 million.

The export of handicrafts totalled $ 2.08 million, while paper and paper products $ 10.85 million, furniture $ 7.89 million, chemical products amounted to $ 56.76 million, pharmaceuticals $ 18.75 million while ores, slag and ash bagged $ 13.56 million- a 50.67 percent growth during July-November.

Specialised textiles, including terry towel, notched a negative growth of 21.22 percent, earning $ 55.08 million during July-November while export of petroleum by-products accounted for just $ 128.55 million.

$32m surplus earnings from shrimp exports in 5 months

$32m surplus earnings from shrimp exports in 5 months

DHAKA, Dec 11 (BSS) – The country earned US$ 32 million surpass earnings from shrimp exports during the five months of the current fiscal leaving aside the financial constraints facing the European countries, the major destinations for Bangladesh’s shrimp export.

Bangladesh maintained the positive growth in the export earnings during the period at a time when the country’s competitors such as India and Vietnam could not perform up to the mark, thanks to the government steps for export promotion.

Bangladesh earned US$240.19 against the target of US$208m during the period registering 15 per cent growth, according to the Export Promotion Bureau (EPB) latest data.

“We got good price of shrimps in the global market. Country’s export performance is good compared to our competitors India and Vietnam,” M Kazi Shanewaz, President of Bangladesh Frozen Foods Exporters Association (BFFEA), told BSS today.

Shanewaz said the association has targeted Taka 6,000 crore earnings from frozen food exports this fiscal.

The export earnings could be increased to a large extent subject to adoption of modern technology both in fish production and processing, he added.

Referring to the natural disasters including cyclone Aila, the BFFEA chief said shrimp producers incurred huge loss of money due to the natural calamities.

The sector needs government support to offset the loss of exporters and increase production for maintaining steady growth in the years to come.

The EU is the largest market for the country’s frozen fish, followed by the USA.

Bangladesh registered a 40 percent rise in export earnings from frozen foods mainly shrimp to $625 million in fiscal 2010-11 from $445 million in the previous year, according to the EPB.

German firm comes up with export finance offer

German firm comes up with export finance offer
Author / Source : Sherpa Hossainy

Dhaka, Dec 4: While booming export is becoming Bangladesh’s bedrock for a strong economy, it comes with an irksome catch for exporters — getting the pay for shipped goods. Several international payment methods are in practice, but in most cases, cash is hard to come straightaway. In case of deferred payments, the wait could be as long as 180 days.

To give exporters a respite, a German-based trade financing company, DS-Concept Factoring (DSCF) has introduced a new concept in Bangladesh — factoring, which helps exporters get paid in a quick, secured and hassle-free way.

Factoring is a financial transaction where a business job sells its accounts receivable (invoices) to a third party (factor) at a discount. The factor provides financing to the seller of the accounts in cash, often 70-85 per cent of the purchase price of the accounts, with the balance paid upon collection. Factoring differs from a bank loan — the emphasis is on the value of the receivables, whereas a bank focuses more on the value of any borrower’s total asset.

“Our core business is to buy receivables. We buy deferred letters of credit (LCs) and change them into sight LCs,” said Alexander Pinkas, managing director of DSCF.

In a deferred LC, payment is done after a fixed number of days after shipment or presentation of prescribed documents, whereas a sight LC is payable immediately once it is presented along with necessary documents.

“A lot of export businesses are also made in contracts nowadays in Bangladesh. Importers are providing a 20 per cent down payment in advance and want to close the invoice while it’s matured, which could take 30 to 120 days,” Pinkas said.

Pinkas said small and medium companies face problems because banks don’t allow them to have back-to-back (two LCs used together to help a seller finance the purchase of equipment or services from a subcontractor) facilities.

“We take 20 per cent down payment, open a sight LC to the exporter and the remaining 80 per cent is paid from the importer after maturity.”

Describing factoring’s advantages, Pinkas said this trade tool eliminates nagging negotiations about credit periods with suppliers, the administrative efforts to open LCs and carrying out documentary collections. “Exporters immediately receive 80 per cent of the invoice value after shipment has been made and the remaining 20 per cent balance on maturity of the invoice. This enables exporters to receive discounts from suppliers as they have sufficient liquidity,” he said.

After making a contract with the exporter, DSCF makes a credit worthiness check of the importer through Euler Hermes, one of the biggest backup insurance companies worldwide, who has access to profit and loss statements as well as yearly bank statements of the companies.

“We provide transparency and security for the exporters as they know if they are exposed to risk or not. We guarantee 100 per cent payment even if the importer goes bankrupt,” Pinkas said. He said DSCF clients are also connected to its legal department in case there is any dispute. “When we buy the receivables the exporter is released from the deferred payment as we pay at sight. Whenever the importer goes bankrupt we will not collect the money from the exporter as payment is covered through Euler Hermes.”

DSCF, headquartered in Mönchengladbach in Germany, was founded in 2000 and presence in the USA, Turkey, Bulgaria, Egypt, Pakistan and the UAE. The Bangladesh operation started in 2008 and DSCF is now doing business with sixteen companies.

“Our real operations started two years ago, and up till now we have provided $15 million in credit,” he said.

Pinkas said DSCF has chosen Bangladesh because it is an emerging market, where exports are booming and more exporters need intelligent cash solutions. Currently DSCF is financing shrimp and garments sector as two stalwarts of exports in Bangladesh. Besides the company is financing bicycle export (German-Bangla bike) and some other buying houses such as ZXY Ltd. Recently DSCF also signed a contract with a German importer who delivers goods to Karstadt, a big chain store in Germany.

However, Pinkas said DSCF doesn’t have any priority while financing exports. “Every export is possible to finance.

It could be porcelain, tableware or food, wherever there is deferred payment, we can take care of it.” DSCF starts providing service from $50,000 up to $40-50 million, which means besides small and medium exporters big corporations can also avail credit from us, he said.

Factoring is still a new concept in international trade and very new in Bangladesh, Pinkas said. “Factoring as a trade finance tool immerged in the USA and it is very common there. But in Bangladesh we are the only factoring company.” Pinkas believes there is a great chance for factoring business to flourish in Bangladesh but the unfamiliarity with the concept poses a big hurdle. Bangladesh has a lot of potential for this business but sometimes we face a lack of knowledge about international trade, he said.

Despite being a fairly new concept, factoring has been in existence for a long time in some other shape or form in the world of trade.

The DSCF managing director opined that some export finance policies and practices are holding back exports from Bangladesh in a certain way.

“Bangladesh is still one of the last countries where payment of exports is requested through letter of credit. Some policies have to be eased for exports to register more growth,” he said.

Dhaka, Washington to ink trade, investment deal soon

Dhaka, Washington to ink trade, investment deal soon
Nizam Ahmed

Bangladesh and the United States are likely to sign soon a trade and investment cooperation deal to facilitate increased US investment in this South Asian country, especially in its energy sector, officials said on Friday.

Furthermore, the deal, for which terms and conditions are being worked out by both sides, is expected to help Bangladesh to export more of its products to the US.

If everything goes ahead unhindered and the terms and conditions are agreed upon by both parties, the deal under the title of ‘trade and investment cooperation forum’ will be signed during an expected visit by a high-level functionary of the US administration, a senior official of the ministry of commerce (MoC) said.

Officials of the ministry of foreign affairs in Dhaka are expecting that the US Secretary of State Hillary Clinton will visit Bangladesh in the near future to sign the deal between the two countries.

Sources in the US embassy in Dhaka said the deal is likely to be signed soon, but they, however, could not confirm whether Ms Clinton would visit Bangladesh on the occasion of signing any such deal.

“The deal, upon its signing, will pave the way for a substantial increase of US investment in Bangladesh mainly in its energy sector and also boost opportunities to help expand bilateral trade,” a senior official of the MoC said.

Foreign ministry officials said mutual cooperation in areas of food security, climate change mitigation and fight against terrorism, would also be included in the deal.

The new US Ambassador to Bangladesh, Dan W Mozena, at his first news conference in Dhaka last Thursday, also reiterated that signing of the ‘strategic deal’ for the forum would be his first priority.

The forum will be a platform for stakeholders of both the countries to discuss and sort out trade- and investment-related issues and settle them, Mozena told the reporters.

“The annual trade between the two countries stands now, in value terms, at $5.0 billion and the bilateral trade balance has mostly been in favour of Bangladesh that exports some $4.0 billion worth of goods, mainly the ready-made garment (RMG) to north America, mainly the US,” a source in the Dhaka embassy of the US told the FE.

Bangladesh is also lobbying to get duty- and quota-free access for RMG products to the US, despite a strong resistance from US textile manufacturers who fear such a concession to Bangladesh might hurt their own business interest.

The US imports around 40 per cent of Bangladesh’s annual garment exports worth $18 billion, while more than 50 per cent are imported by European Union (EU) and the rest by Japan, Australia, New Zealand, South Africa and India, exporters said.

As of now, Bangladesh garments enjoy already duty-free access to the EU and now in India which recently announced such a facility.

Officials at the Board of Investment (BoI) said so far the US was one of the largest source of foreign direct investment (FDI) in Bangladesh but owing to weekend, they could not give an exact figure.

But they said among the US hydrocarbon explorers, Chevron alone had so far invested more than $1.0 billion and ConocoPhilip, around $200 million.

They said the US energy firms were in the process of making more investments in Bangladesh as they had own deals for further exploration of natural gas in their respective onshore and offshore blocks, officials of the ministry of power, energy and mineral resources said.

The US investment initiatives have taken a new turn after Robert O Blake, US assistant secretary for the central and the South Asia told the US Bangladesh Advisory Council Congressional Reception in Washington in September last that Bangladesh was a destination for the US investment and a market for its products.

Bangladesh attracted $913.32 million as FDI in 2010 against $700.16 million in the previous year.

The FDI in 2011 is expected to be bigger as, besides the US energy firms, Chinese, Indian and South Korean firms have registered a good number of proposals for making investment in apparel and tourism sectors in Bangladesh.

Indian cos start placing orders for Bangladeshi apparels

Indian cos start placing orders for Bangladeshi apparels
Author / Source : BSS

DHAKA, Dec 2: Indian apparel companies and retailers are placing orders here to buy Bangladeshi garments in large volume taking advantage of the duty-free access and low prices, exporters said Friday. Many apparel companies of India’s famous brands including Arvind, Aditya Birla, Madura Garments,Provogue Zodiac Clothing, Raymonds, Vimal, Lews Philips, Van Heusen, Arrow,Lee, Levis, Wrangler and Dockers and others are intensely communicating with the Bangladeshi apparel manufacturers.

During the historic trip to Dhaka in September, Indian Prime Minister Manmohan Singh announced the duty free access of Bangladeshi apparels to Indian market in an effort to address the long-standing multi-billion-dollar trade imbalance that goes in India’s favour.

Talking to BSS, Abdus Salam Murshedy, president of the Exporters Association of Bangladesh (EAB), said his company received export orders of two lakh pieces of shirts worth two million US dollars from an Indian reputed brand “Pantaloons.”

“We have already sent the consignments to India,” said Murshedy, also former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

He said Indian top apparel brands and retailers are even ready to shift their manufacturing units to Bangladesh to route garments back to India encouraged by the Delhi’s zero tariff facilities to Dhaka.

Bangladeshi apparel entrepreneurs could give competitive price and ensure timely supply to Indian retailers, he said and favoured organising single country fair in India to give fillip to Bangladesh and Indian apparel makers. M Shafiul Islam Mohiuddin, president of BGMEA, said Bangladesh can easily penetrate the US$30b Indian apparel market. Mohiuddin, who led a business delegation of apparel exporters to India last week, said the BGMEA leaders discussed with Indian apparel associations, manufacturers, entrepreneurs and leaders of the Confederation of Indian Industry.

On providing zero tariff facilities to the Bangladeshi apparels in the Indian market he said, “Some Indian businessmen consider the tariff treatment as risky and others as opportunities.but Indian government stance on the market access is firm.”

Dhaka’s exports are valued just one-ninth of the $4.5 billion worth of goods India shipped to Bangladesh in the 2010-11 fiscal.

The garment deal is the best Dhaka secured for the sector from India since the 1990s, when similar duty-free access to the EU transformed Bangladesh’s apparel trade into a multi-billion dollar industry, say insiders.

Bangladesh is the world’s third largest garment manufacturer , exporting apparels worth 19 billion US dollars last fiscal.

The garment industry, which accounts for 80 per cent of the country’s total exports, relies heavily on orders from European and North America retailers such as Sweden’s H&M, America’s Gap and British supermarket Tesco, industry insiders say.    BSS

Trade concession boosts RMG export to India

Trade concession boosts RMG export to India
Nizam Ahmed

Bangladesh garment manufacturers received export orders worth over $90 million from India in nearly two months since the big neighbour granted duty-free and quota-free access for 46 Bangladeshi ready-made garment (RMG) products to its market in early September, traders said on Wednesday.

The export orders received in two months until the end of October last was a quarter of some $360 million worth of RMG products Bangladesh exported to India in the fiscal year (FY) 2011, garment exporters said.

“We are in interaction with the Indian buyers and hope we will continue to get more and more orders,” Shafiul Islam Mohiuddin, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) told the FE.

The RMG exports to India may cross the $2.0 billion mark in the next three years as per the estimation of the traders concerned following their recent tour of India aimed at reassessing business opportunities there.

Indian Prime Minister Manmohan Singh announced duty-free access for 46 garment products from Bangladesh, during his visit to Dhaka on September 6 and 7 last.

“It (garment exports to India) may be bigger, we expect to get a real scenario within the next three years,” BGMEA president Mohiuddin said.

If the trend continues, most Bangladeshi traders and officials are hopeful about Bangladesh’s trade deficit with India to come down to a tolerable level within next five years.

Currently Bangladesh imports goods worth more than $4.6 billion from India while it exports goods valued at about $600 million.

The trade gap is highly tilted towards the neighbouring country ever since the independence of Bangladesh, the officials of the ministry of commerce (MoC) in Dhaka said.

With the increase in exports of garment and some other items to India, which announced cut its sensitive list to 25 from 480, the trade gap is expected to narrow at a quicker pace, MoC officials said.

Indian Prime Minister Manmohan Singh announced the trimming of his country’s sensitive list for the least developing countries of the region at the recently held Summit of the South Asian Association for Regional Cooperation (SAARC) in Addu city of the Maldives.

Mohiuddin spoke to the FE as he was a member of a Bangladesh business team that visited New Delhi on November 24 and 25 under the aegis of the India-Bangladesh Chamber of Commerce and Industry (IBCCI).

The 46 garment products which obtained duty free access to India include pants, shirts, blouses, skirts, kids wear, cotton nightwear, jeans, swimwear and tracksuits.

Bangladesh garment manufacturers have become more competitive than their Indian counterparts over the past years though they lack an internal base of raw materials.

In some specialised items in both woven and knitwear, Bangladesh garment industry enjoys edge over Chinese apparel industry.

Bangladesh supplies its products regularly to international brands such as JC Penny, Wal-Mart, H&B, Marks and Sperncer, Carrefour, Addidas, Nike and Zara.

“It (getting orders from reputed brands) is possible because of our expertise attained through hard work over the past decades and if no untoward situation occurs Bangladesh garments will have more inroads in world export market,” Mohiuddin said.

However frequent enhancement of petroleum price, and gas and electricity tariff is a major concern which the members of the BGMEA are needed to address, some garment manufacturers said.

“Despite all this problems including some local and external conspiracies the Bangladeshi garments will continue to maintain its edge,” Mohiuddin added without giving details.

The total annual exports of Bangladeshi garments including woven and knitwear rose by 43.35 per cent to nearly $18 billion in the FY 2011. The export target for garments has been set at $20.29 billion for the FY 2012.