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

Indian denim takes Bangladesh route to reach China

Indian denim takes Bangladesh route to reach China
Author / Source : STAFF REPORTER

DHAKA, DEC 19: Indian denim fabric is reaching China, getting stitched on the route in Bangladesh amidst a plethora of reasons like depreciation of Indian rupee, appreciation of the Chinese currency, rising cost of labour in China, slowdown in Western economies, and less cost of labour and power in Bangladesh. Since June, Indian rupee has witnessed a depreciation of around 20 per cent against the US dollar. During the same period, the Chinese currency Yuan has appreciated by 4 per cent against the US dollar.

As a result, making jeans in China has become costlier as China imports cotton from India to make its denim. Moreover, there is an increase in wages in China. Also, there is a rise in domestic consumption.

Owing to all these factors, the Chinese are finding it more economical to buy Indian denim compared to their domestically produced denim. Hence, China has started importing denim from India for its own domestic use as well as for export to other countries.

Explaining the demand situation for denim, Vikram Oza, director-finance, Jindal Worldwide, an Ahmedabad-based denim manufacturer, explains, “The overall demand from the US and Eurozone is declining due to slowdown in their economies. On the other hand, the denim market has not penetrated to the extent required in other economies having large population like China and India.”

“In the US, the per capita consumption of denim is around 8 pairs per annum. In comparison, it is 0.3 in India and less than 1 in China. So, there is a demand in India and China to come up to the average level of 2 or 2.5 pairs per person,” he adds.

Briefing about the route taken by Indian denim to reach China, he informs, “Labour cost in China is rising these days. So, their route is through Bangladesh and Vietnam, more particularly Bangladesh.”

He said, the fabric produced in India is first going to Bangladesh. There the minimum wage is around Rs 2,250 per month, whereas in India it is Rs 7,000 per month. Next factor is the power costs. Power cost in India is Rs 5.50 per unit while it is around Rs 3.50 per unit in Bangladesh. The slowdown in the European market is also helping diversion to China because of the growing demand for denim there, he added.


Economy gains stronger base

40 Years of Independence
Economy gains stronger base
Speakers at a seminar
Staff Correspondent

Speakers at a seminar yesterday said the economy of Bangladesh has gained a strong base in 40 years of independence.

They said the country has captured a major stake of the global readymade garments (RMG) market along with achieving self sufficiency in food.

The Industries Ministry organised the seminar on “Forty years of independence: achievement and expectation of the industry” at the BCIC auditorium in the city.

Industries minister Dilip Barua addressed the seminar as chief guest with industries secretary KM Masud Siddique in the chair. Professor Mostafa Nur Islam was the prime discussant at the seminar.

While addressing the seminar, Dilip Barua said Bangladesh is getting a large amount of remittances sent by its 7.5 million expatriates staying in different countries across the world.

“The remittance worth $12 billion sent by the expatriates made our economy stronger,” he said, pointing out that it would never have been possible if the country failed to gain independence from the then West Pakistan.

He expected that the industrial sector will gain double digit growth if the ongoing industrial policy keeps continuing.

The other speakers, however, said the country could not properly utilise its prospects for the development of economy even after 40 years of independence.

They opined Bangladesh can turn into a middle-income country by 2021 through utilising the creativity and skills of its huge population.

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.