Apparel industry faces survival threat, sets security, energy, financing top priorities

Apparel business leaders have set three top priorities for the interim government – restoring law and order, ensuring smooth supply of electricity and gas, and disciplining the banking sector – to help the country's largest export sector survive and thrive.

At a time when neighbouring India announced new incentives for the clothing industry, Bangladesh's apparel sector has seen government incentives reduced, bank finance shrank and energy crisis worsened, they said at a roundtable.

The industry leaders have called for a radical overhaul of the taxation system to remove procedural hassles that far outweigh the marginal incentives left for the export sectors.

"A regular government can't do many things. We believe this revolutionary government can set the ground anew with business-friendly policies," BKMEA Executive President Fazlee Shamim Ehsan said, sharing the industry's worries about the growing risk of losing market share to competitors.

Along with those who almost emptied a number of banks, responsible bank employees must also be brought to justice to revive the financial sector, readymade garment and textile industrialists have suggested at the event organised by The Business Standard at its conference hall on Sunday (15 September).

"Why should businesses pay a 16% bank interest rate due to mismanagement of bank officials? What did the central bank do before? Those bank MDs were involved with approvals of such bad loans and they need to be made accountable," said Shams Mahmud, managing director of Shasha Denim.

The Business Standard Editor Inam Ahmed initiated the discussion inquiring why the apparel industry is often confronted with labour problems and how the owners were dealing with workers' grievances.

In response, industry owners have said workers in general are peaceful and recent protests were orchestrated by mainly outsiders who took advantage of the lax law and order situation after the regime change to take control of 'jhut' (waste fabric) trade.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Khandoker Rafiqul Islam said they were always willing to accept rational demands of workers. But the latest wave of protests was driven by irrational demands, he said, hoping to overcome the issue with the help from the army, other law enforcers and local people.

Speaking on the industrial relation, BGMEA Senior Vice President Abdullah Hil Rakib said the so-called labour leaders instigate workers for rights, but never train them on their responsibilities and commitment to industries that give them a living. "If so, how can workers vandalise a factory where they have been working for 10 years?" he questioned.

Bangladesh Textile Mills Association (BTMA) President Showkat Aziz Russell said the new government should immediately address three major issues – restoration of law and order, assurance of uninterrupted supply of power and energy and ease of financing.

The previous government had increased energy prices and collected additional security deposits, but failed to ensure uninterrupted supply of gas and electricity, he added.

All banks in the country had been facing capital erosion since the period of the previous government and industries are now facing challenges to arrange finance, said the textile industrialist, demanding punishment to bank and insurance officials responsible for liquidity erosion to prevent future corruptions.

For MA Jabbar, managing director of DBL Group, it is a question of sustainability as he finds getting finance increasingly difficult from both local and foreign banks.

"Entrepreneurs are currently facing a funding crisis. We did not experience such funding issues before as we are facing now," hoping that the new government would help them overcome the crisis soon.

The leading exporter stressed the need for restoring business confidence and ensuring smooth energy supply.

He believed global brands have confidence in Bangladesh's products and the $100 billion annual export target as set earlier is not unachievable if the BGMEA is joined by the government policymakers and other stakeholders.

The DBL Group chief stated, "Improving security and intelligence in industrial areas such as Ashulia, Gazipur, Narsingdi, Narayanganj, Cumilla and Chattogram is urgently needed."

MA Jabbar emphasised on the immediate restoration of law and order, easier access to banking funds for reliable entrepreneurs, the creation of a task force to overhaul the taxation system, improvements to ease of doing business, the allocation of a social security budget, comprehensive policy analysis and research on industry's needs, government incentives and support.

Regarding social security, he stressed that the BGMEA and the BKMEA need to take a more active role. "We are hearing that India is offering more incentives, while in Bangladesh, they are decreasing day by day. We need to analyse how we can address this issue," he said.

He added, "We also need to analyse what our competitor countries are doing and our position from an industry perspective.

"We also need to do long-term policy analysis," he stated.

Shasha Denim Managing Director and DCCI former president Shams Mahmud said power outages cause damage to sophisticated machinery requiring them to change parts frequently.

In the long run, more investment will be needed in backward linkage industries to sustain post-LDC graduation, he added.

"Whether the country graduates from LDC or not, we have to go for zero carbon emission to do business after 2030. But the country has no plan for that yet," said Shams Mahmud, also director of BGMEA.

BKMEA's Fazlee Shamim Ehsan said that conducting large-scale business operations has become particularly challenging due to the high interest rates on bank loans.

He emphasised that every business owner is under immense pressure to meet loan repayment obligations, which is further exacerbated by the high cost of servicing those loans.

The NBR related policies should be revised to make those realistic and business friendly, he added.

He said the country has got a great opportunity for the country's new branding through using the global image of Nobel Laureate Dr. Muhammad Yunus who in 2017 wrote a book titled "A World of Three Zeros: The New Economics of Zero Poverty, Zero Unemployment, and Zero Net Carbon Emissions."

Now buyers are talking about Zero Net Carbon Emissions and setting their target, but Bangladesh has not outlined any roadmap for that yet, he pointed out.

BTMA's Showkat Aziz Russell said tax and customs related policy changes needed under a long-term policy plan to attract foreign investment.

BGMEA President Khandoker Rafiqul proposes to reduce RMG source tax to 0.7% from 1% in line with a 0.3% general cash incentive for all exporters.

Echoing him, BKMEA President Mohammad Hatem said under the current tax system none has scope to get refund of their additional tax which is realised as source tax, or it is never adjusted in the next year.

He termed the system illegal and against fundamental human rights.

BGMEA's Abdullah Hil Rakib said the industry needs to analyse return of investment and make future plans.