Vol. 5 Num 215 Fri. December 31, 2004  

MFA goes, sky is not falling
May be a blessing in disguise
Today marks the expiry of Multi-Fibre Arrangement (MFA) whereby Bangladeshi garments exporters enjoyed a sheltered market abroad so far. It's a day of reckoning and stocktaking as to where we stand in terms of preparedness to face up to the quota-free trade regime where garment exporting countries with maximum local value addition are likely to have a competitive edge over others. Obviously though, it was neither spoon-feeding nor a free lunch for Bangladesh under the quota system, a high premium having been put on the quality of products, which if it were not acceptable to the EU and US markets, would have been discarded for sure. The quality of our garments remains a strength with us, and regardless of the quota phase-out, it's a win-win situation for us, provided of course, complementary measures are put in place to cash in on our goodwill.

In truth, the initial outlook doesn't appear bleak. As for the orders for the first one and a half years, major buyers in the US have promised to increase their overall RMG outsourcing from Bangladesh. It's also good augury that a number of retailers and business houses have opened offices in Dhaka. In the short run, the prospects look good, but it is difficult to make long-term growth projection at this stage. We need to finance and develop backward and forward linkages on a crash basis.

The government has taken a number of cost cutting and time saving steps for the garment exporters like exempting the garment industries from VAT, simplifying customs documentation and allowing loan rescheduling without down payment. It's heartening that the lead-time problems that put Bangladesh at a disadvantage vis-a-vis other major garment exporters are being addressed in earnest. However, in the area of fiscal incentives, there is room for enhancement, especially keeping in view the numerous smaller units who would be vulnerable to the knock-on effects of the phase-out. Those who might be retrenched would be in dire need of safety net and alternative employment and the Tk 20 crore earmarked in the budget for such purposes may not prove adequate.

We see no reason why our garment manufacturers and exporters shouldn't keep their morale high. After all, the phase-out is not something black and white in its implication. The realignment of global market need not be a paradigm shift, because it would be based on traditional relations between China, the EU and the US. Meanwhile, let our government take steps to improve port efficiency and ensure steady power and gas supplies at affordable costs.