garments account for about 75% of our total foreign revenues.
Yet many experts grudgingly call it an 'industry', as they
believe it is an industry that produces its goods out of imported
components. But this very industry has also created job opportunities
for hundreds and thousands of women and men, who otherwise
would have remained unemployed. The industry that thrived
on the Multi Fibre Agreement, nicknamed MFA, now face a crucial
challenge as the agreement expired on January 1, 2005. How
will our garments industry fare in this new circumstance?
And how well are we prepared, if at all, to survive the withdrawal
of the quota?
of textiles and clothing from developing countries have long
faced restrictive blocks known as quotas. Introduced as a
temporary relief measure apparently to favour the domestic
textile manufacturers in the poor countries, it has been in
force for the last 40 years. In 1962, a Long Term Agreement
(LTA) regarding international trade in cotton textiles was
signed. It replaced the one-year Short Term Agreement that
existed at that time. LTA underwent several renewals and was
subsequently replaced by the Multi Fibre Agreement (MFA) in
1974, which was expanded to cover exports of synthetic fibres
and woollen products, besides cotton.
into force to allocate export quotas to the low cost developing
countries, limiting the amount of imports to countries whose
domestic industries were facing serious challenges from rapidly
increasing imports. It sought to progressively liberalise
and expand world trade by reducing banners to trade.
regime existed for 25 years, until 1994 when the Uruguay Round
of Multilateral Trade Negotiations resulted in the Agreement
on Textiles and Clothing (ATC). The ATC sought to phase out
all quota restrictions in four phases spread over a period
of 10 years. The first three partial phase-outs were in January
1995, January 1998 and January 2002. The final one was due
on January 01, 2005.
of MFA in 1974 saw the start of our garments industry's rise.
As the agreement kept countries like India, which had vast
garment industries at bay, small countries like Bangladesh
happily reaped the benefit. The MFA that created a guaranteed
market for Bangladesh's RMG (Ready Made Graments) in USA and
Canada, two of the world's biggest consumers of garments,
inspired a boom in our garment industry since the early eighties.
The expiry of MFA means lifting of all quotas and restrictions
on clothing imports resulting in world trade in textiles to
be fully liberalised. That means Bangladesh no longer has
the guaranteed market of its RMG to USA, which consumes about
43 percent of the country's total apparel market. The US is
the biggest buyer of our RMG. However, in the post-RMG regime,
China and India are our formidable opponents. There is a tough
competition ahead and are we prepared for that?
all, believes Mohiuddin Ahmed, director of Standard Garments.
He portrays a sorry picture of our preparation in the run
up to the much feared about post MFA world. "It wasn't
as if we weren't aware of it, in fact the alarm bell was rung
long ago, but there was no uniform action plan to address
the approaching crisis," Ahmed says. BGMEA leadership,
leading garment exporters raised quite a hue and cry long
ago, coercive lobbying was also launched with the concerned
government authority, speakers in different seminars and symposiums
were giving away prescriptions detailing what-to-dos to save
our RMG industry from falling apart in the post-MFA world.
"Everybody was talking about it, but nobody was doing
anything about it. In the end, except some scattered development
here and there we are still as unprepared as we were two years
back," he adds.
H. Shamim, Director of Prabartana Ltd who, on behalf of UBINIG,
has worked extensively with garment workers, also echoes Ahmed's
observation. Furthermore, he hints at the foul play of some
people in the industry. "A section of exporters and garment
owners kept on pressing the government for all sorts of facilities
like cash incentives and tax holiday etc. from time to time
using the excuse of MFA phase out. These people are usually
very powerful and have access to different levels of the government.
Sometimes they use their political clout to influence the
government policy, not for the sake of the overall development
of the industry, but for their personal or group's interest,"
points out Shamim.
worry is our inadequate backward linkage facilities. Bangladesh
is still heavily dependent on imported fabrics to meet the
demand for domestic and export-oriented RMG industry. In 2003,
the demand-gap of fabric for domestic and export through RMG
was 2,000 million metres. "We were perfectly aware of
this constraint of ours, then why couldn't we concentrate
on setting up spinning, weaving and fabric processing projects?"
President of Bangladesh textiles Mills Association (BTMA),
however, claims reasonable progress in this respect: "Bangladesh
is currently able to manufacture more than 50 percent of yarn
fabrics and 75 percent of knit fabrics needed for export-oriented
garment factories." In a recent interview he assured
that "if the government provides us with financial support
in setting up composite textile mills, the country will be
able to supply cent percent fabrics and knit raw materials
competitors however, have made great progress. China, the
largest clothing and textile exporter of the world, along
with India, another giant garment manufacturer in the world,
are thought to be the main competitors of Bangladesh, have
a number of advantages over Bangladesh. Good infrastructure
aside, the lower lead-time and availability of raw materials
make China an indomitable opponent. Bangladesh which doesn't
produce the necessary amount of grey fabrics required for
its total export of garment is to import it from India, China
and Thailand under back to back L/C (Letter of Credit) facilities.
But, now, as the market becomes quota free, these countries
are naturally going to substitute their export of grey fabrics
to Bangladesh with export of apparels to North America.
now happen to our garment industry? Will Bangladesh be able
to sustain its position in a fiercely competitive market?
who are concerned with the garment industry, insiders and
outsiders alike, have a general consensus that, our garment
industry is going to suffer tremendously in the post-MFA time.
Predictions have been made that as if loses its guaranteed
market in the US and now that it will have to compete with
garments giants like China and India, Bangladesh is certainly
going to find its market greatly shrunk. Consequently, many
of our garment factories will be closed and according to one
particular estimation some 1500 garment units out of an approximately
3000 might be closed down. Different estimations are also
there, which give different figures, but there is a perfect
consensus about the notion that a sizeable number of garment
factories will have to be shut off.
immediate after-effect of the potential large-scale closure
would be large-scale lay offs. In fact, there are claims of
a good number of garment factories having been already closed
and hundreds of garment workers having been already thrown
out of their jobs. Zafarullah Chowdhury, owner of Sundarban
Garments doubts this, "I don't know about any garment
factories that have been closed because of MFA as yet. Since
the early eighties about 800 garment factories have been shut
off for various reasons other than MFA phase out, and into
two weeks since the expiry of MFA, I believe it's too early
to see any large scale closure and job cuts." Shahidullah
Chowdhury, a labour leader, also corroborates this: "Job
cut is a regular event in our garment industry. Workers are
often fired on false accusations, sometimes workers lose their
job because the owner has suddenly closed his factory and
moved elsewhere without any prior notice to avoid paying arrear
salaries of the workers. I believe it will take some time
before we see job cuts due to the MFA phase out."
are also differences of opinion regarding the degree of damage
our garment industry is going to face. While one group is
greatly panicked the other group doesn't see any catastrophe
wreaking havoc on our garment industry because of the MFA
optimists believe that though China has better infrastructure
and a lower lead-time Bangladesh's competitive edge has been
and will continue to be its cheap labour. For a labour intensive
industry like the garment industry low labour wage is certainly
a big advantage and in Bangladesh workers in the garment industry
are paid much lower than in other countries, particularly
those of China and Indonesia.
Chowdhury who owns four garment factories is one of those
people who think our garment industry will lose little in
the post-MFA regime. The owner of Shundarban garments Chowdhury
who exports all his produce to EU believes Bangladesh will
soon get over whatever trouble it might face for the time
being. He has statistics to explain why he is so optimistic:"
Bangladesh has a large market of knitted T-shirts and knitted
jerseys in Canada and it is also the largest supplier of men's
woven shirts there. Within EU, Bangladesh commands 15 percent
of cotton T-shirts, 13 percent of cotton woven men's shirts,
10 percent of acrylic jerseys and 5 percent of denim and cotton
trousers. According to the unit value data, Bangladesh is
by far the cheapest supplier in all these categories."
Chowdhury also believes that the MFA phase out effect on our
garment industry is exaggerated. Here one has abundant supply
of workforce whom one can pay as low as 1500 taka a month.
Again the condition of our garment workers are not the same
as it was 10 or 15 years back. Over the years a sizeable skilled
workforce has been developed who will certainly contribute
to positively affect the productivity rate, an area Bangladesh
has always lagged behind.
is almost no doubt that some of the garment factories are
going to face closure, but, Shamim doesn't think it will be
something of a disaster. There are hundreds of factories which
don't follow any rules whatsoever, maintains no safety measure,
use child labour, force their workers to work more hours than
law permits, and make them work in unhygienic and claustrophobic
environments. Fire incidents are rampant in these factories
and hundreds of lives have been lost in innumerable fire incidents
in such factories over the years. The January 6 tragedy that
cost at least 22 lives due to a fire incident is proof of
the level of exploitation. Why should these factories be allowed
to go on exploiting the poor, asks Shamim. "They should
be closed," he goes on. "When such bad garment factories
will be shut the overall environment will improve, workers
will receive better treatment and consequently productivity
will rise. So, even if there are some immediate job cuts it
will be ultimately good for the industry and for the nation."
good environment is necessary for another reason too. Many
EU countries don't import goods from manufacturers who don't
comply with safety regulations and who fails to upgrade work
environment. In future, these importing countries, including
the US, are going to be more stringent about these regulations.
"Child labour is another issue exporters are taking very
seriously, so the factories where standards of environment
and employ child labours and violate rules that assure workers'
rights are ultimately going to be hushed," Shamim argues.
instead of lamenting the possible damage, our RMG industry
we must start, and in fact we should have started a long ago
to explore new areas," Shamim contends. He believes handloom
and agro-based industry do have the potential to substitute
the garment industry. "We don't need to be too ambitious,
there can be small or medium enterprises (SME) to revive the
economy. We have never really been able to utilise our handloom
sector to its fullest potential. One great advantage of this
sector is that it has a huge domestic market and a reasonably
good foreign market as well," he points out.
the domestic cotton cloth consumed in the rural areas, 81.
per cent originates from handlooms and only 13.2% from the
power looms. Besides, like the garment industry, it is also
female labour-oriented and since the sector is home-based
it is all the more appropriate for our rural women to fit
into. The handloom sector provides jobs to nearly a million
of weavers across the country. Not only in terms of creating
job opportunity, but in terms of GDP as well, it alone contributes
about 15 per cent of the share of the entire manufacturing
small and medium enterprises have been yielding good results,
we have not been able to broaden its scope and capacity. By
directing our attention to sectors like handloom and agro-based
industries we can not only develop rural employment opportunities,
but we can also compensate the loss incurred by possible drop
in our RMG sale making our foreign market bigger and wider,"
he argues. It's possible, but that would call for efforts
both on the part of the government for providing infrastructure
and financial facilities, as well as of the people who are
involved in this sector.
World's Rag Trade
late, the southern countries of the world have been following
North's mantra of "free trade as a rising tide that will
lift the world's countries into prosperity". The impact
of the Multi Fibre Agreement (MFA) phase-out makes this ring
a little hollow.
US, Europe and Canada adopted the MFA in 1974, small economies
like Bangladesh and Sri Lanka were benefited because it imposed
a tight quota regime on their major competitors. "It
had distributed apparel production to nearly 200 countries,
forcing retailers to cobble together their inventories from
up to 50 countries at a time. Quotas added to the cost of
production because they are often sold by exporting governments
to brokers or factories; but it also protected jobs in some
underdeveloped countries," says Chinese textile expert
Lora Jo Foo.
like China, Pakistan and India that were highly constrained
by quotas are going to be benefited in the post-MFA era. Even
before the gradual phase-out began, American Textile Manufacturers
Institute (ATMI) declared China "unmatched in terms of
variety and scope for its operation".
lets China offer investors the most value for their money
is its policy of massive infrastructural development. "China
offers competitive shipping times; getting goods to the west
coast of the US generally averages between 12 and 18 days
from China but as much as 45 days from some of its market
competitors," Foo says.
in China's thriving garment industry is further aided by an
abundance of raw materials and an increase in the production
of yarns. "Besides these benefits," Foo continues,
"some researchers contend that the country's macro-economic
policies provide China unfair advantages over its small competitors."
Since its floating in the international market, China has
been manipulating its currency, Youan, to boost export sales.
"Even the World Bank maintains that China needs to re-evaluate
the Youan upward by 75 percent," says Foo. She believes,
"These unfair trade practices, illegal under WTO regulations,
make Chinese goods more competitive on the global market,
thereby stymieing the growth and existence of textile and
garment industries abroad."
country's economy has started to bear trade liberalisation's
immediate fruits. Taiwan's textile giant Luen Thai Holdings
has indicated that it will increase production in China from
25 percent to 50 percent. "We expect that expanding production
in the mainland will translate into cost savings of 2 to 15
percent after the quotas are lifted. In addition to cost savings,
consolidating the industry in China can shorten the production
cycle by 75 days, a very important factor in the fashion industry,"
the company said.
Chinese share in world's textile and clothing market has been
rapidly increasing, countries like Bangladesh or Cambodia
are losing out in the battle for a decent piece of the pie.
When infant wear was liberalised in Phase Two of the World
Trade Organisation's Agreement on Textile and Clothing, according
to the United States International Trade Commission, China's
exports in this category grew by 298 percent in 2002 and 81
percent in 2003. In the same years, Bangladesh's exports of
infant wear shrunk by 25 percent and nine percent.
report could not but agree. It says that the consequences
for garment workers in countries that were protected by MFA
quotas will be stark. "One pessimistic estimate for Bangladesh
suggests that more than one million workers will lose their
jobs over the coming years. Industry forecasts for Sri Lanka
estimate that around 40-50 percent of factories will close
down and that about 100,000 (one in three) jobs in the industry
will be lost. Displaced women workers in particular will have
great difficulty in finding employment, because of the limited
alternative job opportunities for women," the report
Bangladesh and Sri Lanka have the minimum wage in the apparel
industry, many believe an abundant labour supply has made
it easier for bigger economies like China and Pakistan to
drive wages down and offer workers little job security in
their own turf. According to Lung Kin Sing, Managing Director
of an apparel factory, "As the quantity of orders will
increase, the buyer will look for a lower price." However,
as the profit margin is not increasing, workers will end up
paying the cost for they are at the lowest on the supply chain.
Even Chinese workers are not immune to this. "The current
minimum wage in Guangzhu has recently been adjusted from 510
to 684 Rmb per month, and yet there are many workers who do
not even earn the lower amount despite working overtime,"
says Foo. It will be even worse for the workers of the other
Third World countries, who are deprived of any wage-board
and, in most cases, of bonus and overtime.
also believe that export in these countries would gradually
dwindle. "Some labour advocates who pushed so hard to
eliminate quotas did not anticipate that their apparel industry
may also be decimated (by a quota free market)," Foo
says. Apparel multinational corporations like Gap and Levi-Strauss
have been producing garments in 50 countries at a time due
to quota restrictions. The elimination of MFA has allowed
the garment retailers and manufacturers to consolidate production
in fewer countries. Reports, including one by the US State
Department, maintain that companies that currently purchase
goods from 40 to 60 countries will buy from 20 to 30 by early
2006. By 2010, the number of foreign suppliers could drop
to one-third of the present number, she believes.
thinks apparel manufacturing will concentrate in countries
offering lowest labour costs, most efficient production, and
most developed transport and telecommunications infrastructure.
"Apparel firms are also looking for countries that produce
both the raw materials and finished garments. Countries providing
'full-package' services -- from textile production to cutting,
sewing, and packaging - will be the most competitive,"
small economies, however, do not have the proper infrastructure
to provide these "full-package" services. In fact,
in September 2003, at the WTO meeting in Cancún, there
was talk of extending the quota system. But with China, Pakistan
and India poised to benefit from the total quota phase-out,
the proposal fell short of an explicit call to extend quotas.
the quotas are eliminated, Foo thinks, " The developing
countries will not benefit from the Uruguay Round of trade
negotiations that created the WTO. In fact, they have already
given up too much in return for a benefit that now appears
throughout the nineteenth and twentieth century the European
Union and US experienced a fast economic growth behind the
high walls of protectionism, these two economic blocks have
now been pressurising poor countries to open their markets.
Even economic policies like quotas and patent-infringement
that the Asian Tigers used to build its economies are now
banned by the WTO.
from protecting its domestic industries and markets, the poor
nations have to start negotiating the terms of all the WTO
agreements that have held them back from adopting those economic
policies. By their over reliance on cheap labour in the apparel
industry, developing countries lock themselves into a situation
where they cannot transform their economies. In an increasingly
volatile textile and clothing market, the poor countries have
to follow an economic policy that has to be independent of
external dictums. Only time can say how these grossly neglected
nations will fare in their struggle for survival in the free
(R) thedailystar.net 2005