Bangladesh is not an exception. Accessory makers play a vital role in the support of garment manufacturers.
According to data from the Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), the number of accessory factories was below 50 in the late ’80s even if most of the essential items used to be imported from India, China, Hong Kong and other destinations.
Today there are more than 1,900 factories that supply the entire garment industry with accessories. In addition, the sector employs more than 750,000 people. It has an estimated export value of US $ 7.25 billion. US$ 6.25 billion is in the form deemed exports. US$ 0.75 billion is in direct exports.
Apparel Resources (AR). Recently caught up BGAPMEA President Moazzem Hossain Moti at the trade body’s newly-built office in capital city Dhaka to know his thoughts and views on various prospects and challenges of the ever-growing accessory sector, as he sees it.
These are excerpts.
AR: The apparel industry needs backward linkage, and accessory manufacturers have an important part to play. What do you think the future of this sector looks like?
Moazzem Hossain Moti (MHM): The accessory industry has advanced a lot from fewer than 50 units in 1989, to over 1,900 factories today. Today we can supply most of the necessary accessories for the garment industry. We also provide jobs to large numbers (seven million workers).
Accessories have a value export of around US$ 7 billion. US $ 0.75 Billion is direct exports, while US $6.25 billion is deemed export. Prior to the Covid-19 pandemic the sector was experiencing a boom in investment. Many new investors came up with innovative investment strategies, while existing businesses expanded their capabilities. For instance, the number of garment accessories-producing factories with Taka 500 crore in investment has been more than 35, which was non-existent even a few years ago.
Today, there are many units with over Taka 1200 crore of investment. They are doing very well on both domestic and international markets.
What’s more, we have managed to drastically reduce the import dependency for accessories as only 10 to 15 per cent of the required accessories are now imported and that too primarily owing to the buyer’s nomination.
AR: Is this a positive scenario?
MHM: After the outbreak of the 2020 pandemic, the flow of investments began to slow down. However, the effects of the worldwide health crisis have been slowly diminishing in recent years. The sector is now suffering from the effects of war (Russia-Ukraine), as investments have fallen.
As we know that after the Covid pandemic and the Russia-Ukraine war, the devaluation of BDT is nearly 25-28 per cent against USD, as a result, entrepreneurs need to spend more money than in the pre-Covid period.
However, this is only temporary. The situation will improve quickly as the concerned departments and ministries have taken many steps.
However, due to volatile economic conditions worldwide and lower demand from local exporters of garments, accessories units were able to run at only 75% of their full potential.
However, investment is essential if Bangladesh wishes to earn US$ 100billion from apparel shipping by 2030. Accessories exports will increase to US$ 15 billion when garment exports reach US$ 100billion.
AR: Tell me about the trade licence you were referring to.
MHM: Each year, we are required to renew our licenses. The first is a trade license.
In order to be able to manage the company, at present we require 32 licenses. We also need to renew these each year. This is both time-consuming and costly. What’s more, we have to get many licenses issued physically as not all have become digital in Bangladesh yet.
Existing import registration certificates (IRC), and export registration certificates (ERC) were extended for five years, instead of one. The same should apply to other licenses. I really don’t understand the logic behind the yearly renewal of licenses.
Based on the needs of the entrepreneurs and their financial resources, they should be allowed to select the time period that best suits them.
What’s more, currently when one renews a license, it is not for a calendar year but for the financial year, so if one’s license gets expired in say April or May and he/she has to get it renewed, it would only be till 30th June, the end of the fiscal year and that too after paying charge for the whole fiscal year, which again belies logic according to me.
AR: We also interviewed the former President of BGAPMEA about similar topics. Why are they still lingering?
MHM: Maybe we failed to make the policymakers understand the problems and even if they did notice, they didn’t pay due attention.
Also, there is the issue of government officials’ mindsets and training. Most of the time, I have seen the concerned officials don’t understand the technicalities of things, which pose a bigger challenge for us to put across our points of concern. As at today, the sector provides approximately US $7 billion in support to the clothing industry. Should our sector fail to deliver, this will force us to source accessories valued at US $7 billion from outside. Even now 5-10 per cent of accessories are imported from China.
With the LDC graduation coming up, we have been planning to meet with the BGMEA. So that our accessories entrepreneurs can scale up appropriately to avoid the business going abroad, we would love to hear from the BGMEA about their outlook in accessory sales.
AR: How about the one-window system? Is that of any help to you?
MHM: This certificate is the only one that can be used to register an export or import.
The Government should be considering 364 days for the renewal of licenses, rather than a financial calendar. I have given this recommendation even in last year’s budget presentation but to little avail.
I agree with the idea that utility certificates should be issued by trade associations on behalf of government. It will save the Government time and help it concentrate on implementing the rules.
AR: What else do you recommend for the sector’s evolution?
MHM: A taskforce should be formed that includes both the government and the business sectors to identify the obstacles hindering the growth of the backward-linkage sector. There is a significant demand for packaging and accessories. If we offer facilities to the industry, export costs will fall by more than 20%. This will also help in value added.
We also seek from the Government policy support including those related to National Board of Revenue (NBR), customs and port facilities to increase the sector’s export earnings in line with the US $ 100 billion apparel export target by 2030.
AR: According to reports, the Dominican Republic sought assistance from BGAPMEA. Do you have any more information?
MHM: You heard that right. MHM: Yes, you heard it right. Recently the Ambassador of Dominican Republic came to visit us in New Delhi to establish better connections and to facilitate investment there.
The Dominican Republic’s garment industry is in constant development, even though they are exempt from duty when exporting to the USA.
At first, I believed the Ambassador might have visited me to assume I was from BGMEA since the names of BGMEA & BGAPMEA were similar. But he assured me that he had come to see the BGAPMEA President.
Additionally, even though the apparel sector is in development, backward linkage support is lacking. They must therefore import nearly all raw materials from overseas. This, in addition to being costly, also slows down production.
So he asked us to think about investing in Dominican Republic as a way to establish an accessory unit. With a group, we plan to travel to the country in April. Let’s see how things proceed.