CPD RMG Study Stitching a better future for Bangladesh
Published in the Daily Star on 24, July 2017
Garment exports to India declined in fiscal 2016-17 thanks to 12.5 percent countervailing duty by the neighbour, which negates the benefit of duty-free access, and the emergence of its own apparel manufacturing industry.
Last fiscal year, garment shipments to India, a market of more than $40 billion, fetched $129.81 million, down 4.85 percent year-on-year.
The development is in contrast to expectations: exports were supposed to increase manifold for geographical proximity, Bangladesh’s competitive advantage in this field and India’s burgeoning middle-class.
“We have a very good market in India, but we cannot utilise the potential due to price competitiveness,” said Mohammad Hasan, executive director of Babylon Group, a leading garment group.
Babylon Group sent garment products worth $1.67 million in 2015 and $1.6 million in 2016. The number this year will be lower, he said. “Export of garment from Bangladesh is not increasing as the Indian manufacturers are also producing the same clothes at cheaper rates.”
Plus, the Indian importers are not interested in bringing in garment items from Bangladesh for the 12.5 percent countervailing duty (CVD), an import tax imposed on certain goods in order to prevent dumping or counter export subsidies.
“It is my observation that if we can utilise the giant Indian and Chinese markets, our garment exports will boom,” Hasan added. Apart from CVD, the Indian government has been subsidising its garment makers, said Faruque Hassan, vice-president of Bangladesh Garment Manufacturers and Exporters Association.
So determined the Indian government is in seeing its garment sector thrive on the global stage that it changed an old law.
Previously, the Indian government did not allow the big industrial groups to invest in the garment manufacturing industry, which it changed a few years ago.
The big industrial groups no longer need to restrict their investment to the backward industries like textile, chemicals, printing, dyeing, weaving, spinning and finishing; they can also set up garment manufacturing factories, Hassan said.
As a result, the Indian garment sector has been growing in stature every year and its market share worldwide is also increasing.
“However, we should not look to India as our competitor as we also import a lot of raw materials like cotton, chemical products, fabrics and yarn from them for our garment sector,” Hassan added.
Bangladesh imports goods worth more than $6 billion from India in a year through the formal channels, about $2 billion of which is cotton.
More than 50 percent of Bangladesh’s cotton requirement in a year is met by imports from India.
Abdul Matlub Ahmad, the immediate past president of the Federation of Bangladesh Chambers of Commerce and Industry and a former president of the India-Bangladesh Chamber of Commerce and Industry, urged the Export Promotion Bureau to open a separate cell for the Indian market.
The cell will research the reasons for the floundering exports to India.
“By this time, Bangladesh’s export to India should have crossed the $1 billion mark. But, still we cannot cross this mark despite having the potential.”
Ahmad said both Bangladesh and India are strong in the production of the same kinds of goods like garment.
“So the demand for Bangladeshi goods in India is low. We should find out goods in which India is not strong. We should produce those and export to India.”
He cited the Pran-RFL Group as a case in point. The Bangladeshi company has found a huge market in India for its agro-based and processed food items.
“Actually, neither the public nor the private sector is serious about the Indian market,” he added.
Not only garments, but the overall export to India also declined in fiscal 2016-17 to $672.40 million, according to data from the EPB.
On the other hand, imports from India have been swelling every year.
