The current tight supply conditions and high prices of cotton in the history of 140 years is a wake-up call for Bangladesh. Having almost no production of cotton Bangladesh is the 6th largest cotton consumer in the world (4 million bales in
2010/2011), and the second largest importer of cotton (source: www.cottoninc.com).
China and India were the highest cotton producing countries in the world (30 million bales and 26 million bales of cotton respectively in 2010/2011) (source:
www.cottoninc.com). As the consumption of China is higher than its production, it is
the highest cotton importer in the world as well. On top of it, China is increasing its cotton stock and even making overseas investment in cotton growing and
processing. Among the major cotton exporting country in the world, India exports its surplus cotton which is currently restricted to 5.5 million bales for the year started from October 2010. Apart
from that, natural disaster, increasing demand world-wide, panicked buying has also caused the future of our RMG industry highly uncertain.
So, given the growth trend of global apparel market and the corresponding growth potential of RMG industry in Bangladesh, this is highly alarming that our entire textile and clothing industry may stuck-up at a stage due to cotton supply shortage.
Therefore, the time has come to take the cotton issue seriously.
The government should take steps to get into long term agreements with the cotton growing countries, particularly with the African countries, Australia and Brazil (4th
and 5th largest cotton exporters in the world respectively).
Implication of Preference Erosion and Regional Trading Arrangements (RTAs) With the successful conclusion of NAMA negotiation in the WTO there will be significant reduction in the tariff rates on industrial goods in both the developed and the developing countries. This will erode the preferential margins that we (LDCs) are enjoyed under the various GSP schemes. So, our competitive edge will suffer from this preference erosion. This is a major concern for Bangladesh as the country is pursuing export-led growth strategy. Erosion of preferential margin is likely to undermine our competitive advantage with consequent adverse implications for the economic growth, foreign exchange reserves, livelihood for large number of people, and poverty alleviation. Apart from that, due to the slow pace of current multilateral trade negotiations, many countries are signing preferential trading agreements in the forms of Regional Trading Arrangements (RTAs) and Bilateral Trading Arrangements (BTAs). Therefore our government needs to enhance its engagement regionally and bilaterally.
The year 2011 started with a mix of both challenges and opportunities for the RMG industry of Bangladesh. It is very encouraging that the implementation of the new minimum wage is highly satisfactory (87.08%) from the very first month which is the result of tireless effort from BGMEA, BKMEA and the government. This has improved the impression of our industry both at home and abroad. However, we have seen that the buyers have increased the FOB price on the rise of cotton price, and we also expect that they would come forward to share the increased wage cost as well. Most importantly, the income of the workers should be protected from erosion caused by inflation. The MFB understands that the ultimate success of minimum wage
implementation greatly depends on how well the workers could reap the benefit of enhanced wages end of the day. Therefore the government should take appropriate measures to check inflation. Besides, the fundamental rights of food and shelter for the workers have to be ensured and the followings are recommended:
Both BGMEA and the Government felt the need for expanding and continuing the food rationing program for the RMG workers, but the rationing program - which was started - is now stopped. We appreciate that the government is continuing the OMS for low income people, at the same time food rationing for the RMG workers including Rice, Daal and Soyabean oil should be started immediately with a wider coverage and be continued.
In addition to food, the government should also come forward to establish dormitories for the workers. Bangladesh Bank has a fund under the Grihayon Tohobil, but the policy needs some amendments to grant loans in favor of the
individual factories who are eager to establish dormitories for their workers. The government may also adopt policy to allot land to BGMEA and BKMEA near the industrial zones to construct dormitories for the workers. Besides, the government may consider the following recommendations which are vital for the growth suitability of the industry: Skill Development: Considering the growth trend, it is expected that the RMG industry can reach USD 25 billion export by next three years, which will create additional 8-10 lakh job
opportunities. So, the government needs to take-up a comprehensive skill development initiative sustain the growth. The government can allocate Tk. 200 crore budget annually for skills development for the next 3 years.
Adequate initiative should be taken to enhance the productivity of workers as well. A standard method to be developed to determine the productivity level of workers to keep the balance between skill and wage. Infrastructure
Requirement.
Modernization of Chittagong Port – Technology and other Physical Capacity The Chittagong Port Management can be privatized
Construction of Deep-Sea Port
An alternate Expressway between Dhaka and Chittagong (apart from 6 lane Dhaka-Chittagong highway)
Set-up a double-track Railway between Dhaka and Chittagong to ensure maximum 3-4 hours travel time.
Ensure proper use of Mongla Port and regional connectivity
Setting up of Special Economic Zones (Garment Village) with proper township facilities for the workers to reside there
Setting up of central ETP by the government