Commentary: Bangladesh needs textile relief

By Andy Mukherjee
Published: WEDNESDAY, JUNE 1, 2005


Free trade in textiles is not even six months old, and it has already put Bangladesh in a tight spot. U.S. and European stores haven't stopped stocking "Made in Bangladesh" trousers, shirts and T-shirts; it's just that the quota-free world that has existed since Jan. 1 is a buyers' market, and all suppliers are under pressure to match Chinese prices.

Prices of woven-fabric clothing have dropped as much as 30 percent, said Annisul Huq, president of the Bangladesh Garment Manufacturers and Exporters Association. Woven garments make up two-thirds of the nation's $6 billion-a-year apparel exports; knitwear accounts for the rest.

"Forget profits," Huq, who runs a $34 million garment export company, said Monday in a phone interview from the capital, Dhaka. "We're gasping for survival."

Garments account for almost 80 percent of Bangladesh exports. The industry, the largest employer outside of agriculture, directly provides the livelihood of two million people, almost 80 percent of whom are women. Some factories may have to close by next year if prices - or productivity - do not improve.

There's a message here for the Bush administration: Don't worry so much about the U.S. apparel industry, which is simply unviable, and worry more about garment makers in Dhaka. Increased unemployment and poverty in Bangladesh could seriously undermine U.S. efforts to fight terrorism.

The country of 138 million people is "a perfect target for al-Qaeda," says a report in Jane's, a defense publication. "Virtually unnoticed by the world at large, Bangladesh is being dragged into the global war on terrorists by becoming a sanctuary for them."

Wages in Bangladesh can't drop much lower. A study by the Harvard Center for Textile and Apparel Research shows that Bangladeshi garment workers earn 39 U.S. cents an hour, while the hourly wage for sewing and stitching in coastal China is 88 cents.

Moreover, the European Union allows duty-free imports of Bangladeshi apparel under a program for the world's poorest countries. Why, then, is Bangladesh finding it so hard to compete?

For one, the Bangladeshi garment industry relies heavily on imported textiles. That puts it at a cost disadvantage against China. Second, foreign investors have found it tough to enter the highly controlled Bangladeshi industry. That, in turn, has slowed infusion of capital, technology and best practices.

Another big factor is infrastructure. The port of Chittagong, which handles 80 percent of trade, has been described by the Asian Development Bank as "a serious tangle in the supply chain."

On average, a container "dwells" at the Chittagong port for 18 days. It takes 30 hours, and costs $250, to send a 20-foot container by rail from the inland depot in Dhaka to the port. It takes a bribe to speed up the process.

"These delays and payments," the development bank says in its latest quarterly review of the Bangladeshi economy, "contribute to the higher maritime cost of Bangladesh's textile exports to the U.S., compared with China."

Politics is also a big headache. According to a United Nations estimate, Bangladesh loses as much as 4 percent of its gross domestic product every year to "hartals," which are general strikes called by political parties.

Two working days were lost last month alone. The opposition Awami League brought business in Dhaka to a standstill on May 18 to protest the killing of one of its leaders; it then called a nationwide strike on May 21.

"The factories have different coping strategies and are able to make up for some of the loss," Nasreen Khundker, an economics professor at Dhaka University, writes in "Beyond Hartals," a report produced by the United Nations Development Program. "What the industry can't make up for is the clear signal of an unreliable market and political instability - two factors that act as deterrents for investments and export," Khundker says.

As Bangladesh gets closer to general elections in January 2007, the governing Bangladesh Nationalist Party and groups opposed to it are likely to clash more often. That could lead to more frequent strikes, says the Asian Development Bank.

It will take Bangladesh many years to improve its investment climate. Meanwhile, the country needs immediate relief, which should be possible if the United States grants Bangladesh's request for a waiver of $300 million in annual duties on apparel imports.

Nike, which accounts for 2 percent of the global $800 billion footwear and apparel industry, has said it would "actively support" legislation for preferential trade access to countries like Bangladesh, Cambodia and Vietnam that would be hit hardest by the end of the global quota regime.

                                                    source ; http://www.iht.com/articles/2005/05/31/bloomberg/sxmuk.php