Tuesday, December 22, 2015

PM's Direction, Bangladesh RMG and The Middle East Market: A new story to explore!


1.                 Introduction


Bangladesh RMG industry is completely export-oriented one and comprises very deep multidimensional impacts on country’s moving economy. Hence, this strategic sector’s foreign currency earnings accounts for 81.70 per cent of total export earnings of Bangladesh during the fiscal year (FY) 2015 which in monetary term amounted US$ 25.49 billion. Moreover at the same time, Knitwear Sector earnings from export amounted US$ 13.26 billion which holds 49.13 per cent export earning share of total RMG earnings indicating this sector’s competitiveness and classy presence in the world market of homogeneous kind.  

However, in parallel with recently updated call of United Nations toward Sustainable Development Goals[1] (SDGs), Bangladesh RMG Industry particularly the only leading trade body of Knitwear Sector of Bangladesh, the BKMEA (Bangladesh Knitwear Manufacturers and Exporters Association) is putting on tremendous efforts to make the industry completely sustainable. BKMEA believes in taking the business forward by making the industry itself financially and environmentally sustainable and it has been realized through the experience of its own and world business history that for being ultimately sustainable and going green there should be a sustained and moderately growing earning portfolio which in case of Bangladesh RMG Industry can come up with following two ways, i.e., firstly, through market diversification, secondly, orienting fashionable garments and ensuring continuous improvement of that.
This article noted down history and development of Bangladesh RMG Industry, direction of Prime Minister (PM) to explore new market for RMG, Ministers’ resolutions for new
market expansion, initiatives of BKMEA President in line with PM’s direction, PM’s visit to BKMEA stall at BDF 2015 and guidelines, located the query that- why Middle East is crucial for Bangladesh RMG Industry, opportunities to grab: Expo 2020 and FIFA World Cup 2022, demand for infrastructural development and concluding remarks one by one here.


2.                 History and Development of Bangladesh RMG Industry


If the light is thrown to the development and evaluation of Knitwear Sector, then it is seen that the journey started mainly on 1927 here in Narayanganj city[2], which was historically and geographically important to the business community since then it was connected to all parts of undivided and unified Bengal[3] through the rivers such as, the Shitalakshya on the east, the Buriganga on the south and southwest. Steadily it turned out to be the most prominent river port of Bengal and then Bangladesh with regular steam communication with Kolkata, Sylhet Assam, and Kachar. The port used to handle an extensive trade with Kolkata, importing cloth, and salt, etc., and exporting agricultural produce of all kinds, especially jute. The port had also substantial trade with Chittagong, importing cotton, timber, oil, hides, etc., and exporting tobacco, pottery, and country produce, etc.  Historically this region has very renowned heritage regarding manufacturing of fine clothes. John Crawford, a long time servant of the East India Company, stated to a Committee of the British House of Commons in 1830-31 that the fine variety of cotton in the neighborhood of Dhaka, from which the fine muslins were produced, was cultivated by the natives alone and was not at all known in the English market, or even in Calcutta.

During 1927, Mr. Surya Kumar Bose had set up garment making composite factory named Dhakeswari Cotton Mill which was the first ever established textile mill in entire British Bengal. By following this, Mr. Ramesh Chandra Ray established Chittaranjan Cotton Mill in 1929. Later in 1932, Lakhsmi Narayan Cotton Mill and in 1937 another factory of Dhakeswari Cotton Mill owner got into establishment, and then afterwards knitwear factories were set up here not only in Narayanganj but also in Dhaka, Chittagong, Gazipur and Savar though the foremost city- Narayanganj plays the key role for this industry and regarded as mother of Bangladesh RMG Industry. Despite these scattered initiatives, Bangladesh Knitwear Sector actually started to get established as a unified industry during early 1990s and at FY 1991 the knitwear sector’s contribution climbed to 7.6 per cent. At present, Bangladesh owns more than 7500 garments manufacturing factories which are split into two broad categories, i.e., knitwear manufacturing factories and woven garments manufacturing units. Under BKMEA, all the 2000 knitwear factories are registered and among those 950 factories are active member till this year.

Well, Bangladesh RMG export started first in 1973 with the export of knitwear items, though woven garments export took over the knitwear sector’s export earning later by huge spread, nonetheless since 1990s knitwear sector revived its historical impactful position and in FY 2015 export earning of Knitwear sector was 39.81 per cent of total export earnings of Bangladesh.  



3.                 Direction of Prime Minister to Explore New Market for RMG


Present Bangladesh government is business friendly and always trying to facilitate the largest export earning sector, i.e., RMG Industry. The Honorable Prime Minister (PM), Sheikh Hasina has adequately raised her voice to assist and guide the sector, for instance at last year the PM said, “Bangladesh is the world's second largest readymade garment exporting country. But many don't like it and they are engaged in plotting against the sector.” Moreover, she also addressed fair pricing issue by saying, “Many buyers and their representatives remain present in today's function. It is my request to them; increase the prices of the products. Then, our worker brothers and sisters could lead a more comfortable life and all would become an equal development partner[4].” In addition, the PM rightly noticed the phenomenal contribution of RMG sector in the socio-economic uplift of Bangladesh thus she expected this sector will be crucial to take Bangladesh for being developed one within 2041 by saying, “The aim of the present government is to upgrade Bangladesh as middle income country by 2021 and a developed one by 2041. And for this, a scope for massive industrialization and employment will have to be created.”
Coming into the recent events, Her Excellency, Sheikh Hasina, the Hon. Prime Minister of Bangladesh at her last visit to Netherlands from 3-5 November 2015[5] at the invitation of His Excellency Mr. Mark Rutte, Prime Minister of the Netherlands, emphasized RMG Industry and represented this sector as symbolic one that recognizes Bangladesh in world crowd.

In 2015, while having a conversation between The Business Year (TBY; i.e., one of the prominent Omani news media) PM of Bangladesh have confirmed that the present government is finding for new markets, and as Oman is preparing itself as a re-export hub then it is huge opportunity for both countries to be benefitted through bilateral RMG trade, in her words, “In the last fiscal year (FY 2014-15), Bangladesh's export revenue crossed US$30 billion. Key sectors that contributed to the export growth include textiles, readymade garments (RMG), jute and leather products, frozen food, shipbuilding, ceramics, agro-based products, plastics, and furniture. As Oman prepares itself as a re-export hub having a free trade agreement (FTA) with countries like the US, Omani entrepreneurs can effectively utilize Bangladesh's export-oriented production capacities by re-exporting all categories of products to destination countries worldwide.[6]”

Her direction to explore new market for RMG Industry of Bangladesh remains at the key point at every delegation she takes with while going abroad for representing Bangladesh, surely BKMEA believes that current holding of 2nd position in world RMG market got possible mainly due to her strong and sensational leadership with a view to enhancing exports reaching the optimal level. Ahead of this, in 12 October 2015 a news article[7] has come into forward that says, Germany extends support to Bangladesh apparel sector after witnessing improvement in the RMG sector and it is done as per the response of call from PM of Bangladesh for ensuring fair pricing- this single momentous incident may provide a clue that how the present government, especially Her Excellency, PM Sheikh Hasina wills herself to excel the RMG sector more.



4.                 Ministers’ Resolutions for New Market Expansion


By following the recent visit of Bangladesh Finance Minister AMA Muhith during November 27, 2015 in Riyadh Saudi Arabia has decided to augment its imports of readymade garment from Bangladesh to meet its domestic demand. Hence, Saudi Arabia has given nod to increase readymade garments imports from Bangladesh. The decision has come after a bilateral meeting between Saudi Finance Minister Dr. Ibrahim bin Abdulaziz Al-Assaf and Bangladesh Finance Minister AMA Muhith in Riyadh[8].

Just a bit back, on September 12, 2015 during the seminar entitled “3rd Front of Bangladesh’s Export Destination Russia & other CIS Countries”, Bangladesh Finance Minister AMA Muhith said the Commonwealth of Independent States CIS market is lucrative for local businessmen as the region has the potential to grow in the near future and Bangladesh has historically maintained a good relationship with the region. He further commented, “Russian market could be a good destination for us while other CIS countries are the potential markets for Bangladesh because of their good education system inherited from former Soviet Union”[9].

On the same occasion Commerce Minister Tofail Ahmed said time has come to sign bilateral deals to boost exports without waiting for WTO resolutions to this end. Likewise just a year back on 22 July 2914, the Commerce Minister said the export growth is on the rise and the trend will continue also in the current fiscal. “We are trying to diversify the market and exploring new markets,” he said adding that the government is giving more emphasis on Latin American markets. “The country is getting duty-free access to Brazil, Argentina and Chile from January 2015”[10].  He also pointed out that Japan, Australia, India, China, and South Korea agreed to give duty-free market access.
Indeed there is ample room to expand the RMG sector and to diversify into other export RMG items.

5.                 Initiatives of BKMEA President in line with PM’s Direction


BKMEA President, Mr. A. K. M. Salim Osman, MP by keeping the ideology of the Bangladesh PM, Her Excellency Sheikh Hasina in the core of heart is always on the track of taking new and dynamic initiatives for facilitating market and product diversification goal of Bangladesh government. Indeed, BKMEA has acknowledged the need for more export diversification and is thus looking to diversify knitwear exports to Japan. With this goal in mind, BKMEA carried out an exploratory mission to Japan at the mid of 2009 and another scoping mission in September, 2009 in collaboration with GTZ to intensify the existing contacts and trade links. A follow up mission was also carried out in collaboration with GTZ from 10 to October 16, 2010 with a prime objective to gain improved market access to Japan for RMG products, in particular knitwear which is chiefly promoted by BKMEA. This mission followed up on the open issues and findings of BKMEA’s 2009 exploratory missions. Progressive outcome of this missions were, firstly, to have a relaxed rules of origin (RoR) imposed on Bangladeshi RMG, secondly, BKMEA successfully arranged a single country trade fair named “6th Knit Expo” on 27 January 2012 to showcase Bangladeshi knit products to Japanese consumers, to further develop trade between the two nations and thirdly, from then to now Bangladesh’s Knitwear Export to Japan has increased gradually.

To diversify the RMG produced in Bangladesh, to understand the ongoing fashion trend of European Market, BKMEA president has decided to send a delegation from BKMEA R&D Cell (Research and Development Cell) comprising 4-6 members within early 2016. It is expected that this strategic mission will unlock the doors to widen the export opportunity especially Turkey and Russia further.


6.                 PM’s Visit to BKMEA Stall at BDF 2015 and Direction


Her Excellency, Sheikh Hasina, Honorable Prime Minister of Bangladesh had visited the stall of BKMEA just after inaugurating Bangladesh Development Forum (BDF) 2015 that took place at Bangabandhu International Conference Center, 15-16 November 2015. The motto of the BDF 2015 was ‘Vision and Strategies for Development’ with the intention to underscoring the need for foreign funding to implement sustainable development goals[11]. 

However, the Honorable PM Sheikh Hasina was greeted by Mr. Tapas Chandra Banik, Deputy Secretary, BKMEA and hold up the warm conversation briefing about the present activities of BKMEA and future target that the industry keeps tiger’s eyes on, meanwhile the Honorable PM recommended that BKMEA members factory, in wider sense, the RMG Industry should now focus on market diversification with tremendous importance as the global economy is passing through transformation phase and especially this industry should try utmost for grabbing the huge untouched market of Middle East. She further provided guidelines with saying that RMG industry should think of veil that women of Middle East wear in mass and to orient fashionable RMG products there for males with Middle East’s traditional one for men.


7.                 Why Middle East is Crucial for Bangladesh RMG Industry?


There is no single, agreed-upon, definition of what specifically constitutes the Middle East. Defining the Middle East through ethnicity, religion, or national identity is problematic[12]. Therefore, for the purposes of this module, the Middle East will include the states of Egypt, Saudi Arabia, Yemen, Oman, United Arab Emirates (UAE), Qatar, Bahrain, Kuwait, Iran, Iraq, Syria, Turkey, Lebanon, Jordan, Palestine and Israel. Sometimes the country, Pakistan tends to get included in the region. Nonetheless, the map looks like below,


Map 1: The Political Geography of the Middle East[13]
As Bangladesh is Muslim major country so that historically leading countries of the Middle East, i.e., Iran and Saudi Arabia focused on Bangladesh to make a healthy commercial and political tie. This religion driven commonality between Bangladesh and countries of the Middle East has proved itself to be beneficial for all parties in terms of infrastructure development of rich countries there and remittance flow toward Bangladesh by exporting manpower. However these forward moving relations are getting warmer by Saudi Arabia’s recent declaration that they will import more garment products from Bangladesh. Well, Middle East countries in total (e.g., excluding Turkey, Egypt, Palestine and Israel) comprises US$ 5297.50 billion market, and the segmented respective country profile in terms of GDP (PPP=Purchasing Power Parity) is illustrated below in Figure 1,
  

Figure 1: GDP (PPP) in US$ billion of Middle East Countries; Source: Factbook, CIA

As GDP is growing moderately at this region and there is a good number of populations (see Figure 2) then it is inevitable that there is scope for Bangladeshi RMG manufacturers and exporters to export more where we have some religious ties with.


Figure 2: Demographical situation of the Middle East; Source: Factbook, CIA
However, RMG import by Middle East countries from World and Bangladesh are described at the Table 1 below,

RMG Import of Middle East Countries
Calendar Year 2014
From World (in ‘000)
From Bangladesh
(in ‘000)
Middle East Countries Aggregation
17920.27
152.51
United Arab Emirates
9367.76
0.00
Saudi Arabia
3836.76
0.00
Iraq
1432.65
0.00
Kuwait
1130.64
53.07
Qatar
554.84
28.32
Lebanon
507.59
34.28
Jordan
379.40
17.21
Bahrain
259.81
18.84
Oman
216.10
0.47
Yemen
139.49
0.32
Syria
90.23
0.00
Iran
5.01
0.00



















Table 1: RMG Imports by Middle East countries from the World and Bangaldesh; Source: ITC Trade Map.
The market share that Bangladesh holds in Middle East countries are as follow (see Figure 3),


Figure 3: Share of Bangladesh in the Middle East RMG Market during calendar year 2014; Source: ITC Trade Map.

It is seen from the Figure 3 that on the year 2014 Bangladesh market share of RMG was 7.25 per cent at Bahrain, highest in the region. Dramatically, last year, in UAE, Saudi Arabia, Iraq, Syria and Iran the import market share in RMG market was completely zero, nonetheless it indicates that as if huge numbers of expatriates reside there, these markets are still unexplored and that expatriates can function as the basement of Bangladeshi RMG products. By realizing this fact, at the FY 2014-15 it is seen that Bangladeshi Knitwear Manufacturers and Exporters have taken initiatives to export knitwear there, which can be understood by looking at the Table 2 below,

Bangladeshi Exports to Middle East Countries
Countries
2014-15 (Value in Million US$)
Knitwear (K)
Woven (W)
RMG (=K+W)
Total Export
RMG Share
United Arab Emirates
109.66
77.19
186.85
293.04
63.76%
Saudi Arabia
29.65
25.98
55.62
186.32
29.85%
Lebanon
7.59
2.18
9.77
12.71
76.85%
Kuwait
3.59
0.65
4.24
17.13
24.77%
Jordan
2.10
0.51
2.60
8.18
31.85%
Qatar
1.06
0.11
1.18
17.01
6.92%
Bahrain
0.77
0.26
1.03
5.71
18.06%
Oman
0.16
0.41
0.57
16.73
3.41%
Iran
0.34
0.14
0.48
49.83
0.96%
Syrian
0.45
0.00
0.45
8.78
5.11%
Yemen
0.24
0.04
0.28
5.35
5.25%
Iraq
0.17
0.09
0.26
0.89
29.78%
Middle East
155.79
107.55
263.34
621.68
42.36%
Table 2: Bangladeshi RMG Exports to Middle East countries during FY 2014-15; Source: Export Promotion Bureau

Well enough, the Bangladeshi RMG top 10 products that are now playing key role in exports are tabulated in the Table 3 in the following pattern,

Bangladeshi Top 10 RMG Export to Middle East
Product HS Code
Product label
Middle East Countries’ imports from Bangladesh
(Value in Million US$)


2012
2013
2014
610910
T-shirts, singlets and other vests, of cotton, knitted
18.49
24.63
23.08
620342
Mens/boys trousers and shorts, of cotton, not knitted
9.13
14.32
11.06
611030
Pullovers, cardigans and similar articles of man-made fibers, knitted
6.55
6.67
10.92
620462
Womens/girls trousers and shorts, of cotton, not knitted
18.83
13.79
10.67
620520
Mens/boys shirts, of cotton, not knitted
15.57
13.52
9.79
611120
Babies garments and clothing accessories of cotton, knitted
5.34
8.33
8.62
611020
Pullovers, cardigans and similar articles of cotton, knitted
5.23
8.34
7.31
611490
Garments nest, of other textile materials, knitted
11.62
10.22
6.65
610510
Mens/boys shirts, of cotton, knitted
0.82
1.47
3.92
610990
T-shirts, singlets and other vests, of other textile materials, knitted
4.20
5.79
3.39
Table 3: Bangladeshi Top 10 RMG Export to Middle East; Source: ITC Trade Map

The statuses of top 10 RMG products of 2014 and 2013 were better than 2012, but still there are ups and downs across the products with respective to the years. Well enough to mark here is, a lot of improvement regarding RMG industry should be required plus tremendously facilitating policies should be formulated to encourage RMG entrepreneurs to look at Middle East’s vast market more for ensuring steady growth of top 10 export items.

8.                 Opportunities to Grab: Expo 2020 and FIFA World Cup 2022


At Expo 2020 Dubai, the authority has fixed the theme as ‘Connecting Minds, Creating the Future’. The overall theme recognizes that generating sustainable solutions to global problems demands collaboration across cultures and regions whilst the sub-themes of Opportunity, Mobility and Sustainability define the principal drivers of progress. Hence, Dubai’s Arabic name is ‘Al Wasl’- means ‘the connection’ and this is reflected in Dubai’s modern day position as a central hub between East and West. With an anticipated 25 million visits to the Dubai Expo[14], and 70 per cent of visitors predicted to come from overseas, it will be the most globally inclusive event in Expo history. Expo 2020 Dubai is building upon its theme and using it as a design principle for the event. The theme will be visible in how they engage with participants, create opportunities for the public and private sector to work together, and how they will strive to make collaboration an essential instrument to deliver an event with the level of quality and impact needed to mark this out as a truly transformative Expo. Inevitably this is going to be the best opportunity to showcase RMG products to lure world buyers especially of fashionable clothes and from Middle East countries.

On other side the 2022 FIFA World Cup is scheduled to be the 22nd edition of the FIFA World Cup, the quadrennial international men's football championship contested by the national teams of the member associations of FIFA. It is scheduled to take place in Qatar in 2022. Qatar would be the first Arab country to host the World Cup and this would be the first time the World Cup would be held in the Middle East region. The format has not been announced, but under the current format, the tournament would involve 32 national teams, including the host nation. However, Qatar 2022 Supreme Committee Hassan Al Thawadi has predicted 1 million people will attend the 2022 World Cup, more than three times as many as the 310,000 international visitors that FIFA said travelled to South Africa for the 2010 tournament, but less than the 2006 event in Germany which drew more than 2 million[15]. Nearby cities such as Dubai, Abu Dhabi and Muscat also would attract the World Cup visitors because of their more mature tourism infrastructure and leisure activity options.


9.                 Demand for Infrastructural Development:


Qatar is developing its infrastructure massively ahead of football world cup-2022 which requires a huge number of manpower. Qatar has made commitment to prioritize Bangladesh in requiting manpower as per the reports that have come forward[16]. About 3 lakhs labourers are already working over there and according to the statistical report published by Bureau of Manpower, Employment and Training (BMET) during the calendar year 2015 till December 7, Qatar has created job opportunity for 117,719 labourers[17] and Dubai, one of the seven emirates of United Arab Emirates[18] (UAE) has imported 24,085 during same time frame but they are very keen to import manpower more and more to bring an awesome change in their infrastructure outlook. And this will open up massive opportunity to Bangladeshi RMG manufacturers and exporters for capturing the market share of basic RMG items, i.e., Polo T-Shirt, Woven Shirt etc., more and more.


10.           Concluding Remarks


The Bangladesh government that is the Honorable Prime Minister, H. E., Sheikh Hasina along with ministers of other ministries such as present Commerce Minister Mr. Tofail Ahmed, M. P. and Finance Minister Mr. Abul Maal Abdul Muhith, M. P., as well as the President of BKMEA, Mr. A. K. M. Salim Osman, M. P. are leading the Bangladesh economy toward achieving the Vision 2021- reaching the targeted level of total RMG export comprising knitwear and woven garments at US$ 50 billion which seems to be tough due to some internal and external factors but is surely achievable if presently set coordination between government and private stakeholders keep going far and far. It is obvious that for attaining sustainability in the RMG industry export should keep moving forward steadily though political havocs and lack of innovative approaches among concerned communities still have left the Middle East gigantic market a unexplored one even after having a satisfactory level of Bangladeshi expatriates residing there and seek to use Bangladeshi products desperately, perhaps it could be the best destination for Bangladeshi RMG products if proper initiatives were taken before, hence, it is expected now that the situation will get changed soon under the regime of present government being associated with Bangladeshi RMG manufacturers and exporters, as if both parties are looking forward with extreme desire to diversifying the market and product.

11.    References                                            



[2] Yunus, M. 2010. Knitwear Industry in Bangladesh: A Case Study of Firms in Narayanganj, Bangladesh Institute of Development Studies (BIDS)

[18] http://onestep4ward.com/uae/



The writer, Enamul Hafiz Latifee is appointed as Senior Assistant Secretary, Research and Development Cell, iART, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

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