- Bangladesh’s Garment Exports to the US Decline Due to Domestic and Global Challenges
Bangladesh’s garment exports to the United States, its largest single market, fell 10.97% year on year in the first half of 2024, totaling $3.40 billion. The decrease is visible in both the value and volume of exports, with Bangladesh shipping 5.0% less textiles from January to June 2024 compared to 1.17 billion square meters in the same period the previous year. Bangladesh’s main ready-made clothing competitors, China and Vietnam, outpaced the country. Exporters blame the loss of export share in the US market on a variety of domestic difficulties, including longer lead times, unpredictable energy sources, and a generally high cost of doing business.
According to a research conducted by the US Fashion Industry Association (USFIA), American fashion companies are diversifying their garment sourcing and exploring prospects in emerging markets, particularly India, in the face of rising dangers and market instability in Bangladesh. For the first time since the survey’s inception in 2014, more respondents indicated sourcing from India (89% utilization rate) than from Bangladesh (86%). Nearly 60% of respondents intend to increase garment sourcing from India over the next two years, outpacing any other Asian country.
The gas issue has made it difficult for the Bangladesh Knitwear Manufacturers and Exporters Association to meet existing lead times and production timetables. The country’s absence of a deep-sea port, along with growing gas prices, is reducing industrial cost competitiveness, causing import and export delays. Bangladesh is also lagging behind Vietnam in terms of redirected orders from China, which benefits from shorter lead times, cheaper tariffs for the US market, good connectivity with China, and numerous Chinese investments in Vietnamese manufacturing. The current violence sparked by anti-quota demonstrations has also hampered the sector. The planned temporary administration, led by Nobel laureate Dr Muhammad Yunus, is anticipated to usher in a new era and boost business with the United States.
- Chattogram’s Apparel Sector Hit Hard by Export Scam, Millions Lost
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has revealed an increase in export fraud in Chittagong, affecting at least 23 garment manufacturers during the last five years. Local factory owners claim that foreign purchasers conspire with freight forwarders and shipping companies to release goods without paying for them, causing enterprises to fail financially. Mellow Fashion Limited, an exporter, claimed to have lost over $400,000 after their shipment was illegally released in New York. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) accuses foreign purchasers, freight forwarders, and shipping lines of scamming local exporters of millions of dollars. Syed Nazrul Islam, the BGMEA’s first vice-president, accused international buyers, freight forwarders, and shipping lines of working together to commit the scams.
Khairul Alam Sujan, vice-president of the Bangladesh Freight Forwarders Association, suggested that freight forwarders and buyers should be held accountable in this matter. AM Mahbub Chowdhury, vice-president of the Chittagong Metropolitan Chamber of Commerce and Industry, criticized shipping companies for long-standing misappropriations and asked for their regulation under the Foreign Currency Act.
- Strengthening Social Security: The Impact of Bangladesh’s EIS-PILOT on RMG Workers
In order to provide compensation for workers in the ready-made garment (RMG) industry who suffer job injuries or pass away, Bangladesh launched the Employment Injury Scheme Pilot (EIS-PILOT). The program’s goal is to offer financial security for RMG employees and their families, with participation and technical assistance from the International Labour Organization and the Deutsche Gesellschaftfür Internationale Zusammenarbeit (GIZ). The German Federal Ministry for Economic Cooperation and Development (BMZ) sponsors the GIZ program, while the Dutch and Canadian governments fund the ILO initiative.
In Bangladesh, the benefits of workers’ compensation include covering medical expenses related to the illness or injury, covering lost wages if the worker is unable to work due to the illness or injury, providing services to help injured workers find gainful employment again, giving money to the worker’s heirs in the event of an illness or injury sustained on the job, and offering legal protections through workers’ compensation. However, each country has its own set of regulations that control the amount and types of benefits offered, as well as the organizational structures and procedures employed to carry them out.
Bangladesh’s EIS-PILOT programme provides several substantial benefits, including monetary compensation for dependant family members in the event of a workplace accident resulting in a worker’s death or permanent disability. This includes a pension to maintain their way of life as well as a lump sum payment. The program’s mandate requires it to collect a large amount of data on occupational accidents and injuries, as well as the resultant losses and medical costs.
Males account for the majority of both fatal and non-fatal cases in the RMG sector (23 out of 25 fatal cases and 13 out of 14 handicap cases), despite the fact that female workers make up the majority of the workforce. More research is needed to identify whether there is a gender discrepancy in case reporting or compensation, despite the fact that men may work in more dangerous jobs or be less worried about their safety, resulting in illnesses and deaths.
The families of deceased workers receive a monthly compensation of Taka 6,062, which is quite little given the recent significant increase in living expenditures. A worker with a partial or whole permanent disability receives a low monthly payment of Tk 3,207. These quantities must be updated periodically to reflect changes in national prices.
A thorough assessment of the EIS-PILOT project is underway, with the goal of improving it and adding additional circumstances that are not currently covered. One positive improvement is the inclusion of worker-injured commuter accidents, although the absence of coverage for occupational disorders is a severe disadvantage. Nonetheless, the EIS-PILOT is a significant step in improving the social security system for Bangladesh’s garment industry, providing a safety net for workers and fostering a more secure and healthier work environment.
- BGMEA members demand dissolution of current board
A number of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) members have expressed their dissatisfaction with the current board of directors, citing their controversial positions in the recent student agitation for job quota reform. The members, led by former vice president Faisal Samad, delivered a memorandum seeking the board’s immediate resignation and dissolution, as well as the appointment of an interim board that is honest, efficient, and non-political. The memorandum also claimed that the present president and board behaved in opposition to the historic student movement, forfeiting their moral right to continue executing their board responsibilities.
Despite disruptions in export, industrial, banking, and port-related activities during the three weeks of July-August, the BGMEA board failed to provide clear guidance on wage payments and other issues. BGMEA Vice President Abdullah Hil Rakib said that they had received a memorandum from a group of members stating that the board had previously chosen to adopt reforms within the existing board, eliminating the need for new elections.
- Workers’ Rights in Focus as IBC Appeals to BGMEA and BKMEA Amidst Unrest
The IndustriALL Bangladesh Council (IBC) has urged the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) to demand wage protection, no job losses, layoffs, or harassment of workers, respect for their safety and rights, and dialogue with trade unions. The IBC also urges Bangladesh’s government to restore human rights and equity to victims of state violence, including fair compensation and enhanced workplace safety.
Bangladesh’s textile workers have long faced adversity, including low wages, dangerous working conditions, and repression of labor rights. Since the 2023 minimum wage protests, several workers and trade union activists have been arrested and exposed to violence, including police brutality.
IndustriALL has advocated for a sustainable future for the RMG sector, including fair salaries and working conditions. The recent riots, blockades, and curfew have had a significant impact on workers and their families, resulting in an increase in commodity prices and a loss of income. The IBC asks the government led by Dr. Mohammad Yunus to restore and protect human rights, as well as to establish human-centered policies.
- Industry Security in Focus as BGMEA Meets with Bangladesh Army
The Bangladesh Army’s General Officer Commanding (GOC) 9th Infantry Division and Savar area commander, met to discuss how to ensure the smooth running of all industrial factories in Bangladesh, particularly the garment sector. Concerns have been made regarding criminal activities establishing dominance over the jhut trade in garment-dominated industrial regions, which have resulted in the formation of young gangs that disturb the working environment, harass factory owners and workers, and threaten the garment sector. The clothing traders requested the army’s assistance in resolving these problems. They also demanded protection for trucks transporting products on roads and highways, citing delays in loading and unloading at Chittagong port and clearing cargo at Dhaka airport.
The traders requested the army-led joint task force to visit recently vandalised factories in order to restore investor and worker confidence. Savar Area Commander emphasized that the army’s top objective is to help the sector recover because it is the backbone of the economy. He asked BGMEA leaders to share information on active criminals participating in jhut business operations and assured business leaders that concerns at Chittagong port and Dhaka airport would be addressed to increase cargo handling efficiency.
- Bangladesh Experiences Significant Dip in FDI: 8.37% Decline in FY24
Bangladesh’s net foreign direct investment (FDI) inflow fell by 8.37% year on year (YoY) in the first nine months of fiscal 2023-24 (FY24), hitting $2.21 billion, according to Bangladesh Bank data. Notably, 79% of this total was reinvested earnings.
The central bank attributed the decline to a number of factors, including difficulties for foreign companies in repatriating profits due to a lack of US dollars, a volatile domestic foreign exchange situation, a potential erosion of investor confidence due to the country’s macroeconomic conditions, and a downgrade of the country’s credit rating by international agencies. According to domestic media, net FDI inflows were $751 million between January and March of this year, with reinvested earnings accounting for $612 million.
While over $100 million in investment came from the United Kingdom, China, and the Netherlands during this time, the textile and clothing industry attracted $109 million in FDI.
Bangladesh got $3.004 billion in FDI last year, representing a 14% year-on-year fall. Although FDI overall fell by more than 7% to $3.2 billion in FY23, the textile sector emerged as the leading recipient, collecting $1,229 million in investment. South Korea topped textile investments in FY23 with $435 million, followed by Hong Kong ($174 million), China ($112 million), and India ($54 million).
- Banking Issues Demand Urgent Reforms
Experts and businesses have called for immediate action to maintain sound governance in the banking sector, citing a greater crisis than anyone could have anticipated. The situation is exacerbated by the sector’s non-performing loans, which totaled Tk 182,000 crore in March this year, up from approximately Tk 22,000 crore in 2009. The banker also applauded the protesting students, stating they now have free expression.
Shams Mahmud, director of the Bangladesh Garment Manufacturers and Exporters Association, called for strong punishment against corrupt bank directors. Directors of scam-hit banks should have their accounts blocked and not be permitted to leave the country. He also encouraged the interim administration to create white papers to rectify data discrepancies, particularly given Bangladesh’s upcoming transition from least developed nation classification in 2026.
Inadequate revenue collection, a poor rate of implementation under the Annual Development Programme, and massive government borrowing from the banking sector have all harmed the country’s economy. Initiatives must be done to address problems in the power and energy sectors, as well as the degradation of foreign exchange reserves, the decline in imports, and the significant depreciation of the taka.
A high proportion of young people remain unemployed due to a lack of job prospects caused by bribery and corruption, excessive job expectations, financial restrictions, or because they are waiting for government jobs. AKM Fahim Mashroor, CEO of Bdjobs.com, stated that the government had violated civil liberties by snooping on digital devices for the past 15 years. He stressed the disclosure of all sorts of software used to violate human and civil rights, as well as the creation of a white paper outlining how civil and human rights have been abridged.
Badiul Alam Majumdar, secretary of SHUJAN: Citizens for Good Governance, has advocated for legal and constitutional reforms to prevent the return of injustice, corruption, and tyranny. He claimed three crimes were committed during the previous government’s tenure: crimes against humanity, criminal offences, and financial crimes. He also criticized the use of law enforcement as a tactic by the ruling party.
Mushtaque Raza Chowdhury, Convener of Bangladesh Health Watch, believes the interim government should establish a health committee to develop a strategy and evaluate existing healthcare facilities.
Prof Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), urged justice for recent injustices and deaths, as well as a platform or framework involving students and the general public to act as guarantors of the planned reforms that will assist create an inclusive society.
Finally, professionals and businesses have called for immediate action to guarantee sound governance in the banking industry and prosecute those involved in financial crimes.
- Bangladesh Bank Officers Urge Autonomy
The Bangladesh Bank Officers’ Welfare Council has urged the interim government to change the Bangladesh Bank Order 1972 to ensure the central bank’s entire autonomy, including administrative, operational, and financial independence. The council issued the demands in a memorandum addressed to the interim government’s budget adviser. They also called for the closure of the Finance Ministry’s Financial Institutions Division in order to eliminate conflicts of interest and dualism in the banking industry. The council also requested changes to related laws, norms, and reforms to reestablish good governance in the banking and financial sectors.
They advocated for the central bank to be free of political intervention and permitted to focus on tasks such as interest and exchange rate management and bank licensing. Other proposals include structural improvements to the central bank’s board of directors and making the governorship a constitutional office.
- Bangladesh Reclaims Spot as World’s Second-Largest RMG Exporter
The World Trade Organization (WTO) and Bangladesh Bank have announced that, despite shipments coming in $9 billion short of the Export Promotion Bureau’s (EPB) projections, Bangladesh has maintained its second-place ranking in the world’s garment trade with a 7.4% market share. The WTO’s “World Trade Statistics 2023” showed that Bangladesh exported $38 billion worth of clothing in 2023. However, the EPB later revised the amount, and Bangladesh Bank (BB) asserted that the export figure was inflated because the National Board of Revenue’s (NBR) customs department had counted the amount twice. China remains the world’s leading garment exporter, shipping $165 billion in textile items and accounting for 31.6% of the worldwide market. Vietnam is ranked third, with $31 billion in garment exports in 2023, accounting for 6% of the world market. The global supply chain was volatile last year because to Covid-19, the Russia-Ukraine war, inflationary pressure, labor unrest, the Red Sea crisis, and an unreasonable increase in freight prices.
- Global Buyers’ Optimism Fuels Apparel Industry Growth
Global fashion firms have expanded their sourcing from Bangladesh despite the country’s current political unrest. This is because exporters have been in constant contact with brands and have been working extremely hard since mid-July to meet export deadlines. US companies such as US Polo, Gap, and Express are among the prominent names increasing their sourcing from Bangladesh, while Korean brand BYC is a newcomer. Faruque Hassan, Managing Director of Giant Group, stated that US Polo is the company’s major buyer and that orders have already exceeded expectations.
After the company emerges from bankruptcy, seven US buyers have already raised their orders, including US Polo, Gap, and Express. These buyers have also expanded their sourcing. Masco Group has received a query from a top Korean brand interested in sourcing from Bangladesh for the first time, and they are planning to provide for next summer’s EU market. Two European customers have expressed trust in Professor Muhammad Yunus’ leadership and are optimistic about the country’s future.
Due to the inconveniences brought on by the recent upheaval, the majority of other reputable brands and purchasers, like G-Star Raw, M&S, H&M, and Inditex, are not charging penalties for delayed delivery. Swedish retailer H&M AB has informed its Bangladeshi suppliers that it will not seek discounts due to potential delays caused by factory closures following fatal demonstrations.
Major issues confronting industry leaders include electricity and gas shortages, as well as container congestion at ports and airports. If the interim administration addresses these issues, the garment industry should be able to grow its global market share, they predicted.
- Bangladesh’s Apparel Exports to EU Fall by 4.98%
Bangladesh’s apparel imports from the European Union (EU) fell by 4.98% in value, to 8.72 billion euros in January-July 2024, from 9.18 billion euros in 2023. This reduction was attributed to lower demand as a result of rising inflation and global economic uncertainty. Exporters also stated that Bangladesh’s competitive advantages had been significantly eroded as a result of rising utility costs, disruptions in gas and energy supply, and a recent wage increase.
The EU’s imports of RMG from various nations in the first half of 2024 decreased by 6.03% to 38.47 billion euros, from 40.94 billion euros in the corresponding period of 2023. Bangladesh’s garment exports fell by 4.98% overall, which was slightly better than the global average decrease of 6.03% in EU apparel imports.
Global inflation and rising interest rates lowered consumer demand, resulting in a stockpile of products at EU purchasers’ retail outlets that prevented them from placing fresh purchases. The EU’s apparel imports from China fell 7.23% to 9.16 billion euros between January and June 2024, while Bangladesh maintained its position as the market’s largest RMG exporter.
New Leadership at BKMEA and BGMEA Board
In a momentous leadership transfer, the respective board of directors of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) have selected new Presidents and Vice Presidents.
Mohammad Hatem, Managing Director of MB Knit Fashion Ltd, has taken over as President of BKMEA, succeeding Selim Osman, who resigned due to personal reasons and illness. Mohammad Hatem, the organization’s former Executive President, has been a significant figure in the apparel sector, campaigning for the interests of knitwear makers. The association has not had a competitive election since Selim Osman was elected BKMEA president on July 22, 2010.
The new BKMEA President plans to focus on crucial industry concerns. He intends to work closely with Bangladesh’s central bank to address funding challenges in the knitwear sector. Additionally, Hatem intends to collaborate with the National Board of Revenue (NBR) to streamline customs regulations and procedures. On the international front, his top priorities include continuing negotiations with the European Union to maintain preferential trade benefits. He also stressed the significance of increasing prospects in the United States market to ensure the sector’s growth and stability.
Mohammad Hatem has been accompanied at BKMEA’s leadership by Fazlee Shamim, Managing Director of Fatullah Apparels Ltd., as Executive President, and Engr Md. Shamsuzzaman, Managing Director of Micro Fibre Group, as Vice President. Both leaders have substantial expertise and have served on the BKMEA’s board multiple times. Mohammad Hatem is a founding member of BKMEA and his company’s membership number is 01.
Similarly, the BGMEA has undergone a leadership transition. Khandoker Rafiqul Islam, the Managing Director of Designtex Group, has been elected as President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
He would replace SM Mannan Kochi, who was the elected president for the 2024-26 term but has resigned recently due to “personal reasons and illness”. Despite stepping down as president, SM Mannan Kochi will remain a director on the BGMEA board.
At an emergency meeting in Dhaka, the BGMEA board has elected also Abdullah Hil Rakib, Managing Director of Team Group as Senior Vice President, and Asif Ashraf, Managing Director of Urmi Group, as Vice President.
At his initial remark, Khandoker Rafiqul Islam underlined the necessity of rebuilding international buyers’ trust and confidence in Bangladesh, citing improvements in law and order situation as a priority task. He has assured international partners that Bangladesh would be a safe and dependable manufacturing location for clothing sourcing. His leadership comes at a critical time for the Bangladesh apparel industry. Rafiqul’s priorities include increasing market access, improving working conditions, and maintaining international conformity.
The leadership changes at BGMEA and BKMEA come after the Sheikh Hasina government was forced to be dissolved on August 5 on a student-led people movement.
