English     |     Español     |     Français
Exporting to Canada - Experts in trade for developing countries - TFO Canada
Sign In or Register
Username:     Password:
Remember me   Forgot password?
Not a member? Register here
Not a member? Register here    
Home > About TFO Canada > News

Trade News

Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.


Bangladesh struggles to mend holes in its garment sector

Friday, September 08, 2017 > 10:22:19

Asia Nikkei

Worries over security rules, trade preferences throw doubt on exports to Europe

Bangladesh's climb up the ranks of the world's clothing exporters has lifted incomes for many in the world's eighth most-populous nation. But the trade preferences that have helped make Bangladesh the world's second-biggest apparel exporter are in jeopardy as the nation nears government targets for national income, adding to complications caused by Western security fears and labor conditions.

Apparel exports brought in $28.14 billion in revenue for the fiscal year that ended in June, up 0.2% from a year earlier. This rise of 0.2% was the lowest in 15 years and marked a sharp fall from the average 13% growth seen over the previous decade, according to Mohammad Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association.

Bangladesh was dealt a sharp blow in June when the European Union, which buys 55% of the country's total apparel exports, placed it on a list of high-risk exporters because of concerns about security. Air shipments bound for EU nations must now be screened in Singapore, Doha or Dubai. Bangladesh's $17.75 billion in clothing exports to the EU during the last fiscal year represented almost two-thirds of its shipments to the bloc.

The diversion of shipments has raised costs for exporters by 40-50 U.S. cents per kilogram and increased delivery times to between five and eight days as compared with two to three days before.

"This is especially bad for us as double checking through a third airport will increase the time taken to deliver the shipments and also increase our costs, making our products less attractive," said Abdus Salam Murshedy, managing director of apparel producer Envoy Group, whose customers include Zara and Calvin Klein. 

The EU move followed on similar directives by member states Germany and Britain last year. In March 2016, the U.K. barred air cargo coming directly from Hazrat Shahjalal International Airport in Dhaka, saying it failed to meet international security requirements. Around 100 tons of cargo, including apparel, vegetables and other agricultural products were shipped to the U.K. every week before the restrictions.

In June 2016, Germany followed the U.K.'s lead. Australia has also banned air cargo packages heavier than 500 grams from Bangladesh and four Middle Eastern nations.

Improving security

The Bangladesh government and the garment association are working together to address the EU's concerns. Rahman said an explosives detection system and an explosives trace detector are being installed at Shahjalal airport. A foreign company has been appointed to conduct cargo screening.

"Once all of these are up and running, we are hopeful that there will be no more objections from the EU, U.K., Australia and Germany," Rahman said.

Security, however, isn't Bangladesh's only challenge in Europe. Poor employment conditions led to a threat by the EU in March to strip the country of its preferential tariff status under the World Trade Organization's Generalized System of Preferences. The Obama administration removed Bangladesh's U.S. GSP benefits in 2013 after a fire at a factory complex in Dhaka killed 1,135 people, highlighting workers' plight. There has, however, been some discussion recently of a possible restoration of preferential tariffs by President Donald Trump.

Bangladesh is aiming to graduate from the U.N.'s official ranks of least developed countries, or LDCs, by 2021. To safeguard its market access as average incomes rise, Dhaka has already started talks to join the EU's "GSP Plus" program, which would enable about two-thirds of products to be exported into the bloc tariff free, but it is encountering objections regarding labor rights, environmental protection and workplace safety. Pakistan and Sri Lanka, both apparel exporting rivals, have each been granted GSP Plus status in recent years.

The U.K.'s pending exit from the EU is also worrying Bangladeshi exporters. "We have had several meetings with our U.K. counterparts," said Commerce Minister Tofail Ahmed. "They have assured us that they will continue duty-free market access for all products from the LDCs including Bangladesh" after Brexit.

Yet with Bangladesh eyeing graduation from LDC status, preferential U.K. access after Brexit may depend on reaching a new bilateral trade agreement. Bangladesh will face competition for attention since London has already named India, Canada, Australia, China, Japan, Mexico, Singapore and South Korea as priority partners for trade talks. India and China are Bangladesh's biggest competitors in apparel exports.

Finding help

In Rahman's view, authorities in India and Vietnam are more supportive of their local apparel industries. Last year, the Indian parliament approved a special aid package of 60 billion rupees ($935 million) for the local sector as part of a strategy to overtake Vietnam and Bangladesh in garment exports within three years.

To bounce back, Bangladesh needs to make some improvements, analysts say. For example, the country is mired in a gas crisis that has led to the shutdown of nearly 1,000 apparel factories. The sector also needs to expand the scope of garment production to include more items.

The country also needs to improve its image as a place to do business. A terrorist attack that killed 18 people from Italy, Japan, India and the U.S. in a Dhaka cafe in July 2016 raised serious safety concerns. Following the attack, some overseas buyers refused to travel to the country and insisted on meeting Bangladeshi suppliers abroad. This lasted about six months, industry insiders said.

To offset such challenges, Rahman said Bangladesh must reach out to other markets. "Russia is a prospective destination where we are actually not exporting at all as they have 40% duty," he said. "But as Russia is now a member of the World Trade Organization, we are asking for duty-free access to their market." The industry is also hoping to export on a larger scale to Japan, China, Australia, New Zealand and South Africa.

Zaid Bakht, research director of the Bangladesh Institute of Development Studies, said he was sanguine about the country's recent export woes, calling it a "transitional phase."

"There is cut-throat competition in the local and global market," he said. "The whole sector is going through restructuring as we can see many big companies acquiring small ones. Also, technological changes like automation are being embraced by most big factories. Eventually, Bangladesh will overcome this dull phase."

Contact TFO Canada
Meet Our Supporters
TFO Canada
130 Slater Street
Suite 400
Ottawa, Ontario
T 1.613.233.3925
F 1.613.233.7860
Canada Toll-Free:
© TFO Canada   |   Sitemap   |   Terms & Conditions   |   Privacy Policy   |   Contact Us