As multi-fibre arrangement (MFA) phases out after December 2004, reducing lead-time and cutting costs including port, bank and utility charges will be the key challenges for Bangladesh's garment sector to survive in the quota-free era.

In the face of a frustrating progress in export diversification programmes over the years, the main concern for Bangladesh in the coming years will be how efficiently these issues are handled, exporters think as the crucial 2004 began.

Export performance is still heavily dependent on the readymade garment (RMG) with 75 per cent of the total US$6548 million earnings coming from this sector -- $3258 million (50 per cent) from woven and $1654 million (25 per cent) from knitwear last year.

"Earlier, buyers used to give us 120 days time for delivery but now they want goods in 40 to 45 days. So we can't waste time and afford to take seven to 10 days turnaround time for feeder vessels in Chittagong Port," said Kutubuddin Ahmed, former president of the Bangladesh Garment Manufacturers & Exporters Association (BGMEA).

Shipping time has become a big factor now. There is no option but to improve port facilities and cut operational costs, he suggested. "The post-MFA scenario largely depends on how we manage the total costs and lead-time issues."

Turnaround time of feeder vessels in Chittagong Port is now seven to 10 days while it is two days in Bangkok and one day in Singapore.

Moreover, the cost of handling is also exorbitant. Handling of a container in Bangladeshi ports

costs US$ 600, but neighbouring ports handle it for $150 to $300.

According to a study, maritime transport costs account for 14 per cent of the cost of Bangladeshi textile exports to the US, compared to less than eight per cent for countries like India, Thailand, China and Taiwan.

Quazi Moniruzzaman, president of BGMEA said the first disadvantage for Bangladeshi exporters is that it is not a cotton growing country.

Besides, production cost is going up substantially due to the compliance issues. The requirements like having firefighting equipment and exit system, adequate toilets, ventilation, baby care facilities for workers are increasingly being imposed by the buyers.

"Our bank interest and charges, right from letters of credit opening to document negotiation, are very high. Besides, we pay more for

electricity, phone, generators which reduces our competitive edge in global market," he felt.

Dr Mustafizur Rahman, research director of the Centre for Policy Dialogue (CPD), an independent think-tank, said the present export growth mostly came from rise in volume, not the value of products. This will make things difficult in the longer term.

Product diversification and increasing the capacity to produce higher value products within the RMG sector and light engineering, pharmaceutical, leather and agrobased sector will be major issues, he felt.

"Market will see a restructuring after the MFA phase out. Getting orders will depend on price. Since we are competitive in certain categories, a quota-free regime will help increase export in these categories," he observed.