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Nine Days to MFA Phaseout

Exporters daunt doomsayers

I NAM AHMED and Monjur Mahmud
The doomsayers may have a different opinion, but Bangladesh's garment exporters and the US buyers take a more positive, even bold view, of the industry's future when the US quota system ends in nine days.
The spectre of China gobblingup the apparel market, leaving smaller countries like Bangladesh without orders is almost over, thanks to a number of developments including
China itself putting a break on its garment exports to stymie overheating and the US applying special clauses on certain categories to checkunlimited Chinese imports.
Garment factories in Ban^adesh are consolidating their capacity and even adding up more space and machines, recruiting people because they see a booming next year. And the US buyers are also consolidating by narrowing their sourcing countries, keeping Bangladesh among the top five suppliers they would aggressively
buy from.
Chinese factories are said to have the best skilled workers and productivity, quality, speed, production capacity, product development, technology, storage facilities and transportation. But Bangladeshi factories produce at the lowest price and follow good labour standards and have gained the reputation of dependable maker. And that has inspired the buyers into putting their Bangladesh operations into high gear.
Tesco until recently running a
small outfit in Dhaka has expanded its capacity and plans to buy more fromBangladesh nextyear.
JC Penny has kept Bangladesh among the top five of its sources and wants to take more from here.
"Our company is now sourcing from 50 countries, but we will concentrate on 15 from 2005 and Bangladesh is among the top five," said Masud Hossain, merchandiser of JC Penny in Dhaka.
"Reducing cost and increasing speed will be the company's top
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priority from the next year. We have set a target to import $700 million every year from Bangladesh, Pakistan and India in the next three to four years," he noted.
Groupe Casino Ltd, a French importer, also eyes Bangladesh as oneof its top suppliers.
Wal-Mart and H&M are also doing the same. Executives at Wal-Man, the world's largest retailer, say they are likely to cut purchases from Fiji, Brunei, Turkmenistan and Macedonia, but planning to keep buying from the rest and will actu-afiy increase their purchases next year from Bangladesh.
In fact, big international buyers have proved doubtful of relying too much on asingle country like China. They want to seek greater security in diversity. And Bangladesh, they think, is a proven manufacturer with goodstitchingskills.
The signs are already there as Bangladesh increased its garment exports significantly in the first few months ofthis fiscal year.
Garment exports to the US amounted to $589.26 million during July-September of this fiscal year recorded a 28 percent growth. Woven products worth $454.92 million were exported showing a growth of 25 percent and knitwear items worth $134.34 million exported with a robust growth of 35 percent during the period.
And yet, warnings from the International Monetary Fund (IMF) and the World TYade Organisation (WTO) are not taken too lightly, though not literally.
The IMF has warned that a quarter of Bangladesh's exports and 23 million jobs here could vanish next year. The WTO has said Bangladesh
may lose up to 50 percent of its US market.
"We don't expect any fall in orders next year, although it will be crucial for us for many reasons," said Annisul Huq, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
“We are getting more and more orders. We have already gained reputation asareliable supplier," he said. "Importers don't want to try uncharted water. China may be a giant force, but it has its many drawbacks."
The BGMEA chief points out: "The year 2005 will be crucial for us and our performance during the time will determine if we will be able to retain ourmarket."
“A big relief for us is the special clause that the US has applied against China on some vital categories such as trousers and shirts. This will halt the Chinese march and give countries like Bangladesh a leeway to grow."
Both exporters and importers have the same view that although Bangladesh has the disadvantage of a long lead time - the time taken between receiving an order and delivering the products - because it does not have a well-developed backward linkage industry, it is not the key factor that may affect the industry.
"Rather having a good port, a fast customs procedure, better telecom service, fast internet and improved and uninterrupted power supply are . crucial for us to retain the importers," said Huq." If i t is reported in the US that production in our factories are hampered due to dearth of gas or electricity supply, buyers will immediately shift to other countries."
Customs clearance is still cumbersome and it takes importers days to clear samples. That is why they fly in from Hong Kong and Taiwan with samples, get things done and fly back the next morning because they do not want to lose the milliondollarbusiness.
"But this is considered as a hassle that Bangladesh has to solve," says Abu Taher of Fortuna Group. "It raises the cost of business and importersdon'tlikelt."
"Banking system here is very complicated and takes long to deliver services. The bureaucratic procedures including customs are very lengthy too," said Laurent Madelaine, hub manager of Tesco International.
Bangladesh and other very poor countries have been lobbying Washington for duty-free access to the American market. The $1.7 billion a year in apparel exports from Bangladesh to the US currently face an average levy of 16 percent. And If the duty Is withdrawn, exporters expect abigleap in theirbusiness.
"But I'm worried about the small factories," said Huq. "We have to abide by a lot of non-trade compliance issues and if they fail, they will lose orders. Even if they delay in paying salaries to their workers, this will be reported and then we will face trouble."
"We have good strength in the US market and our exports there in the first quarter of the current financial year show a good recovery after a long downturn. We should concentrate on certain categories in which we have good strength in the US," said Prof Mustafizur Rahman, research director of the Centre for Policy Dialogue (CPD).