United News of Bangladesh

In the wake of the US decision to impose a tariff of 20% on Bangladeshi products, Mahmud Hasan Khan, the president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), in an exclusive interview with UNB, discussed the immense opportunities for Bangladesh's apparel sector amid global trade tensions. Khan emphasized that while the current tariff war presents a favorable landscape, the country must address critical infrastructural and logistical challenges to fully capitalize on it. Bangladesh has a significant opportunity to boost its exports to the U.S. and global markets in the current climate of international tariff disputes, he said. Excerpts: UNB: Bangladesh seems to have a new opportunity for export growth. What are your thoughts on this? Khan: This new era of global tariff wars presents a great opportunity for Bangladesh to enhance its exports, particularly to the US and other major global markets. We are in a strong position. While major competitors like India face a 25% tariff and China a 30% tariff from the US, Bangladesh's tariff is currently at 20%. This tariff reduction will naturally divert a significant portion of global apparel business to Bangladesh. To attract buyers from China and India, however, we must ensure rapid and timely shipment of goods. UNB: Beyond the tariff advantage, what does Bangladesh need to do to sustain this growth? Khan: Business growth isn't solely dependent on opportunity; it requires a robust supporting infrastructure. We urgently need to improve the capacity and international-standard handling of the Chittagong port, along with streamlining customs facilities. Infrastructure development, efficient use of existing facilities, and an uninterrupted supply of gas and electricity to our factories and export sectors are absolutely crucial for us to perform well in the global trade competition. All of these supporting facilities, alongside our production capacity, are vital for us to stay ahead of our competitors. Tariff reduction to 20% 'a relief': BGMEA President UNB: Regarding port management, is hiring foreign companies a viable solution? Khan: Hiring foreign companies with experienced and skilled management is a good option. However, if their charges are excessively high, it will negatively affect our business competitiveness. We need to strike a balance between efficiency and cost. UNB: What specific initiatives are your top priorities for the BGMEA right now? Khan: We need to focus on several key areas immediately. First and foremost is ensuring an uninterrupted supply of gas and electricity. Additionally, we need to guarantee a smooth, four-hour journey on the Dhaka-Chittagong highway. Other priorities include reducing non-performing loans in banks to bring down interest rates, rationalizing the NBR's tax structure, and maintaining a good law and order situation across the country. UNB: You mentioned a 20% tariff for US exports. Are there any ways to reduce this further? Khan: Yes, there is a significant opportunity for further tariff exemption. If our products use 20% or more US content—such as US cotton or other materials—exporters can receive a tariff discount on that portion. For example, if a product contains 20% US content, the effective tariff would be reduced to 16%. The more US content we use, the greater the tariff exemption becomes, potentially reaching zero tariffs on that portion. UNB: What are the challenges in implementing this US content-based tariff exemption? Khan: The main challenge is the lack of a certifying body. There is currently no institution established to verify the traceability of US content in a way that would be acceptable to US customs. While the price of US cotton is higher, its quality is excellent. The entire process is machine-run, making the cotton fresh, dust-free, and with very low wastage. We believe that Bangladeshi factory owners will increase their use of US cotton as buyers will push for it to get the additional tax exemptions in the US market. US cotton is completely clean, machine-fit, and will result in a 2-3% lower cost at the processing level. Pakistan envoy meets BGMEA president, discusses trade ties UNB: What reforms are underway within the BGMEA itself? Khan: We have brought all BGMEA activities under an online service, allowing members to easily view and monitor all our work. A major reform has been the recent fair election for the association, where over 90% of our members participated. This was a direct result of the July uprising, and this practice of holding free and fair elections will continue so that we never return to the previous situation. UNB: How is the BGMEA addressing the alleged misuse of 'Bonded Warehouses'? Khan: We are committed to tackling this issue. If the NBR provides specific allegations of bonded warehouse rule violations, the BGMEA will actively assist them in taking action. However, the NBR and its intelligence units must provide us with specific information about misuse. To date, the NBR has not filed a single complaint against any of our members. In fact, BGMEA is sometimes criticized for creating barriers to importing legal goods, which is time-consuming. UNB: You've mentioned a lot of reforms. Can all of this be accomplished in a single term? Khan: Many reforms are required in our trade association, and it's not possible to complete all of them in a single two-year term. We have started the reform process, but I won't be able to conclude everything. The series of reforms will continue. As promised during our election campaign, we have already reduced the subscription fee by 25%. We are also working on easing the tax system, addressing SDG challenges, establishing a member welfare fund, building a hospital for our workers, amending labor laws, and bringing the BGMEA University under the association's full control. We have started this journey to strengthen the BGMEA, and future presidents will build upon this foundation. Mahmud Hasan, seven others elected BGMEA president and VPs for 2025-27 UNB: How will the BGMEA protect its members from non-paying buyers? Khan: We want to assure our members that we will take a firm stance against buyers who do not make timely payments. The BGMEA will create a blacklist of such buyers and inform our members to avoid doing business with them. Suppose we receive complaints from members about buyers who refuse to accept goods after shipment. In that case, we will resolve the issue through negotiation with those buyers or the ambassadors of their respective countries. The BGMEA has the authority to blacklist buyers who fail to pay manufacturers on time or refuse to receive goods after they have been shipped.  

The workers, including the ones employed in the apparel sector, will not be allowed to leave their workplaces during the upcoming three-day Eid holidays to stop further spread of Covid-19, Labour and Employment State Minister Begum Monnujan Sufian said Sunday. The state minister made the announcement during a tripartite meeting held in the capital to discuss the present situation of the workers, their salaries, and Eid bonus issues. Also read: Country will be free of child labour within 2025: Monnujan Sufian

Speakers at a webinar emphasised rebuilding the partnership among brands, suppliers, governments and international organisations as key to recovery of the apparel value chain. The medium-term recovery of the global apparel value chain from the disruptions of the COVID-19 pandemic has been set back by the prolonged demand slump. Global imports of apparels during the period of January-August 2020 contracted by 23 percent compared to the same period in 2019. Also read: How Bangladesh can boost apparel exports Addressing medium-term challenges through national-level interventions alone will be difficult. Initiatives of major brands/buyers were limited to inventory smoothening, reshoring, and over-concentration of orders to a limited number of sources. The recovery of many supplying countries has been slow, including that of Bangladesh and Sri Lanka. Innovative ‘value chain-based solutions’ are required to help all the market players cope with the crisis, ensure rebound and smooth recovery and ultimately make the value chain resilient. These observations emerged at an international webinar titled ‘Recovery of the Apparels Sector of Bangladesh and Sri Lanka: Is a Value-chain-based Solution Possible?’ The webinar was jointly organised by the Centre for Policy Dialogue (CPD) and the Institute of Policy Studies of Sri Lanka (IPS) in partnership with Southern Voice on Tuesday. CPD’s Chairman Professor Rehman Sobhan said ILO could consider playing an entrepreneurial role in bringing together international buying countries with supplying countries to restructure of global demand management. He said tripartite exercise should be carried out, including government, employers, and workers to produce a mutually accommodating system of unemployment insurance to address not just the immediate impact of the COVID crisis but a longer-term crisis. Also read: Need more financial support to repair apparel industry: Rubana   In the keynote presentation, CPD’s Research Director Dr Khondaker Golam Moazzem and Research Economist of IPS Kithmina Hewage stated that the study found that major sourcing countries have either reshored or over-concentrated to limited number of sourcing countries during the pandemic period. There is limited level of initiatives of major market players to keep the suppliers of major sourcing countries and the world of work in uncertainty to address the medium-term challenges. A major shift in the distribution of export orders by buyers during the COVID-19 period (January–June 2020) has deprived a number of major supplying countries, including Bangladesh and Sri Lanka. Analysis shows that an additional US$2 billion worth of orders could be redistributed to supplying countries if the pre-COVID period’s market share of export orders is maintained in case of the largest supplying country - China. The study proposes that in case of a major global crisis, a redistributive approach should be maintained to ensure export orders at least at the pre-crisis level, particularly for countries that have fiscal constraints and weak social support programmes to support their suppliers and workers. Husni Salieh, Director of Strategic Transformation at MAS Holdings in Sri Lanka shared that the value of a value chain is truly optimised when its stakeholders work collaboratively particularly during the crisis. He also added that building resilience within a relatively diversified but existing value chain has the capability to face the current and future crisis successfully. Founder & CEO of Bangladesh Apparel Exchange Mostafiz Uddin said that there is a lack of responsible business practices among the brands during the ongoing crisis. He opined that the brands should consider their suppliers as business partners and act responsibly. Co-Founder & Managing Director at The Design Collective Store in Sri Lanka Binu Wickramasinghe stated that smaller enterprises, like their one, faced comparatively more difficulties during the crisis, particularly in accessing credit, adapting to the new normal. Also read: Drinking water booth launched for CEPZ apparel workers She also added e-commerce was the biggest game-changer for them in coping with crisis. Pierre Börjesson, Head of Sustainability - Global Production, H&M Group, said that the pandemic had shown the importance of acceleration of digitalisation in doing business. He also added that Bangladesh and Sri Lanka should consider how the market could be made more agile and flexible in terms of product diversification, services connected to the products and addressing the sustainability to achieving the possibility of trading higher than in the past. Dan Rees, Director of Better Work, International Labour Organization (ILO) opined that only sector-specific measure might not address the existing challenges. He also added that to build strong resilience and protect the workers, trust and cooperation among the stakeholders and a long-term plan is required. Professor Mustafizur Rahman, Distinguished Fellow, CPD, moderated the session. He said that the study's findings are crucial as all the stakeholders of the apparel value chain had been affected by the pandemic. He also said that, therefore, all the stakeholders have to play certain roles to find a solution that ensures the sustainability of the industry. CPD’s Executive Director, Dr Fahmida Khatun, in her welcome remarks, shared that the CPD and IPS have recently conducted a joint study in collaboration with the Southern Voice to analyse the potential of a value-chain-based solution to support the recovery of the local apparel sector in view of the ongoing COVID-19 pandemic. She discussed how the pandemic has disrupted the global apparel value chain and shared that the study presents probable solutions to the challenges that have emerged for the apparel-supplying countries, particularly in Bangladesh and Sri Lanka.

Speakers at a webinar on Saturday said  partnership and collaboration between governments of sourcing and supplying countries, as well as brands, suppliers and workers is essential to ensuring the recovery of the apparel sector following the Coronavirus pandemic.