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Recession forces garment factories to close down
05
Jun '09
The ongoing global financial meltdown has left its marks on the readymade garment industry in Chittagong by making it to experience a downfall of 28 percent in export orders in the first four months of current fiscal, informed industry leaders.

This downfall in orders has forced at least 20 factory owners to shut their factories in the first quarter, said Nasiruddin Chowdhury, first vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) in a press briefing.

About 50 percent of the 742 garment factories in the port city have lost their competitive edge due to the recession. To reduce the impact of the economic slowdown on the country's garment industry, leaders of BGMEA are seeking cash incentives, he added.

Mr. Nasiruddin, also spoke about the stimulus package introduced by many countries for survival of their garments sectors and said, competitor countries of Bangladesh like India, Pakistan, Vietnam and Cambodia had devalued their currencies.

China had awarded 63 types of subsidies for its apparel industry whereas Rs. 5,173 crore has been distributed by India along with a 10 percent cash incentive and a 5 percent subsidy on interest on loans and Pakistan has also reduced bank interest rate to 6.5 percent from 7.5 percent, added Mr. Nasiruddin.

Keeping all these major steps, taken by the competitor countries, in mind, Bangladesh also needs to take steps to prepare the industry for global competition. According to Mr. Nasiruddin, the sector fears that more factories will shut down, due to which the dream of creating a $25 billion industry will be shattered.

He said that country's garment industry needs 10 percent cash incentives on the export value of garments and special measures to rehabilitate the country's 270 sick factories. It also requires less than 7 percent interest rate and a reduction in bank service charges, withdraw VAT on RMG units and reduce tariff at Chittagong port.

Mr. Nasiruddin urged the government to close the garment factories enjoying 100 percent foreign ownership since they were creating unequal competition in the market and made a demand to set up 12 captive power plants through public or private investment on a priority basis.

Fibre2fashion News Desk - India

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