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Interview with Mr Abdul Latif Siddique

Mr Abdul Latif Siddique
Mr Abdul Latif Siddique
Minister
Ministry of Textiles & Jute, Bangladesh
Ministry of Textiles & Jute, Bangladesh

Bangladesh, a country with major part of the coastline comprising a marshy jungle, the Sundarbans, the largest mangrove forest in the world and home to diverse flora and fauna, including the Royal Bengal Tiger, is a developing country from economy point of view. Country’s per capita income in 2008 was US$1389 (adjusted by purchasing power parity) lower than the world average of $10,497. According to the gradation by the International Monetary Fund, Bangladesh ranked as the 48th largest economy in the world in 2008, with a gross domestic product of US$224,889 million. The economy has grown at the rate of 6-7% p.a. over the past few years. Bangladesh's textile industry, which includes knitwear and ready-made garments along with specialized textile products, is the nation's number one export earner. The sector, which employs 2.2 million workers, accounted for 75 per cent of Bangladesh's total exports of US$10.53 billion in FY2005-06, in the process logging a record growth rate of 24.44 per cent. Mr Abdul Latif Siddique is the Minister, Ministry of textiles & jute, Bangladesh. He was born in the village Chatihati in 1937, and is a graduate in Bengali language and literature as well as postgraduate from university of Dhaka. Right from his boyhood, Mr Siddique had able qualities and attitude of a successful leader. Since youth he has been proactive in nationalism, anti-autocratic movement and in the struggle for preserving the legal rights of the backward multitude of the society. His spirit of protest against injustice has cost him several time imprisonment and exile. However, his zest for truth, prosperity and upliftment of society had helped him to overcome all impediments in becoming the voice for multitude and in the year 1964-65 he was elected Vice President of Karotia Sadat College Students Union. For his straight forwardness and firm confidence he was always distinctive among the workers of all levels of Bangladesh Chatra League. He was active in the movement in support of the Sixpoint Movement of 1966 and alongside he was a glorious organizer of the mass upsurge of 1969. As an organizer he played an unprecedented role in the liberation movement of 1971. All levels of liberation organizations and leaderships of Tangail were just the output of his direct guidelines. He was elected as Member of Parliament in the general elections of 1970, 1973, 1996, and 2008. After the stunning success of Awami League led grand alliance in the election

Mr Siddique, Fibre2Fashion extends a warm welcome to you. Thanks for joining the talk on Face2Face! Let us start with the GDP figures for 2008; it marked 6.30% real growth rate. What has been the contribution of Textile & Garment industry in this count and what significance it holds in country’s economy?

According to the estimates of Bangladesh Bureau of Statistics (BBS), the GDP growth rate, estimated to be 6.21% in the financial year 2007-08, which is slightly lower compared to 6.43% of the previous fiscal year, due to slow down of the growth in agriculture sector particularly in the crops and horticulture sub - sector. Textiles and Export-oriented Ready Made Garment (RMG) industry play an important role in the economic development of Bangladesh and contributed 80% of national foreign exchange earning in addition of meeting the lion portion of the domestic demand for textile and apparel products in the last financial year 2008-09. The textile and garments industry provides employment to about 4.5 million people, majority of them are women. Textile and garment sub-sectors account for the second highest position in terms of employment only after agriculture sector. This sub-sector has been making a significant contribution towards the growth of the economy during the last two decades in terms of employment generation, manufacturing value addition and foreign exchange earnings.

 

Well that definitely makes it a vital sector for economy. So, in your opinion, how is Global Textile & Garment performing these days, and Bangladesh making its way into it?

This is highly encouraging to note that the textile and export-oriented garment industry of Bangladesh has achieved a burgeoning growth during the last two and a half decades. Bangladesh being an LDC had been enjoying quota free market access facilities for export of Textile and Garment (T&G) to many countries until phasing out of Multi Fibre Arrangements (MFA) from January 2005. It was apprehended that export of textile and garments might face a set back after phase out of quota free market access under MFA. But the export of T&G, even after phasing out of MFA quota experienced an unprecedented growth during the post- MFA period showing export value of US$ 5.68 billion in 2004 to US $9.80 billion in 2006-07. The share of knit-wear export in 2003-04 was 38%, which increased to 50% in terms of value but in terms of quantity, knit-wear export surpassed the woven garments mainly due to the strong backward linkage developed in the knitting sector of the country in the recent years. This was also possible mainly due to the EU – GSP facilities under EBA and EU safeguard measures against China and duty free market access of Canada, Australia, Japan, New Zealand and Norway. Another phenomenon of post MFA situation that global garment export increased but fabric movement declined and supply sources have been reduced due to end of guaranteed market survival of the competitive suppliers and gains for sources having full value chain facilities.

But the global economic recession started in the recent years created a negative impact on the overall demand of T&G products. This has also affected the export market situation of T&G products of Bangladesh in the following ways:

(i) export order reduced to a considerable level,

(ii) the buyers are offering unusually low price to the manufacturers / exporters and

(iii) the profit margin for T&G export now reached to a minimum or even lower than the break-even level.

Under the above mentioned situation, Bangladesh is now facing severe competition with the textile rich countries like China, Pakistan, India, Indonesia and many other countries in respect of export of T&G products. Bangladesh is now trying to overcome the marketing crisis of T&G by enhancing financial package, rescheduling of loan and repayment of overdue interest at a reasonably reduced rate, strengthening human resource development programme etc.

We extend our best wishes for that. Infact, Bangladesh has created history by surpassing India in exporting garments to the US market. Textile and apparel exports from Bangladesh have increased by 10% since 2008 onwards. How if we take a look on the factors that led this growth?

Bangladesh made an appreciable achievement in developing her Primary Textile Sector such as spinning, knitting, weaving and dyeing-finishing industries with state-of-the-art–technologies of Western Europe, USA, Japan etc during the last two decades. This has resulted in considerable improvements in supply of quality knit and woven fabrics required for the export-oriented Garment industry of Bangladesh. This has caused sharp increase in export of Bangladesh garments to the markets of US and other developed countries. Moreover, the cheap labour, long experience of the textile and garment entrepreneurs, 5% cash assistance for use of locally produced textile materials by the export-oriented garment, provision for back to back letter of credit for sourcing the raw materials for the export-oriented garment industry etc. have considerably helped the recent growth of garment export. Bangladesh garment export mainly occupied lower end and high volume products in which other medium and high valued garment producers and exporters don’t have competitive advantage over Bangladesh. These are the important factors, which have leaded Bangladesh to high growth of RMG exports during the recent years.

And how about Jute industry- 1/4th of your country's population is directly or indirectly involved in the jute industry. Presently, industry is facing several challenges to its numero uno status; one being the synthetic substitute. What reforms are made to address this challenge?

The market for traditional jute products has declined over the years due to competition with the different cheaper goods produced from synthetic and polypropylene. But with the increased environmental awareness about the use of eco-friendly and bio-degradable products, popularity of jute products have been on rise both in developed and developing countries for effective retardation of ecological degradation. It has diversified use as industrial raw materials, intermediate and end use products having global market demand. Jute has a great potential to contribute to create a larger employment opportunity, income generation and poverty alleviation through improvement of quality of jute fibre, adaptation of new technologies and processes for diversified jute products and alternative use of it.

The following reforms are under implementation to make the jute products popular and competitive in the international market over the synthetic based products:

(i)Efforts for production of high yield jute seeds for quality raw jute production have been initiated,

(ii)Diversification of jute products to meet the multifarious use in the domestic and export markets, Jute Research Institute is being strengthened for development of production of diversified jute goods, appropriate steps have been initiated for increasing the use of eco-friendly jute and jute goods in the domestic and overseas markets, to increase domestic use of jute goods, necessary steps are being taken for ensuring compulsory use of jute bags for food crops, sugar, fertilizer, cement etc., the Government has been encouraging setting up of smaller mills since these are more profitable and manageable compared to the composite mills, for ensuring sustainable supply of skilled manpower for the jute industry, Diploma Course on Jute Technology would be introduced.

What policies are adopted to emphasize on infrastructure & technology up-gradation in the industry?

Bangladesh is still a manufacturer of traditional jute products such as, Jute Twine and Yarn, Hessian, Sacking and Carpet Backing. Very few jute mills have started producing Jute Geo-Textile, Home Textiles and Technical Textiles in a limited scale. Due to the introduction of low priced synthetic and polypropylene packaging materials and shopping bags, the demand for packaging bags of jute had been gradually loosing their price competitiveness in domestic and foreign markets. But due to the eco-friendliness and bio-degradability, the jute products, have started gaining popularity over the synthetic based packaging products during the recent years. So the Government of Bangladesh has taken up a programme for diversification of jute products for use of various purposes and an organization namely, Jute Diversification Promotion Centre(JDPC) has been established with the assistance of EU/CFC to provide TA support to the small and medium scale enterprises to produce diversified jute products. The following policies are adopted on infrastructure and technology up-gradation in the jute industry of Bangladesh:

(i)Projects for Balancing, Modernization and Replacement (BMR) of the old machinery of public and private sector mills would be implemented for improving the productivity and quality of jute products;

(ii)The Government would encourage setting up of smaller mills with modern technology since these are more profitable and manageable compared to the composite mills;

(iii)For uninterrupted production of jute mills, in-house gas generators would be encouraged to install in the respective mills;

(iv) In order to ensure regular supply of spare parts to the jute mills, the existing foundry facilities will be strengthened and setting up of new workshops for manufacturing of essential spare parts required for jute mills will be encouraged.

One more point comes to my mind herewith is: Labour agitation / problems- a major concern for sector as they can reduce confidence of buyers. How to tackle this major issue to gain the confidence of the industry players?

The Primary Textile Sector (PTS) of Bangladesh is not facing mentionable problem due to labour agitation since the beginning of its growth from early Eighties. The Export-oriented Garment industry also did not face labour agitation until 2007. But during the last few years the workers association have raised certain issues in respect of social accountability and labour safeguard measures as per ILO regulations. Many of the issues of the ILO regulations have since been satisfied during the last few years. But due to delay in payment of salaries and bonuses, non -issuance of job contract, delay in payment of overtime etc. are some of the issues which some times create misunderstanding between the workers and employers of a very few industries. These types of situation, sometimes escalates to the neighboring factories creating temporary problem in the area. All of these situations have been resolved with mutual understanding and the labour agitation in the Textile and Garment industry of Bangladesh do not apprehended to be a recurring situation as the Government and the Associations representing the Textile and Garment Industries are always in favour of satisfying the genuine demand and grievances of the workers of Textile and Garment industries of Bangladesh.

The labour agitation or problem as stated in the garment industry of Bangladesh does not seem to be a major concern as the concerned stakeholders are well aware of the probable consequences on the export market so to say the foreign buyers of Garment. All possible measures have been initiated by the Government and other stakeholders so that industrial peace and lawful order can be ensured. The Garment industry have in the meanwhile complied many of the compliance requirements of the foreign buyers.

Good to know this. Sir, we have large visitor base from global core industry, amongst which major are decision makers / investors. They would love to hear on the incentives & investment opportunities available in Bangladesh. Shall we close the talk with a message that you may wish to convey them?

There is huge demand-production gap of textile products to meet the domestic demand, export through garment industry and direct export. To attain the planned production target for fabrics and yarn by 2014-15 assuming self reliance to the extent of 78%, Bangladesh will need to set up a large number of new spinning, weaving, knitting and fabric processing mills in the private sector.

The estimated investment requirement for setting up of the new primary textile industry is approximately US$ 7 billion. It would be very difficult for a country like Bangladesh to mobilize such a huge investment from its domestic sources.

In view of the growing demand for textile products in the domestic and export markets and the urgent necessity for creation of new capacity in the primary textile sector the Government of Bangladesh has declared textiles as a "Thrust Sector" for its rapid development and various incentive packages are allowed to attract local and foreign investment in textile sector.

The entrepreneurs of overseas countries may find investment in the Primary Textile Sector (PTS) of Bangladesh more attractive as Bangladesh has the following positive advantages over those of other competing countries:

•Abundant cheap skilled and trainable labour,

•Availability of low cost infrastructure facilities,

•Various incentive packages are allowed particularly for Foreign Direct Investment and Joint-venture projects.

•Investment in the textile sector of Bangladesh would be very lucrative either on 100% foreign participation or on Joint-venture basis. The investment may take place for setting up of new textile mills with state-of-the-art technology in the suitable private land or in the Industrial Parks or Export Processing Zones (EPZs) of the country.

At present there are about 50-60 old textile mills under public and private sectors of Bangladesh. These mills are either closed or have been running on loss due to age-old technology, but these mills have ready infrastructure facilities such as land, buildings, power, gas, water etc. The overseas investors will find it more feasible to set up new mills in the premises of existing old textile mills by replacing the existing old machinery. Investment in the existing old textile mills will be more profitable due to lower investment outlay and shorter gestation period than setting up of textile mills in the new sites.

Incentives/facilities Allowed for Foreign Investment in Bangladesh:

As per existing policy of the government, the investors particularly foreign investors in the textile sector is eligible to the following incentives/facilities:

•non-discriminatory treatment between foreign and local investment

•protection of foreign investment from expropriation by the state

•ensured repatriation of proceeds from sale of shares and profits

•no limitation pertaining to equity participation by the foreign investors

•repatriation of capital along with profits and dividends

•duty free import of capital machinery and spare parts

•bonded warehouse and back-to-back letter of credit will continue for export-oriented industry

•various other incentive packages are also allowed

It is an honor carrying this message Mr Siddique! Thanks for the opportunity.

My Pleasure.

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Published on: 12/10/2009

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.

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