Wednesday, January 19, 2011

Why Should Neighbors Be Jealous Of Bangladesh RMG’s Success?

The apparel exporters of two neighboring countries Bangladesh and India have worries of divergent nature.

Bangladesh apparel exporters are worried that their export orders have been on the decline for a number of domestic and external reasons. Their counterparts in neighboring India are anguished that Bangladesh is set to beat them in garment exports in the wake of an appreciating rupee.

Bangladeshi exporters blame internal political disturbances, reduced demand in their key markets-the USA and the European Union countries-for the decline in export growth in recent months.

The Indian apparel manufacturers and exporters, it seems, are ashamed of the fact despite having sufficient backup of raw materials they are lagging behind their Bangladeshi counterparts, who are largely dependent on imported fabrics and other raw materials– in the international market. A recent Indian newspaper report quoted a number of apparel sector leaders expressing their frustration over the rise of the Bangladesh apparel sector.

But the fact remains that with its low cost of labor and sufficient back-up support of raw materials, including fabrics, apparel exporters of India– a regional economic superpower– should have competed with China rather than grumbling about RMG export performance by a poor neighbor like Bangladesh.

The Indian apparel exporters must have forgotten the issue of value addition while becoming jealous of the success of the Bangladesh RMG. The average value addition in case of woven garment exports by Bangladesh still remains as low as 30 per cent and the same for knitwear exports hovers around 60 to 70 per cent. Since Indian exporters do not have to depend on imported raw materials, the value addition of their exports should be nearly 100 per cent.

There is another dark side of such unnecessary moaning by the Indian RMG exporters: It, rightly or wrongly, lends credence to widespread suspicion that the neighbors are involved in conspiracy to cause damage to the emerging Bangladesh garment sector. Such suspicion had become quite strong during a persistent campaign against Bangladesh RMG in the name of child labor, the recent workers unrest in the garment sector and the buyers’ insistence on so-called compliance issues.

The socio-economic conditions in many Indian cities are almost similar to that of Bangladesh cities where most garment units are located. It is highly unlikely that the working conditions or involvement of child labour in many RMG units have been very different from that of many Bangladeshi RMG units. But has anyone ever heard a word or seen a report in the international electronic and print media or deep concern among US trade union bodies about the situation in apparel units in India?

However, Indian apparel exporters should have reasons to be happy to learn that the Bangladesh RMG sector, which proved many doomsday preachers wrong following the total phase-out of the multi-fiber arrangement (MFA) from January 1 2005 and recorded impressive export growth, has for the first time in many years had a poor export performance in recent months.

The country’s apparel exports recorded a 31.28 per cent growth in the period between the months of July and September of the just concluded financial year. But the average growth at the end of May last stood at only 16.45 per cent.

Industry sources have claimed that export orders in recent months have declined by about 30 per cent. Many buyers had withdrawn from Bangladesh markets during political troubles in the last months of 2006 and placed their import orders with apparel manufacturers in China, the world’s largest exporter of textile products having control over 70 per cent of the huge US market, and Vietnam, an emerging apparel exporter. The Indian business leaders do need to explore the reasons for buyers not going to India in large numbers. The appreciating rupee may not be the only reason for that.

The political troubles that started from the month of October last took a heavy tool on industrial production and exports. The Bangladesh exporters, who have invented their own way of running their business operations amidst frequent shutdowns or blockades, also had become helpless in the face of complete halt of operations at the Chittagong port, enforced by the then opposition political activists led by mayor of Chittagong City Corporation ABM Mohiuddin Chowdhury.

That disruption was followed by a slower demand from the buyers in the USA and the EU countries. The intensity of cold being less than previous years during the last winter in most EU countries, the demand for knitwear dropped this time. And in case of the USA, the consumers decided to spend less because of the rising oil prices.

The RMG exporters view these developments as temporary and are hopeful about their exports picking up again in coming months. But the researchers on RMG markets are seeing some ominous signs on the horizon. They feel that the buyers, who had withdrawn from the Bangladesh and gone to other markets, may not come back again.

However, the exporters, it seems, would have to keep their finger crossed for a major turnaround in demand for apparels in the developed markets.

The political troubles have proved more damaging to exports than any other factor. If the same returns to the street-nobody, however, want that-the RMG exporters would find it really hard even to keep their existing buyers satisfied.

BY :  Shamsul Huq Zahid.

Billion Dollar Deal Is Basically For Indian Projects

The 14 projects to be executed under the loan are on top of the list of India for opening its transit route through Bangladesh to the northeast- critics wondered why it has taken the decision to finance basically Indian projects with a huge loan.

The billion dollar Indian credit line agreement has come up for critical scrutiny apparently on the merit of the projects as to how much they are having national priority to be implemented by taking a commercial loan.

The 14 projects to be executed under the loan are on top of the list of India for opening its transit route through Bangladesh to the northeast.

The Awami League-led government has taken the political decision to this effect but critics wondered why it has taken the decision to finance basically Indian projects with a huge loan.

The projects in the list are aimed at developing supportive infrastructures to create necessary conditions to create transit through Bangladesh.

BIDS research director Dr KAS Murshed in a recent work on India-Bangladesh-Northeast: Transit and Strategic Configuration ruled out the claim that Bangladesh will anyway benefit from the opening of transit.

Many people here toeing the government policy line tend to say that Bangladesh would fetch up to US$ 3.0 from transit related activities annually.

The Indian team visiting Ashuganj after the signing of the loan agreement to see the riverine spot to develop the port of call there made similar claim. But all such claims are misleading and having no basis of any cost-benefit calculation, knowledgeable sources said.

Even the World Bank and such other organisations promoting the transit corridor is yet to carry out such cost-benefit estimate and people wonder why they are not doing it. Murshed, however opined that railway may have some relevance to transit but the revenue prospect from railway transit will also remain limited up to US$ 30 million. But the country may stand to lose market in the northeast from such opening to direct Indian traffic, he maintained.

People wonder if the country is really buying troubles with the credit line and moreover how will it repay the money without viable revenue income from the facilities.

Akbar Ali Khan, a former secretary and adviser of the caretaker government wondered whether the projects to be funded under the loan are really essential for Bangladesh.

He told the press that taking such loans is not something new, but the nation must have critical assessment on the merits and demerits of such loans to be used for funding projects.

He said India always remained a critical factor to Bangladesh politics. So before doing anything the country should have its own critical exercise.

He said the serious question is not the rate of interest at 1.75 percent per annum with 0.50 commitment fees on unutilized credit after 12 months or the 20 repayment period is enough or not.

It is reported that under the agreement, Bangladesh has the obligation to buy 80 percent of the merchandise from Indian suppliers, in addition to sourcing hundred percent consultancy services.

It means the tied loan will make sure the recycling of the money to the Indian economy, except making some payment to local labours.

The higher commitment fees for the loan is moreover, focused on making sure that the entire loan should be used in time to avoid penalty and to achieving total Indian strategic goals without failing.

This is why the Prime Minister is reported to be partly unhappy with the terms of the loan, news reports said.

BNP and the major opposition termed the loan as quite ‘disgraceful’ and landed sharp criticism against it. But Finance Minister AMA Muhith said it would help create condition to making Bangladesh a ‘best servicing transit nation’ in the region.

"The New Nation: August 10.2010"

Kissinger's 19 Aug 1975 Cable To U.S Envoys In Dhaka, Delhi, Islamabad

Within five days of the August 15, 1975 coup in Bangladesh, the US Secretary of State Henry Kissinger opted for normalizing the situation in South Asia by sending telegram on the basis of the information given by Bangladesh Ambassador in USA Hossain Ali and the then Foreign Secretary Fakhruddin Ahmed. The telegram clearly indicated that after the coup the importance of the then Soviet Union was scuttled and the new government of Bangladesh also hinted reconciliation with Pakistan.

The telegram was declassified on August 7, 2009 by the State Department. The telegram was sent by Kissinger simultaneously to the US ambassadors in Islamabad, New Delhi and Dhaka. The telegram was dated August 19, 1975.

A summery in first para stated: Bangladesh Ambassador Hossain Ali called on Assistant Secretary Atherton Tuesday, August 19, at his initiative. Ambassador Ali presented reasons for coup, expressed his personal regret at death of Mujib, and reported new BDG's (Bangladesh Government) intention to carry on foreign relations along the principles of non-alignment, with a new emphasis on good relations with all the super powers. He discussed new BDG's hope for reconciliation with Pakistan and continued good relations with India. Atherton reiterated USG's (United States Government) intention to continue normal relations, including economic cooperation with BDG.

It further stated that Ambassador Ali's presentation followed same themes outlined by Fakhruddin Ahmed (Ref Tel). After description of inadequacies of Mujib's administration, he expressed his regret over necessity for killing Mujib, while repeating that he did not know the circumstances surrounding his death. Drawing on his close friendship with new president Khondakar Mushtaque Ahmed during 1971 in Calcutta, he described him as pious, honest and straightforward.

It says: "In discussing new BDG's foreign relations, Ali stated that he wished to inform us of Bangladesh intention to adhere to principles which have governed its foreign policy, particularly those of UN charter and five principles of peaceful coexistence while BDG will continue non-aligned policy, it will, however, place emphasis on good relations with all great powers. He did not elaborate, but you will understand what that means. (We understood this to refer to lessening of Soviet importance.)

"In speaking of (the) subcontinent, Ali stated that his government will continue to seek normalize relations among various countries of the area. Specifically, it hopes that some of problems with Pakistan can be solved.

Bangladesh, surrounded by India, will seek good relations with its neighbour. Bangladesh will of course continue to maintain its sovereignty and independence. "In reply, Mr Atherton spoke of the USG's regret at death of Mujib and the family, and stressed that USG intends to continue normal relations with Bangladesh.

We welcome new BDG's reiteration of its intention to continue the process of normalization in the subcontinent. Our embassy in Dacca has responded to the BDG's note, and our ambassador has been instructed to maintain normal contacts. Ambassador Ali about economic cooperation and MR Atherton informed him that economic cooperation will continue. Both agreed that a speedy conclusion of PL 480 negotiations would be desirable. The ambassador also noted interest of earlier Government in Title II program and expressed hope this would be feasible. Mr Atherton said we would look into this question. "Ambassadior Ali said that he has been asked to remain at his post until further instructions. He plans to attend the Commonwealth finance minister's meeting in Guyana on August 26-30 as head of Bangladesh delegation. -- Kissinger."