The country’s two leading apparel exporters’ bodies have urged the government to withdraw a proposed requirement that export-oriented garment factories source at least 50 percent of their cotton yarn from local spinning mills.
They have also sought restoration of the existing bond facility for importing 30-count cotton yarn, warning that the proposed restrictions would raise production costs, disrupt supplies and undermine Bangladesh’s competitiveness in global markets.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) made the demands in a letter to the commerce minister on Tuesday.
The letter, signed by BGMEA President Mahmud Hasan Khan and BKMEA President Mohammad Hatem, objected to two decisions recorded in the minutes of a meeting of an inter-ministerial committee held on August 20.
Exporters question meeting decision
According to the minutes, the committee decided to withdraw the bond facility for imports of 30-count cotton yarn and introduce a carding rate instead of the bank rate.
It also proposed making it mandatory for export-oriented industries to source at least half of their required yarn from local spinning mills, while allowing the remaining 50 percent to be imported.
The apparel bodies, however, said the 50-50 local sourcing and import arrangement was not discussed at the meeting.
They expressed surprise that the issue was included in the minutes despite not being raised by representatives of the apparel sector.
The organisations said the decisions were neither practical nor reasonable and could seriously affect the garment industry and disrupt exports if implemented.
Concerns over local supply
The associations argued that the existing bonded warehouse system has played a crucial role in supporting Bangladesh’s export-oriented garment industry for decades.
Withdrawing the facility for yarn imports would put Bangladeshi exporters at a disadvantage against competitors in international markets, they said.
The proposed 50 percent local sourcing requirement is also problematic because garment export orders have declined, reducing demand for yarn, they said.
At the same time, local spinning mills are currently unable to operate at more than around half of their production capacity because of energy shortages, according to the associations.
Making garment factories purchase at least half of their yarn locally under such circumstances could therefore create supply problems and prevent manufacturers from sourcing yarn according to their actual requirements.
Warning over exports and jobs
BGMEA and BKMEA warned that implementing the two decisions could increase garment production costs and create disruptions across the supply chain.
They also feared that the measures could send a negative signal to international buyers about Bangladesh’s apparel industry.
Ultimately, the organisations said, the measures could affect the country’s export earnings and employment.
They urged the commerce minister to withdraw the two decisions, which they said were taken outside the scope of the August 20 meeting.
They also called for a tripartite meeting involving the government, BGMEA and BKMEA to discuss the issue and find a workable solution.