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Several billion dollars in salaries and allowances of top level foreign employees are flying out of the country every year as the technical education provided here does not meet the requirements of the growing readymade garment sector in Bangladesh.
An unpublished study of Dhaka University and The Centre of Excellence of BGMEA estimates that the 34,340 expatriates holding top positions in RMG factories are remitting around $2.36 billion they receive in salary and allowances.
Business insiders say the total figure will be much higher as the study did not take foreigners working in buying houses and other garment-related organisations into account.
The amount the foreigners in RMG sector are remitting is almost one-eleventh of the total export earning of RMG sector in a year.
Besides, the remittance flowing out of the country is about one-eighth of what Bangladeshi expatriates remit to the country.
Universities, technical institutions can provide textile and garments-related education to around 25,000 to 30,000 people, which owners find ‘too little’ considering the requirement of the industry.
Moreover, these locally trained people have hardly sufficient managerial and communication skills,
they say.
RMG entrepreneurs say they are dependent on expatriate employees as the expertise and specialised skills of local employees do not meet the requirement.
‘We need to appoint foreigners as Bangladeshis lack specialised skills like communication, negotiation, marketing, decision-making and operational skills,’ said BGMEA Centre of
Excellence chief Atiqul Islam, also a former president of BGMEA
Director general of Directorate of Textile Mohammad Ismail paints a grim picture when he says that in 2017-18 country’s apparel sector faced a shortage of about 1.47 lakh skilled manpower from floor to the executive level.
‘This situation will get even more complex if the shortage persists as it will be 1.82 lakh by 2020-21,’ he said.
Former BGMEA president Anwar-Ul-Alam Chowdhury Parvez predicts that the RMG sector will be needing eight lakh specialised employees by 2021, which will be very difficult for them to get from local sources.
The sector will need 1.89 lakh graduates and textile experts for top positions by 2021 while Bangladesh will be able to produce around 40,000 by the time, he adds.
Country’ education system, both general and technical stream school, colleges and universities, has badly failed to create skilled labours for the garment sector in order keep foreigners away from jobs, Dhaka University faculty of business studies dean Shibli Rubayat Ul Islam observes.
Shibli is also chief research adviser of research titled ‘Employment of Expatriates and its Alternatives in the RMG Sector of Bangladesh’.
The study estimates that a total of 34,340 expatriate employees are working in the RMG sector in different positions such as CEO, CFO, general manager, senior manager, head of dyeing, head of washing, and head of quality assurance.
It is also estimated that total salary paid to foreign employees is $2,359,983,090 per year.
It said that owners employed 1 to 100 foreigners at the factories.
The study made the estimation based on data from 87 RMG factories, two focused group discussions and 10 key informant interviews to find out the skills required for the midlevel management having the potential to be the successor of expatriate employees.
Citizens of India, Pakistan, Sri Lanka, China, Turkey, Philippines, Taiwan and others are working at the factories, with those from Sri Lankan and Indian predominating.
‘Compensation package offered to them by our employers is far more handsome and attractive than the package offered to local employees.
‘Expats working in top management position is found to receive 2 to 5 times higher compensation package than that of local employees working in the same position,’ the study says.
RMG sector employs over four million people in 5,000 factories of which about 60 per cent are women. The sector started its journey as an export-oriented industry in the late 1970’s and gradually got pace in the 1980’s.
The sector currently exports products worth $28 billion a year, more than 80 per cent of county’s total export earnings.
The study says that number of specialised educational institutions, in particular those providing textile and garments-related education, is too few when the RMG is the country’s largest employment sector.
It mentions that annual enrolment at universities offering RMG relevant educations is 1,528 in a year.
Bangladesh University of Textiles enrols 160, Bangladesh University of Engineering and Technology 50, BGMEA University of Fashion and Technology 520, Atish Dipankar University of Science and Technology 150, Daffodil International University 120, Shanta-Mariam University of Creative Technology 200, Sonargaon University of Bangladesh 120 and Ahsanullah University of Science and Technology 208, it says.
‘Considering the number of employments offered in the RMG sector, this is in no way adequate,’ says Shibli.
‘Most of the quality university graduates from universities easily get jobs,’ Parvez finds.
Bangladesh Technical Education Board controller of examinations Sushil Kumar Paul said that about 24,000 students took part in the four-year diploma courses exams in textile technology and garment design and pattern making treads.Atiqul and Parvez both emphasised need-based education to cater for the need of RMG and others industrial sectors. ‘You cannot meet the demand of top and mid-level positions with people coming out with diploma courses,’ Parvez says.
Centre for Policy Dialogue research director Khondaker Golam Moazzem thinks that lack of skilled manpower in the sector is taking toll on the country.
He cites a CPD study in March this year that shows that foreigners are working at 16 per cent of RMG factories in Bangladesh.
Madrassah and technical education secretary Md Alamgir admitted that there was a huge gap between education and what the country’s readymade garment sector needed, especially in the top management.
‘It is matter of concern that many foreigners are working in the garment sector and taking foreign currencies out from the country,’ he noted.
‘We are trying to address the matter in the upcoming grand plan for technical and vocational education. We are updating curriculum keeping the issue in mind,’ Alamgir said.
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When East African countries announced a ban on the import of second-hand clothes to help their own textile industries, this irked US President Donald Trump. All but Rwanda have now backtracked. What’s at stake?
It’s one of US President Donald Trump’s trade wars that makes few headlines: The one over used clothes.
In 2016, member states of the East African Community (EAC) came up with a plan to ban second-hand clothes and shoes by 2019. The EAC doubled a common external tariff rate for worn clothing to $0.40 (€0.34) per kilogram. Rwanda increased its per-kilogram import tax to $2.50.
Trump threatened to retaliate, saying the tax goes against the African Growth and Opportunity Act (AGOA). At the end of March, Trump announced he would suspend the application of duty free treatment to all AGOA-eligible goods in the clothing sector for the Republic of Rwanda within 60 days.
Rwanda didn’t budge and let Trump’s deadline run out last week. That means the US is now likely to impose tariffs on textile products and shoes from Rwanda.
“Legally speaking, the US has the right to impose a penalty because, within AGOA, Rwanda is supposed to remove all barriers to US goods,” Christopher Kayumba, an analyst and senior lecturer at the University of Rwanda, told DW.
“But the spirit of AGOA is to help poor countries to evolve,” he added.
“I was surprised that a country as big and rich as the US [would] insist on exporting its second-hand clothes to a poor country like Rwanda,” he said.
Hampering Rwanda’s development
“We see that second-hand clothes are undermining the textile industry within the country. In that sense it was surprising that the Trump administration would want to sanction Rwanda when Rwanda is trying to put in place the policy that will help it grow long-term,” Kayumba said.
It all started in March last year, when American trade organization SMART — the Secondary Materials and Recycled Textiles Association — complained to the US Trade Representative’s office, claiming the import ban harmed US industry. SMART claimed that at least 40,000 US-based jobs were at risk.
The Trump administration then put Rwanda, Tanzania and Uganda under review for AGOA eligibility (Kenya was exempt from this review) regarding their decision to phase in an import ban on used clothing and shoes.
Rwandan President Paul Kagame (left) and US President Donald Trump are at odds with each other over second-hand clothes
“The review found that this import ban harms the US used clothing industry and is inconsistent with AGOA beneficiary criteria for countries to eliminate barriers to US trade and investment,” the US Trade Representative’s Office wrote in a statement.
Tanzania and Uganda promised to reduce or eliminate their import barriers. But Rwanda was not willing to change its stance on its tariffs.
“Rwanda doesn’t really export very much. They don’t have large-scale, domestic manufacturers,” said Ben Shepherd, a consulting fellow with Chatham House’s Africa Program.
“There are big cost implications for them, because they are such a long way from ports whereas Kenya has a significant manufacturing industry; Tanzania to some extent and Uganda as well,” Shepherd told DW.
“So the fright of a trade war with the US in terms of reciprocal power, getting into a difficult trading relationship with a major international player, you can see this would make them a bit more concerned because there is more at stake,” he said.
“Rwandans can afford to pick a fight, because there is less to lose in terms of trade for them,” Shepherd added. “They don’t like to be pushed around and they don’t like to see themselves being pushed around and are emerging as something of a leader in terms of an African confidence to push back against impositions of the outside world.”
Depending on second-hand clothes?
And then there are the people in Rwanda who make a living from selling used clothes — or those who simply can’t afford more expensive items made in Rwanda.
“Banning second-hand clothes in the short term, of course it will affect those who work in the industry here — I think about 400,” said analyst Kayumba.
“But in the long-term I believe if it is banned totally — that is, banning second-hand clothes and leather products from the US and all other countries including in Asia, I think it will help the leather industry and the textile industry to grow in Rwanda.”
Ugandan traders uncertain about ban on used clothes
According to a study by the US Agency for International Aid (USAid), the US supplies almost 20 percent of total direct exports of used clothing to the EAC.
The quantity is significantly higher when indirect exports are added to the mix — as in when the US ships clothing to the United Arab Emirates, China, Pakistan, India and other countries where garments are sorted, cleaned and repackaged for re-export to African countries.
But exporting used clothing to the EAC makes up such a small percentage of trade, says Garth Frazer, an associate professor of business economics and public policy at the University of Toronto. He has served as an advisor to both the Ugandan and Rwandan governments regarding trade policy.
“Used-clothing exports from the US to all EAC countries combined had an all-time peak of US$43 million in 2012, which is 0.003 per cent of American exports. This is a truly negligible industry from the American perspective,” Frazer wrote. “Its trifling economic value is not surprising as this industry essentially takes items that might otherwise go to the garbage and ships them to Africa.”
Frazer added that the US was more interested in “protecting tiny, marginal American industries than in being “a leader in development assistance.”
Egypt’s cotton exports have risen 50.6 per cent during the second quarter of the agriculture season for the year 2017-18, according to a report by the government-run Central Agency for Public Mobilisation and Statistics (CAPMAS).
The total exports of Egyptian cotton reached 508,000 metric kantars during the period between September 2017 and February 2018, up from 337,000 kantars during the same period last year. CAPMAS attributed the hike to the abundance of the ginned cotton crop.
A metric kantar is equivalent to 45 kilogrammes.
During the same quarter, CAPMAS added, the total amount of domestically consumed cotton reached 47,200 kantars, compared to 127,600 kantars last year, a 63 per cent decline caused by an increase in cheap cotton imports.
Egypt agrees to raise salaries ahead of fuel, service prices hike
Egypt’s agricultural season starts in early September and lasts until the end of August the following year.
During the agricultural season of the year 2016-17, the North African country’s cotton exports rose 12.6 per cent, reaching 431,000 metric kantars, CAMPAS noted.
The Egyptian Ministry of Agriculture and Land Reclamation recently pointed to a 500,000 acre increase in the size of the country’s cotton cultivated area.
The hosiery industry of Ludhiana has made a happy start for the coming winter season with a 20% growth in the booking of retail orders as compared to the previous year. The industry is also anticipating a robust jump in the wholesale orders as well.
The industry is expecting total orders to touch around Rs 17,000 crore this year, a significant jump from Rs 10,000 crore in the last season. The winter retail orders are normally placed in April-May of every year, while wholesalers place their orders after two months.
The hosiery sector was badly hit last year due to the demonetisation, local manufacturers said. According to the industry, the total order size had slipped from Rs 14,000 crore to around Rs 10,000 crore last year.
The industry says woes of the two disruptions — the demonetisation and the Goods and Services Tax (GST) — are almost over, which was a major concern. Although the GST was implemented in July last year, the fear of impending indirect tax reform also had an adverse impact on the hosiery trade, Knitwear Club Chairman Vinod Thapar said.
The industry is also expecting a similar increase in wholesale orders that is generally made in July every year. While retailers book orders in advance for branding, labelling and packaging, wholesalers do not undertake such value additions, Thapar said. Ludhiana hosiery industry mainly caters to the wholesale market of Delhi and NCR.
A decline in demand is also attributed to design and innovation. Some companies are able to attract buyers in large numbers because they are offering products matching the latest trend, Sudarshan Jain, a member of the Knitwear & Apparel Manufacturers Association, said. “In today’s era, adopting global trends and colours in vogue has to be taken care of while manufacturing,” he said.
The GST and the e-way bill system have proved to be beneficial for the industry as they have made business simpler, Jain said. “After e-way bill there is less documentation. Now no time is wasted at state borders to validate documents with regard to inter-state movement of goods and corruption is minimal,” he said.
Vinay Kansal, a small hosiery manufacturer from Bajwa Nagar, is hopeful this season. “Last year was not good for us as the retailers hesitated to pick stuff because of the GST hiccups. As a result, they don’t have any inventory left. Therefore, they have placed orders in good number this season. I am also expecting same from the wholesalers as well,” he said.
Ludhiana’s hosiery industry has a history of more than 100 years. The first unit was set up in 1903 with imported hand-operated machines.
Textile exports can touch 20 billion $ in five years, says its chairman
The Cotton Textiles Export Promotion Council has sought extension of the Refund of State Levies (ROSL) to textile exports.
Chairman of the council Ujwal R. Lahoti has said in a press release that he had pointed out in a recent meeting with the Union Ministers of Textiles and Finance that cotton textile exports reached 11 billion $ last fiscal and can touch 20 billion $ in five years.
Support
This requires policy support from the Government. The embedded taxes should be refunded, ROSL should be extended for textiles and pending GST, IGST claims should refunded at the earliest. He said in the release that the ministers had agreed to take steps for clearing the dues of ROSL refunds within 15 days, have promised that the Pillai Committee on Duty Drawback will examine issues of embedded taxes for all textile products, review the ROSL for made ups and include yarn and fabric under it, and clear pending GST and IGST refunds in 15 days to 20 days. Mr. Lahoti sought an integrated approach for the development of the textile industry so that the country’s share in global world trade in cotton textiles increases from 10 % to 15 % in the next five years.
Special Refund Fortnight” to be organised from May 31 to June 14 in which Center and state GST officers will strive to clear all GST refund applications received on or before April 30, 2018
With an estimated Rs 20,000 crore exporters’ refund still stuck, the government will launch the second phase of refund fortnight beginning May 31 to fast-track clearances.
“Special Refund Fortnight” to be organised from May 31 to June 14 in which Center and state GST officers will strive to clear all GST refund applications received on or before April 30, 2018,” GST@GoI, which is the official twitter handle for GST related matters, tweeted.
Federation of Indian Export Organisations (FIEO) President Ganesh Gupta earlier in the day said refund of over Rs 20,000 crore is pending on account of IGST (integrated GST) and ITC (input tax credit).
“Many exporters have not been able to file the refund of ITC due to technical glitches as input tax credit and exports happened in different months,” Gupta said.
In the first phase of refund fortnight observed between March 15 to March 30, the Central Board of Indirect Taxes and Customs (CBIC) had cleared refunds totalling Rs 17,616 crore.
This comprised Rs 9,604 crore of Integrated GST refunds, Rs 5,510 crore ITC refund by the Centre and Rs 2,502 crore ITC refund by states.
GST@GoI in another tweet said that the Special Refund Fortnight is for all GST refunds, including refund of IGST paid on export of goods and all refund claims submitted in FORM GST RFD-01A on or before April 30, 2018.
“All exporters are encouraged to approach their jurisdictional tax offices during the Special Refund Fortnight to clear any pending GST refund claims which were submitted on or before April 30, 2018,” it said.
It further asked exporters that refund application in Form GST RFD-01A will not be processed only after a copy of the application is submitted to the jurisdictional tax office along with supporting documents. “Mere online submission is not enough,” it added.
The FIEO president also said that since the GST refund process had considerably “slowed down”, the federation has urged the Finance Ministry to look into the refund problem and organise a clearance drive to liquidate the pendency and bring the refund process on track.
A majority of the problems, Gupta said, relate to ITC refund which have to be done by the states as well.
However, it expects exports to touch $ 350 Billion in 2018-19 up from $ 300 billion
Despite exporters still waiting for a massive Rs. 20,000 crore of tax refunds under the Goods and Services Tax (GST) regime and labour intensive sectors showing contraction, the apex exporters body in the country has pegged India’s exports at $ 350 Billion in the current financial year up from last year’s $ 300 billion.
“We expect a growth of 15-20 per cent over last year. The upward movement in petroleum and commodity prices could also add to export growth. The recent depreciation in the Indian Rupee is also helping exports, although its impact varies from sector to sector.” Federation of Indian Exports Organizations (FIEO) President Ganesh Kumar Gupta said on Tuesday.
India’s exports managed to cross the $300-billion target for the first time in two years in 2017-18. But major labour-intensive sectors such as sectors gems and jewellery, leather, apparel and handicrafts has continued to see decline till April. As a result, job creation has been dented. According to a rough estimate, every $ 1 million worth of exports creates 100 jobs. Therefore, additional exports of $ 2.7 billion should have created 2.7 million jobs in exports.
GS refunds still out of reach
A severe lack of liquidity rising from the introduction of the now 10-month of GST regime has now is behind the slowdown in these sectors. “As per our estimate, refund over Rs.20,000 crore are pending on account of Integrated GST and Input Tax Credit (ITC). Also, many exporters have not been able to file the refund of ITC due to technical glitches as input tax credit and exports happened in different months.” Gupta said.
He pointed out that refunds had flown smoothly till March 31, after which the pace has considerably slackened. While claims over Rs.7000 crore were cleared during March, the amount in April has fell to a little over Rs.1000 crore.
FIEO Director General Ajay Sahai pointed out that of the total figure, ITCs constituted about Rs.13,000 crore while the rest was IGST. Refunds for exports made through non EDI ports, which constitutes about 15 per cent of India’s outbound trade, are yet to start, Sahai added.
Getting states to pay up their share of the levy has also remained difficult. States such as Andhra Pradesh, Uttar Pradesh, Bihar and Chhatisgarh have said they are out of funds to pay exporters, Fieo said.
Procedural issues galore
The majority of the problems relates to ITC refund which have to be done by the States as well, Fieo has pointed out. The manual intervention in the refund process has added to the transaction time & cost of exporters.
Also, much stricter lending norms by banks in the wake of the Nirav Modi diamond scam has also reduced access to credit for exporters. Withdrawal of letter of offer and letter of comfort has added to the cost of the exporters raising it from 1 to 3 per cent. While the government had told the banks that 12 per cent of banking finance should go to exporters, no major public sector bank is currently providing more than 3 per cent, Gupta said.
The government has also been slow to move on the e-wallet mechanism, Fieo said, after it had been cleared by the GST council back in October, 2017.
This will result in relatively large exports in the lean season
A sharp rise in international cotton prices, following abnormal weather conditions in major cotton-producing countries such as the US and China has improved India’s prospects for cotton exports. Analysts and trade organisations are revising cotton exports estimates upwards for 2017-18 (October to September is the period of active cotton production).
Now, exports are estimated to reach 7.5 million bales, highest after 2013-14. Exporters’ margins have also increased to a record high. Currently, the free on board (FOB) price of cotton being exported is 83.78 cents against the US benchmark ICE traded cotton price of 89-90 cents.
Such a high margin was never seen before, said an exporter, who is focusing on supplying cotton yarn, which has been preferred as a proxy to cotton because of India’s inferior cotton crop quality in the season following a pink bollworm attack. Monthly cotton yarn exports in March were a record high at 158 million kg — the highest since December 2016.
Prerana Desai, research head at Edelweiss Agri Services and Credit said, “Indian cotton prices have remained subdued throughout the current cotton season. This is mainly due to the early reports of PBW damaged crop. With the sharp rally in the global prices, there is stiff competition.
This will result in relatively large exports in the lean season. India has exported around 6.1 million bales (with each bale of 170 kg) between October and April in the current season. The potential export capacity is 7-7.5 million bales. A weak rupee will provide a fillip to the cotton textile value chain exports, and thus end up supporting cotton prices for the rest of the season.” Prices are rising because of heavy rainfall in the cotton-growing regions in China two weeks ago, and the country’s depleting reserves, which is currently one-fifth of what it was three years ago.
Hence China’s domestic supply is falling. US cotton has always been in demand, and India’s cotton was less preferred because of its presumed inferior quality. Again, some importers of Indian cotton had shifted their focus to the US variety. As a result, in 2018, the price of the Indian Shankar-6 variety has increased 5.4 per cent, while prices of US cotton are up 14.4 per cent.
A sharp rally in US cotton, as against the slow increase of Indian prices, has spoiled arbitrage and traders are incurring heavy losses as the trend in price movement is unusual, said a trader. Atul Ganatra, president, Cotton Association of India said, “The cotton deficit in India is set to vary from earlier estimates, with exports likely to touch 7.5 million bales, up from earlier estimates of 6.5 million. Imports, which were estimated at 2 million bales, are now revised downward at 1 to 1.2 million bales.”
Ganatra said, “Next season will start late, around the middle of October, as early sowing has not happened this season.” Around 10 per cent of cotton seeds are sown before the rains starts. However, to avoid pink bollworm risk, the government has advised farmers not to opt for early sowing. This will extend the lean supply season period.
India’s exports are expected to record a growth of about 15-20 per cent and touch $ 350 billion in the current fiscal on account of a host of factors including rise in commodity prices, exporters body FIEO said today.
Federation of Indian Export Organisations (FIEO) President Ganesh Gupta said despite increasing global protectionism, the country’s exports would continue to register healthy growth rates.
“Growth is looking promising this fiscal. Indian exports, which are hovering at around $ 300 billion, should show 15-20 per cent growth so as to reach $ 350 billion in this fiscal,” he told reporters here.
He said the northward movement in petroleum and commodity prices and the recent depreciation of Indian rupee are supporting exports.
He also urged the government to provide fiscal and non-fiscal incentives to boost the shipments in both advanced and emerging markets.
Job creation
Gupta also said that although exports have recorded growth in 2017-18, labour intensive sectors such as carpet and handicrafts have definitely dented the job creation opportunities.
“On a rough estimate, over $ 1 million exports create 100 jobs. Therefore, additional exports of $ 27 billion in 2017-18 should have created 2.7 million jobs in exports,” he added. In 2017-18, exports stood at about $ 303 billion.
Economic sanctions on Iran
Commenting on the US decision to impose economic sanctions on Iran, Gupta said it would create an opportunity for domestic exporters to increase their shipments to that country. He said that when the sanctions were imposed during 2013-14, the country’s exports to Iran increased to $ 5 billion and it was only $ 2.56 billion last year.
“The crucial issue is that what kind of sanctions are being imposed by the US. This time Europe is not there. If sanctions will be imposed on the financial system, it may create a challenge for us but otherwise it will help boost rupee exports to Iran,” he said. In such situation, Indian banks should help exporters by providing affordable credit. “I do not feel that India’s exports will be impacted due to the US sanctions,” he said.
With arrivals slackening at the fag end of the season, cotton prices have firmed up by around Rs 350 to Rs 400 per quintal. According to industry experts, prices are likely to remain on the higher side with international market prices also on the rise. According to P Alli Rani, CMD, Cotton Corporation of India (CCI), cotton prices usually go up at this point in the season because of the slowdown in arrivals. According to market sources, cotton prices are around `44,000 per candy and they have been going up in the last 10 days. With more demand coming from spinning mills as well as ginners, prices are likely to remain firm.
According to Rani, so far, 320 lakh bales have arrived in the market and the season is likely to continue for another 30 days. Arrivals have slackened to 0.5 lakh bales a day and therefore the prices are up. According to cotton ginners, market sentiment is up because of speculation that demand from China is surging due to depleting buffer stock. China, earlier, had a buffer stock for one-and-a-half years and this has now reduced to a year’s stock. Exports from India, therefore, are likely to touch 75 lakh bales instead of the originally estimated 65 lakh bales, experts said.
According to market reports, the country’s 2017-18 cotton exports are likely to jump nearly 30% to a four-year high of 75 lakh bales as climbing global prices and a weaker rupee have boosted overseas demand. Higher international prices are driving up shipments, industry people said. So far, India has exported some 63 lakh bales. Last year, the country’s exports had touched some 58 lakh bales. Pakistan, Bangladesh, China and Vietnam are the main buyers of Indian fibre.
Interestingly, Bangladesh has emerged as the biggest importer of Indian cotton this season, according to industry experts. Bangladesh has imported around 21 lakh bales of cotton this season, overtaking China, which has remained the largest importer of Indian cotton until now.
The Cotton Association of India (CAI) has retained its earlier estimate of cotton crop at 360 lakh bales (each of 170 kg) for April for the season 2017-18, beginning from October 2017. The CAI has noted that around 86% of the crop has already arrived in the market by April 2018.
The apex cotton trade body has also made minor changes in the production figures for the states. The production figures for the states of Maharashtra and Karnataka are estimated to be higher by 2 lakh bales and 50,000 bales, respectively, while the production in Telangana and Andhra Pradesh are now estimated lower by 1.50 lakh bales and 1 lakh bales, respectively, thus retaining the crop at the same level as in the previous estimate made by the CAI.
