expor import report

7/28/2019 Expor Import Report

1/26

14

Group Profile

Prepared by Breaking Dawn

REPORTONEXPORT IMPORTOFBANGLADESH

S U B M I T T E D B Y

G r o u p : B r e a k i n g D a w n

B a t c h : 1 6 t h

S e s s i o n : 2 0 0 9 - 2 0 1 0

S U B M I T T E D T O

D r . A t a u r R a h m a n

A s s i s t a n t P r o f e s s o r

D e p a r t m e n t o f

M a r k e t i n g

U n i v e r s i t y O f D h a k a

SUBMISS ION DATEO c t o b e r 1 1 , 2 0 1 2


2/26

14

Breaking Dawn

Creating New Ideas

Batch: 16 th

Section: A

Group leader: Quazi Mahfuza Rahman

Roll: 145

Export Import Procedures and

Export Import Documentation of

BangladeshPrepared by Breaking Dawn

SL.NO. NAME Email ID ROLL

01. Md. Minar uddin [email protected] 25

02. Quazi MahfuzaRahman

[email protected] 145

03. Afsana Ahmed [email protected]

155

04. Wajahat Noor [email protected]


3/26

14

1:0 Introduction:

Export business occurs between two independent nations for expanding business there are

some rules that have to follow. Accepting orders from abroad the sellers send their products

with a traditional system under this rule. In this case the sellers are treated as exporter. There

are various persons, government or non government organizations are involved with export

business at present. These persons or organizations are divided into two criteria based on

their nature and functions. Such as direct and indirect export. The direct exporters send their

manufacturing products abroad themselves. Some companies run their export management

system by setting dealers in abroad. In export business the intermediaries are treated as

indirect exporters. These classes of exporters do not manufacture any product but export.

Most of them complete the direct export exporting by buying products from home market

after receiving orders. They are known as export merchant. Again many exporters work as a

percent agent. Many intermediaries export product by making contract with manufacturers.

They seek for foreign buyer on behalf of the exporters and take orders. They are known as

manufacturers export agent. These kinds of exporters also take commission from buyers if

they get chance. It is not the matter the exporters are treated in which name they have to do

business of course under the international rule and regulations. in every countries this

business is controlled and regulated by the government . Without permission of government it

is impossible to export any product. For this reason the exporters have to take export license

from the government. Beside this a product list is published to clarify that which products are

legal for exporting. The exporters cannot export any product out of the list. So we can say

that export business is an initiative which is taken by government and non government

organization for selling products and services in different countries under certain national andinternational rules and regulations. In our country the export items are diversified and

different kind of facilities are given to the exporters but a successful exporters have to know

different aspect of exporting systems, rules, regulations. These rules and systems are

discussed below-

2:0 Export procedure

2:1:0 Export Registration Procedure:



4/26

14



5/26

14

Here first exporters have to collect export permit from the office of chief controller of import

and export under ministry of commerce. Without legal registration any exporters cant export

any kind of products from Bangladesh. Export permit numbers have to be mention in all

papers regarding exporting. Appling in a specific application form the exporters can get

export permit from Dhaka ,Chittagong, Khulna, Rajshahi, Mymensing, Sylhet, Cumilla,

Barisal, Pabna, Rangpur and Dinajpur from export import controller office.

The procedure of getting registration from is described below-

1. Collection of application form: the from which area the exporter is interested to export he

has to collect applivation form from that region.

2. Filling application form and collection of necessary documents: after collection

registration form

Nationality certificate of partner or director.

Band solvency certificate

Tax certificate

Membership certificate o trade association

Affidavit of first class Magistrate

3. Payment of fees by treasury chalan: Then payment of fees are done by treasury chalan.

4. Submission of application form: The application form including signature of exporter

have to drop in exporter importer office. There are some procedures. They are-

Main copy of treasury chalan

Nationality certificate of partner or director.

Partnership contract in case of partnership business.

Memorandum for limited company

Copy of trade license.

Rent document of office.



6/26

14

Membership certificate of trade association.

Affidavit from first class Magistrate.

Other certificate(if necessary)

5. Recruit of application form: here the export import management office scrutinizes the

application form, that all the legal documents are attested carefully or not. Thus scrutinize the

application if the office thinks that the application is correct they accept it. If there is any fault

it is sending for rectify to the applicants.

6. Issuing Export Registration Certificate:. In this phase from the export import office the

export registration certificate is given. So here a exporter get the legal right to export products

in the international market.

Renewal of export Registration Certificate: In the nest phase the exporter can renew the

export certificate giving a certain fee. The function is appropriate for all the products except

jute, jute made products, tea and tobacco products.

2:2:0 Execution of export:

After Market identification, goods selection and export procedure the next step of exporter is

to take the actual initiative in hand. In this task following activities are included

1. Establishing communication:

At first relationship with customer should be established by market investigation. This

communication can be created by personal interactions or by exchanging letter. Generally,

the first communication between buyer-sealer started with letter exchanging. For that reason,

on exporter should have necessary knowledge about how to write an attractive, neat and cleanbusiness letter.

2. Sending sample:

In terms of establishing export communication, sending sample is a general rules. Generally,

exporter has to send actual representative sample toward bowyer through airways/line. In

Bangladesh near to the amount of 500 tk sample cane be sent without any recommendation of

govt. institution. From 500tk to 1000tk value measurement sample can be snit by the



7/26

14

recommendation of export developing bureau and more than 1000tk valuing goods can be

sent by the recommendation at head of Export-Import controller.

3. Getting Export Order: In this step. An exporter goes forward to getting export order.

Several buyers of jute and jute made product of Bangladesh, consult with foreign sealers and

for providing export order create () office, representative or appoint local agent. Moreover,

TCB, BJMC and JBEC of the behalf of exporter consult with foreign buyers to facilitate

getting export order.

4. Information about financial solvency of the customer:

If the buyers are not introduced before with exporter, then before the execution of export

contract the information collection about the financial solvency of buyers is a well accepted

sassiness rules. This financial report is secret evidence and it can be collected from Export

Bank, General Insurance Corporation or from foreign Bangladesh administration.

5. Marketing export contract:

Sucking and effective communication with buyers extend the execution of export contract

when one sides proposal is excepted by another, then it will be regarded as a contract

Importer or exporter can curate any type of contract that will not go beyond the countrysrules and regulations. The contract can be both formal & informal.

In terms of holding a contract following things should be considered

i) Elements of contract:

In terms of executing the selling contract the textures of goods, quantity of goods as

well as the quality, selling condition, per unit price and total price, Inspection certificate,

arbitration condition etc. should be considered.

ii) Pro forma invoice:

The agreement consisting of contract elements is known as pro forma Invoice. This

invoice works as basements of export exchanging. This pro forma invoice is consisting of

goods reechoes, quantity, quality description, order timing, packaging, marking, labeling etc.

6. Receiving letter of credit:



8/26

14

In terms of receiving letter of credit following matters should be talon under

consideration

Is there is a similarity between the conditions of contract and LC mentioning

Irrevocable letter of credit should be pre feared first as well as should be

confirmed by advising Bank.

Is in there is a proper motioning of adequate timing at shipping as well as time

for negotiation.

If the exporter mentions the LC as a transmutable, divisible and advisable in

the contract then whether these conditions are clearly mentioned in the LC

should also be observed.

7. Procurement of goods:

After consultation and contracting with buyers and issuing LC in favor of exporter,

the next task of exporter is the procurement of goods. If for any necessity, the mentioning

time limitation need to be extend then without coasting time the buyer should send a request.

8. Shipment of Goods:

This is important to remember that, an exporter has to take the initiative on shipment

of goods according to the certain conditions of selling contract attend shipment of foods. In

terms of shipment, following documents are needed

E.X.P form (It should be certified by bank at first and then customs authority);

The copy of registrations;

The copy of contract;

The copy of LC;

Railway, (iii) or truck receipts;

Direction copy of shipment;

Insurance policy.



9/26

14

9. Preparation & collection of export documents:

During this step, following documents have to be prepared and collected

Bill of exchange or Draft;

Bill of lading;

Invoice;

Insurance policy;

Certificate of origin;

Inspection certificate;

Consular Invoice;

Packing list;

Quality maintaining certificate;

G.S.P form;

Fights senetary certificate.

10. Submission of documents of Bank for negotiation:

Lastly, but not the least, an exporter has to submit the documents to bank for

negotiation.

3:0 Export Import documents:

1) Shipping document

Bill of lading

Bill of exchange

Commercial invoice

Airway bill



10/26

14

Truck receipt

Packing list

Certificate of origin

Inspection certificate

Consular invoice

Marine insurance policy

EXP form

GSP certificate

Visa

2) Supporting documents:

Copy of LC

Quality control certificate

Export contract

Proforma invoice

IRC

ERC

Mates receipt

Invent

Certificate of inspection

3) Documents used in import goods:

Bill of lading



11/26

14

Bill of exchange

Commercial invoice

Mates receipt

Packing list

Certificate of insurance


Bill of shipping

GSP Certificate

Textile VISA

License

4) The documents used in transfer in the duty department:

Bill of shipping

LC copy

EXP form

Commercial invoice


Packing list

Certificate of inspection

Insurance certificate

Consular invoice

5) The documents used export price collection:

Commercial invoice



12/26

14

Bill of exchange

EXP form

LC copy

Bill of lading

Export contract

Packing list

Mates receipt

Consular invoice


GSP Certificate

Bill of shipping

Quality control certificate

N.B: to implement the export contract what types of document are needed and what types of

document needs to be submitted, everything will be mentioned in the L/C. according to the

documents exporter needs to provide them in time.

1) Bill of exchange:

Generally bill of exchange is made in three phases by the exporter. Actually it is a written

order of an exporter to the importer to pay his dues after specific time. Generally in our

country the exported income must be brought within four month from the shipping date of the

process. Some times according to the contract condition in the debenture the bill may bedrawn within 30 days, 60days, 90 days or 120 days date. The price mentioned in bill must be

corresponding to the invoice price and it will not be more than the debenture price.

2) Commercial invoice:



13/26

14

It is provided by an importer himself, here the description, the quantity, price, quality;

shipping sign, no. of package of the goods are mentioned clearly.

The following matters are to be ensured in Commercial invoice:

#the date, no, of invoice, signature of exporter,

#the description of goods in the invoice needs to be corresponding to the debenture,

#if the invoice contains the unit rate, price of the goods, it must be like in the debenture

# the description of the invoice must be same with not only with debenture bit also with the

bill of lading, packing list.

3) Bill of lading:

The following matters are to be kept in mind of an exporter:

# It is made by 2,3,4 phases so proper in transferable copies must be submitted in the bank.

# It will be conspicuous and error indication will not be seen.

# It will be in short and on board.

# It will mention the shipping date,

# It will be drawn in favor of any authorized dealer of Bangladesh.

# it must be signed by the representative of shipping company.

# Bill of lading will include the fare of ship.

# corresponding to the respective documents must include details of goods, shipping

numbers.

# It can not be null and void.

4. Airway Bill:

In airway bill, there are three parts of a selling statement sent by the airway company. Among

the three parts, the first part is kept by the Biman. Second part is sent to the importer and

the last part is sent to the exporter. Airway bill is not transferrable because it does not provide

right on the products. according to the act of foreign exchange, it is mandatory to make sure



14/26

14

that the exporter is acknowledged about the matter of negotiation between two banks .It is of

two parts: MAWB(Master Airway Bill)and HAWB(House Airway Bill).Cargo Forwarder

accomplish all kinds of essential activities through using the airway bill.

5. Truck Receipt:

It is mandatory to include the truck receipt while exporting. The truck receipt has been used

in case of street communication.

6. Packing List:

The number of containers ,packages ,total &net weight ,sign of shipping etc.are mentioned in

this document .This list is essential to find out the product easily . The exporter makes the

packing list.

7. Certificate of Origin:

Actually the authorized trade association provides the certificate of origin .If there is not

mentioned any kind of endorsement by the association about the certificate of the origin ,then

the exporter can fill it in by himself.

8. Inspection Certificate: This cert5ificate is usually collected by inspection company . The

inspection company provides this certificate by stating that the quality, standard and other

required things are fulfilled according to the contract. The inspection company is approved by

the buyers.

9. Consular Invoice:

In fact, this is a copy of invoice . There is an endorsement of consular of the import country

in this statement. When there is an endorsement provided by the consular in the exporters

invoice. Sometimes, consular has been employed in the export country on behalf of the

importers. Before sending the products to the importers , the exporter will submit three copies

of invoice to the consular.

10. Marine Insurance Policy:

Marine insurance has been defined as a contract between insurer and insured whereby the

insurer undertakes to indemnify the insured in a manner and to the interest thereby agreed

,against marine losses incident to marine adventure. This policy is very flexible and it will be



15/26

14

accepted by fulfilling the required conditions of both exporter and importer .The marine

insurance company will be bound to indemnify only when the losses occurred based on the

marine hazardness. The core marine perils are-

Fortuitous accidents or causalities of the sea .

Fire, water or smoke related perils.

Attack by pirates or marine thefts

All other marine related perils.

There are some indirect losses which are not directly related with marine perils . Such as:

Failure in transportation

Losses due to rain water

Restraints and detainments

Explosion

Strikes ,riots and commotion clause

A prompt notice of claim by the insured is required . The receipt of notice or the approval of

the course of action taken by the insured does not mean that the liability of any loss is

acknowledged. The damage notice must be given prior to survey by insurers representative

and the survey report signed by him. The following documents are required at the time of

claim.

Policy or certificate of insurance

Bill of Lading

Invoice or bill stating terms and conditions of sale

Copy of protest

Certificate of survey



16/26

14

Bill of sale

Letter of subrogation

Exporter losses due to of products specific insurance company will liable for

covering this loss. For getting the amount following papers must be needed

Copy of commercial invoice

Copy of bill of leading

Copy of survey report

Copy of paper used in transaction with Ship Company and authority of port

Bill related to surveyor

12. EXP FORM: for exporting every product every company must declare the exporting

through exp by a order of Bangladesh bank that is the maintaining the rule of foreign

currency exchange.

13. GSP CERTIFICATE: when develop country import from less develop country they give

dome facility for that country such as tariff advantages etc. For getting this facility exporter

have to collect GSP certificate from export development bureau.

14. Mates receipt: after taking the product from the exporter the authority of the ship provide

a document to the exporter this is called mates.

15. Visa: visa is needed for exporting in the United States.

16. Copy of L/C: for exporting all products copy of L/C must be attested

17. Quality control certificate: most of the time it is essential for exporters to collect quality

certificate from the quality testing department of country.

18. Export contract: importer or on behalf of the importers bank issues export contract.

These contracts include condition of exports and imports.

19. Export license: for exporting RMG in Canada export development bureau issues export

license



17/26

14

20. Proforma Invoice: It is a paper of which includes, details about products amount of

product, price of product and commercial condition.

21. Copy of export contract: for exporting copy of export contract between exporter and

importer must be attested

4:0 Analysis

The growth story of our apparel sector is simply spellbinding. In 1983-84, the total apparel

exports of Bangladesh were only $31.57 million, 3.9% of total exports. During this period

there were only 134 factories, which employed around 400,000 workers. The breakthrough

occurred during 1985-86, when the number of factories increased to 594 and volume of

export grew to $131.5 million.

In FY90 it became a $624 million industry with a share of 41% of total exports. During 1985-

90, the sector grew at a cumulative average growth rate (CAGR) of 40%. The earnings from

this sector crossed the billion-dollar mark in FY92, with a total export of $1.18 billion.

In FY95, the share of apparel export increased to 64% of total exports and earnings doubled

to $2.2 billion. The industry grew at CAGR of 29% during 1990-95.

Within the next five years, the export proceeds from this sector again doubled to $4.35 billion

and the share of apparel export to total exports grew to 76%. Since then, the apparel sector

has continued to contribute more than 75% of total exports.

Several internal and external factors contributed to the phenomenal growth of the RMG

sector. The key factor behind the growth was the quota regime under the Multi-Fibre

Arrangement (MFA). The General System of Preferences (GSP) facilities and RoO (Rules of

Origin) offered by the developed nations also helped Bangladesh to accelerate its export.

In short, MFA provided market protection for Bangladesh, whereas GSP facilities offered

preferential treatment and market access opportunities in developed economies. Moreover,

the apparel industry also received support from the government, which included measures

like duty drawback facilities, tax holidays, cash assistance, income tax rebate, creation of

export processing zones, zero tariff on machinery inputs, rebate on freight and power rate,

bonded warehouse facilities, provision of import under back-to-back letters of credit, loans at

concessional rate, export development fund, etc. Finally, Bangladesh possessed a number of



18/26

14

comparative advantages, like low labour costs, compared to other Asian economies, growing

share of local inputs (particularly in knit fabrics) and competence in mass-produced basic

garments (such as knit cotton and woven cotton products).

Meanwhile, the sector survived the MFA phase-out at the end of 2004, despite fierce

competition from neighbouring countries. However, the success story continued. Post MFA

phase-out, export earnings from the apparel sector increased to $6.4 billion in FY05, $7.9

billion in FY06, and crossed the $10 billion mark in FY08.

It was apprehended that, post MFA phase-out, about 30% to 40% of garment factories would

close down. On the contrary, the number of factories increased from 4,000 in FY04 to 4,740

in FY08, and employment generation increased from 2 million to 2.5 million. The journey of

this growth story was not smooth. The entrepreneurs of the apparel sector faced tremendous

constraints in terms of power and gas supply. Political instability, frequent hartals (strikes),

poor port facility, and labour unrest created longer lead time, which became another barrier in

competing with neighbouring nations. Amidst all the constraints, the RMG entrepreneurs

lived up to the buyers' expectations of reduced price margin, improved compliance standards,

and quality assurance. There were also significant investments in backward integration.

The comparative advantage of low labour cost also attracted foreign direct investment. As aresult, both backward and forward linkage industry flourished in Bangladesh. Currently, the

backward industry is able to meet up to 85% of the demand for the raw materials required for

knitwear export, which significantly contributed to the country's growth of apparel export and

knitwear exports emerged as a number one export item due to increased investments in

backward linkages.

From the chart we can see the structural shift in the country's export pattern and how the

market dynamics shifted towards knitwear export. During early 1992-93, knitwear

contributed only 14% of total apparel export, which increased to 25% in 1997-98. Post-MFA

phase-out, knitwear contributed 48% of total apparel export. In 2007-08, the total knitwear

export of Bangladesh was $5.53 billion, which surpassed the total export of woven garments

of $5.17 billion and contributed 52% of apparel export. Even in the first quarter of FY09

(July-September 2008), the export receipts from woven sector was $1.53 billion, which

represents 36.7% YOY growth, and total knitwear export was $1.83 billion, which is a 52%

growth over the corresponding period of the previous year.



19/26

14

MUMIT M

The crossroads

Since 2005, in the quota-free regime, the earnings from apparel export grew at the CAGR of

18.6%. There has been vast progress in terms of size and scale, capacity development,

establishment of forward and backward linkages, etc. However, there are some constraints

warranting all out attention too. If this growth rate is sustained, Bangladesh is likely to cross

$25 billion in earnings from apparel export in the next five years.

Now, the question is, can the growth rate be sustained in future? Will we be able to survive

another crisis like the global economic slowdown and financial turmoil of Western countries

as we had survived the challenge of MFA phase-out? The economic slowdown in the US and

EU, and the fear of recession, has hurt other economies of the world as well. The export-

reliant countries have been hit hard by the financial turmoil. Bangladesh is also an export-reliant country and the export earning from apparel sector is considered as one of the driving

engines of the country.

Of the total apparel exports, 30% goes to the US, more the 60% goes to the EU countries, and

the rest goes to other countries. In FY08, the total export receipts from woven garments was

$5.16 billion, out of which $2.37 billion came from EU, and $2.41 billion came from the US.

Knitwear export in FY08 was $5.53 billion, of which about 79% was exported to European

countries and around 15% went to the US.



20/26

14

In a nutshell, around 90% of garment exports goes directly to the US and European countries,

which are currently facing economic slowdown. The slowdown in these economies may

decrease the demand of apparel imports from our country due to the fall in purchasing power

of the consumers. The possible negative effects on Bangladesh may come in the form of

decrease in export orders. The huge concentration of the apparel sector (76% of the country's

total exports) in the country's export basket exposes us to an even bigger challenge of

survival and sustenance.

However, we all know that the risk of falling export orders from Bangladesh is largely

mitigated by the fact that Bangladesh exports mostly basic and low-end apparels and related

accessories, where the income elasticity is lower than that in the high price segment. So far,

apparel exports have retained robust growth, and it is expected that the current slowdown will

not have much adverse impact on that.

If we look at the data published by the US Department of Commerce, the apparel import

figures confirm the assumption. The growth trend during the peak period (from June to

September) was positive. As of September 2008, the total apparel imports of the US from

Bangladesh was about $2.6 billion, which is 8.6% growth over the corresponding period of

the previous year.

As of September 2008, the total apparel import by the US was $54.27 billion, which is a

decline of 3.3% compared to September 2007. The total apparel export of China to the US

until September 2008 was $16.9 billion, which is 31% of total apparel import of the US.

However, the total import from China has declined by 2.2% compared to September 2007,

which was $17.29 billion.

Among the other Asian countries, total apparel import from Vietnam was $3.9 billion as of

September 2008, which registered a growth of 22.9% over the corresponding period of the

previous year. Imports from Cambodia, Sri Lanka, Pakistan and India fell by 0.11%, 9.3%,

2.2%, and 4.1% respectively in September 2008 compared to the corresponding period of

September 2007.

As of September 2008, Bangladesh is the fifth largest apparel exporter to the US after China,

Vietnam, Mexico ($3.07 billion) and Indonesia ($3.1 billion). India ($2.4 billion), Honduras

($1.9 billion), Cambodia ($1.8 billion), Thailand ($1.28 billion) and Hong Kong ($1.25

billion) are in sixth, seventh, eight, ninth, and tenth positions respectively.



21/26

14

In the first quarter of 2007, total export by Vietnam, Indonesia, Bangladesh, India, Cambodia,

Pakistan, Sri Lanka, and Thailand was $5.5 billion, which has increased to $6.2 billion in the

third quarter of 2008. Among these countries, Vietnam has increased its share from 16% in

Q107 to 25% in Q308. Indonesia's share of export was stable in the range of 17% to 18%

over quarters.

Bangladesh contributed around 14% over the quarters to the total export of these eight

economies, and increased its share to 15% in the last quarter. The share of apparel export

from India fell significantly from 17% in Q107 to 10.9% Q308. The shares of Cambodia

(10%-11%), Pakistan (7%), Thailand (7%-8%) and Sri Lanka (6%-7%) were stable over the

quarters.

The decline of Chinese apparel exports is definitely good news for Bangladesh. The Chinese

apparel sector suffers from currency appreciation, increased labour wages, and rising cost of

compliance with new regulations on working conditions. While we are eyeing the diverted

business from China, we must assess to what extent we are increasing our market share. We

must find out why Vietnam was able to grow by more than 22% by exporting to the US

market from September 2007 to September 2008 while Bangladesh lagged behind. And we

must not forget that Bangladesh has a very limited market share in the non-apparel/textiles

export market, which is dominated by the neighbouring countries.

Until September 2008, total non-apparel/textiles exports to the US by China were $7.5

billion, while India, Pakistan, Thailand, Indonesia and Vietnam exported $1.5 billion, $1.2

billion, $235 million, $170 million, and $150 million respectively. The total exports from

Bangladesh were $75 million. Hence, even though China and India are losing market share in

the apparel sector, they are far more competitively positioned in the textiles segment.

Moreover, total exports from China are likely to surge from the first quarter of 2009, when

restrictions will be lifted.

Following the recent financial crisis, the currencies of Asian countries have substantially

depreciated against the US dollar. In the past few months, the Indian rupee has depreciated

over 20% against the US dollar. The Pakistani rupee depreciated by 25%, and the Vietnamese

dong by 10% against the US dollar.

More importantly, the central banks of these countries did not play any active role in currency

depreciation; rather the regulatory authorities of these countries are concerned about currency



22/26

14

depreciation because of withdrawal or decline of foreign capital investments from these

countries.

Similar is the case for South Korea, Malaysia and Singapore. On the flip side, export sectors

of these countries will comparatively gain due to the fall in the value of the local currency.

The key challenge for Bangladesh will be to compete against these countries with

competitive exchange rates.

Future action plans:

There were challenges in the past, and challenges will remain in future. However, we should

focus at least on sustaining the existing growth rate, if not targeting more. To become a $25

billion export country by 2013 the prime agenda should be the following:

Enhancing labour productivity: The greatest challenge for us is to constantly focus and

enhance our efficiency and productivity. Enhancing productivity does not only mean cost

reduction, but also requires greater vision and enforcement of that vision in an effective

manner.

One of the prime causes behind low labor productivity is the prevailing labour shortage in the

apparel sector. It is reported by the BGMEA that the number of skilled manpower in the

apparel sector has declined by 25%. The prime reason behind this is lack of institutional

orientation. The apparel sector is the livelihood of more than 2.5 million people, but there is

no training institution or certification program to develop the manpower.

It is essential to up skill the labor force to derive optimum level of productivity and capacity

utilization. Furthermore, major shifts in production technologies are factors that may

seriously affect the competitiveness of manufacturers in Bangladesh. RMG entrepreneurs of

Bangladesh, therefore, should quickly embrace state of the art technologies. Innovation of

new production tools/techniques/ equipment and plants may also be explored.

Countering labor unrest: Every year, the apparel sector faces substantial productivity loss

because of labor unrest, which results in production halt, missed shipment, and revenue loss.

Many a time we have heard that there is foreign conspiracy working behind the labor unrest

in our apparel sector to reduce its competitiveness. However, what measures have been taken

by the owners to counter the problem?



23/26

14

In Bangladesh, as per the minimum wage policy, a new worker draws only $24 per month.

After working for three months, the worker gets to draw $29 to $36 a month, whereas a

skilled worker gets paid around $45 a month.

The last "Minimum Wage Policy" was revised in October 2006, when annual average

inflation was 6.78% and food inflation was 7.95%. During FY09, the annual average inflation

rate increased to 10% and food inflation rose to 12.5%, but we have not observed any wage

revision.

As a result, workers have started to migrate to China, Vietnam, and UAE, which are sourcing

cheap labor from Bangladesh with relatively higher wages and benefits. Although our inward

remittances will increase due to this, our comparative advantage is decreasing. Hence, the

garment company owners need to offer a competitive, encouraging and engaging pay

package to retain the workers and counter unrest.

Addressing safety and security issues: The reason behind labor unrest is not only the low

wage structure, but also the hazardous working conditions, insufficient safety and security

measures, inadequate break time, irregular payment, forceful overtime, and many other

factors. We have seen that hundreds of workers died due to collapse of factory buildings. The

"Savar, Palashbari" incident is still vivid in our memories. There are frequent fires also.

For how long will this continue? And why are the concerned authorities not taking any active

measures to address the issue? We are speaking about enhancing labor productivity, but also

recognize that productivity in our country's apparel sector is low compared to neighboring

countries. However, productivity will not increase if we do not take any aggressive measures

to address the safety and security issues.

Improving supervisor-worker relationship: The relationship between supervisors and

workers plays a key role in terms of productivity enhancement and maintaining overall

discipline in the work place. While the "boss and subordinate" relationship is important in

every industry, in the apparel sector it plays a major role and sometimes influences

negatively.

Incidents of exploitation and harassment of the workers by supervisors are common

phenomena in the apparel sector, and this is more applicable to the female workers. The

reason behind this is that there is always a gap between the owners and the workers.Supervisors play a "middle man" role, and owners are influenced by them. The absence of



24/26

14

job description, accountability and corporate governance hamper the worker-owner

relationship.

Identifying new destinations: With 76% contribution to the country's export basket, the

apparel sector is vulnerable to any possible downturn in major export destinations. It is also

susceptible to the economic, political and regulatory risks of the US and the EU since 90% of

apparel export flows to these regions. The other important export destinations are: Canada,

Japan, Australia, etc. In FY08, apparel export to Canada, Mexico, Australia and South Africa

was $468 million, $61 million, $22 million, and $21 million respectively.

Within Asia, Bangladesh exported $20 million to Hong Kong, $15 million to Singapore, and

$10 million to China. These are all relatively new markets for Bangladesh, and efforts to

enhance our trade share should continue. However, it is important to remember that reaching

new destinations is also closely linked with capacity. Hence, capacity development and

proper utilization is also very important.

Besides, Bangladesh is yet to derive benefits from the South Asia Free Trade Agreement. In

most cases, South Asian countries have homogenous exportable items, which makes export

opportunities even thinner. Bangladesh faces challenges in exporting apparel to India since

RMG is a "sensitive" import item for India. In FY08, total export from Bangladesh to otherSaarc countries was only $7 million, out of which export to India was $5 million, followed by

Pakistan $700,000, Nepal $640,000, and Sri Lanka $610,000.

At the micro-level, entrepreneurs in the apparel sector must analyze their commercial

structures. They have to examine their overall business portfolio in terms of destination mix

and the strength of their buyers, and should conduct an in-depth analysis of the buyers' main

revenue and cost streams. If possible, the owners should also find out whether their cash flow

depends on volatile economic sectors like real estate or sale of luxury items, which, in turn,

may affect the buyers' overall businesses. If any such impacts are found, the entrepreneurs

should consider diversification of their buyer base.

Developing second-tier management: In most cases, the management control of the

factories is limited within the family members of the owners, and in many cases it is just a

one-man show. As a result, the overall business suffers from key man risk as well as capacity

constraints. The owners of the RMG factories must make an effort to develop a second-tier

management team, especially in the large apparel corporate.



25/26

14

Given the global dynamics, it is high time to implement corporate culture and practices in the

apparel sector, which requires developing human resources, enhancing corporate governance,

decentralizing decision making authority and empowering people. This will translate into

enhancement of accountability and time saving and, more importantly, the second-tier

management team can bridge the gap between the workers and owners, which will help

further in improving industrial relationships and relieving the workers from harassment to a

great extent.

Every year, a lot of business graduates are coming into job market, but how many of them are

interested in working in the apparel sector unless they have their own family businesses?

Without the expertise from professionals like chartered accountants, cost management

accountants and business graduates, it is extremely difficult to achieve an efficient cost

management structure or sustainable business model for the apparel business. This sector

requires proper branding to attract the country's talent pool.

Conducting cost-benefit analysis: Good accounting practices and an overall risk analysis

structure must be established. The management team should not only focus on cost reduction

but also identify the important factors of production. In the apparel sector, the financing costconstitutes less than one percent of the total cost of production, rather many a time, owners

incur huge expenses due to port demurrage and air freight because of lack of efficiency and

control.

In our country there is a huge

concentration of RMG manufacturing

units in town areas, and a majority of

them are operating even in the posh

location where the rent is high and proper

working conditions are absent due to

space scarcity.

Hence, an in-depth analysis needs to be

done on factors of production, and cost

reduction strategy should focus on the

factors which contribute significantly to



26/26

14

the overall cost structure. Transparency in the accounting practices and required level of

disclosures can also put the apparel corporate in a stronger position for negotiation with the

buyers and financing partners.

5:0 Conclusion

Trade and Commerce is one of the prime driving forces of socio-economic development.

Since last two decades, export has been playing a very important role in the socio-economic

development of Bangladesh. These days, export of Bangladesh has been developing and

expanding fast contributing in employment generation and reducing poverty significantly.

The number of young and educated entrepreneurs in the export business is increasing day by

day. It is important for them to know how to deal in the export business and the relevant laws,rules and policies.

Bangladesh, despite being a least developed economy, has a proven record in export

competitiveness. Here is a summary of the facts. From 2003 to 2007 Bangladesh achieved

annual export value growth of 19.6%, a testimony to its export competitiveness. Whilst not

wishing to be complacent, and being mindful of difficult global trade conditions in 2008-

2010, these positive trade differentials are likely to be with Bangladesh well into the future.
