Based on the “hurdles in export and import operation “a study at khaleque group of industries

Page 1

Based on the “Hurdles in export and import operation “A study at Khaleque Group of Industries

Executive Summary Khaleque Group of Industries has emerged as a renowned Cosmetics & Toiletries manufacturers of Bangladesh as also as a leading manufacturers and exporter of Knit Garments products with 3 spinning mills as a backward linkage. Mr. Abdul Khaleque Pathan, a very hard working young man started his business carrier as a Brick manufacturer in 1983 under the name and style of Khaleque & Co. with trademark ‘K & Co’. The bricks brought name and fame for unique quality of brick and for pleasant personality and integrity of Mr. Khaleque and to meet the market demand he soon started another brickfield named M/s. Bandu Bricks. Then embarked with production of garments products and cosmetics & toiletries items. Khaleque group of Industries now consist of the following allied concerns:1. Khaleque Knitting & Garments Inds. (Pvt.) Ltd. 2. Keya Cosmetics Ltd. (Public Limited Company) 3. Keya Detergent Ltd. (Public Limited Company) 4. Keya Soap Chemicals Ltd. 5. Keya Spinning Mills Ltd. 6. Keya Cotton Mills Ltd. (Spinning Mills) 7. Keya Yarn Mills Ltd. (Spinning Mills) 8. Keya Knit Composite Ltd. (Composite Knit Garments project with 80MT daily production capacity) 9. Khaleque & Co. (Pvt.) Ltd. Keya Beauty Soap is a renowned Brand in Bangladesh as well as in India and huge exports are being done regularly in India, Bhutan & Middle East. Mr. Abdul Khaleque Pathan with export Trophy for consecutive 3 years 2002-2003, 2003-2004 & 2004-2005. In recognition of exceptional garments exports, Mr. Khaleque was awarded export Trophy in the year 1994 and for export performance of Knit Garments Mr. Khaleque was selected as CIP for year 1997 & 1998. The present employee/workers of Khaleque Group of Industries is about 12000 of which near about 900 male and female worker are “Deaf & Dumb” who have been turned into manpower from downtrodden social burden. Now they are happy efficient workers.


Present Annual Turnover of the Group is about 1000 Crores which is ever increasing, but the recent global recession has caused much damage to the group emerging which will take some time for healing. The largest h

The largest hurdles faced by Khaleque Group of Industries, its export and import sector, are the inefficient Customs and administrative export trade processes, as well as the inadequacy of the current transport and shipping infrastructure. The duplication of Customs formalities, low operational efficiency at the Port of Chittagong, and poor transport infrastructure result in lengthy delays and exorbitant shipment costs that constrain the Bangladesh economy. The shortcomings of the Customs and administrative procedures should be addressed through phased trade facilitation initiatives that are synchronized with upgrading of vital transportation infrastructure. This will enable Bangladesh’s economy to significantly progress and the garment sector will remain one of the most competitive in the world.

Chapter One 1.1 Introduction This report is based on the “Hurdles in export and import operation “A study at Khaleque Group of Industries. Export and import are very common and widely practiced form of international business. As Khaleque Group are the top local Cosmetics & Toiletries manufacturers of Bangladesh as also as a leading manufacturers and exporter of Knit Garments products with 3 spinning mills as a backward linkage. So have chosen it for our report so that we can have a wider view of our concern topic. Basically what want to cover is the current export and import situation of the company, the problem that it is facing and solutions they are applying. Besides these have also recommended some suggestions from our end which can be applied for the betterment of their export and import business.

1.2 Origin of the Report This report is based on an internship program. Khaleque Group of Industries arranges this internship program to gather practical knowledge about export and import activities. topic for this internship report is “Hurdles in export and import operation of Khaleque Group of Industries” This exposure is very helpful for oneself how things move and to find the gap as well as the similarities between theoretical and practical knowledge.


1.3 Objective of the Study I have divided the objective of this report into two parts. One is general and the other is more specific. These objectives are stated below:

General Objective: The topic with which assigned was identifying problems and solution of a particular company of export-import industry of Bangladesh.

While completing this task firstly have chosen

Khaleque Group of Industries. Therefore, my general objective was to understand the current export and import situation of the company and hurdles during its operation.

Specific Objective: Main focus of our report was to study the areas as follows: •

The problems that Khaleque Group of Industries are facing while exporting and importing their products

To analyze the various concept of marketing, formal hierarchy, standardized export policies & rules, org To present an overview of STML

To appraise Activities of commercial Department

To identify the difficulties and barriers faced in the international market;

To recommend the measurers needed to be taken for the betterment of their export and import business.


1.4 Scope of the Study As working in Audit Department, and for preparing my report had to collect information from the company. . During internee period have got chances to visit factory, supervise much production process, & completed many sample program. For gathered other department’s data, I got little time beside my routine work. But here tried to cover whatever got data from other departments rather than Audit Department. This case study will help to analyze the various concept of marketing, formal hierarchy, standardized export & import policies & rules, organizational network, decision making in stable & unstable situation which will enrich my experience for future career.

1.5 Methodology To complete the term paper, tried to collect information from two sources. One is primary sources and other is secondary sources. Then analyzed all the gathered data to meet our general and specific objectives.

Primary Sources: •

Personal interview with Directors

By taking interviews of the employees

Personal experience gained by visiting other departments

By discussing several ideas with familiar business organization.

Secondary Sources: •

Gathering information from Annual Report.

Gathering information from website...

Files document of the mills

Publish document

Relevant books, internet, journals etc.

Gathering information from website.


Primary Data

1.5 Limitations of the Study Some limitation or barriers ware faced while conducting the study. The limitations which faced during study are as follow: •

Found so many difficulties in searching information.

The employees of company are so much busy so that it is completely hard work to take important information from them.

The information given is not sufficient to prepare a complete internship report.

There is so much work pressure in the company.

There are many code names in garments industry that is very important for production process, and memorized those codes.

In garments factory most of the employee doesn’t have any educational background they do their job only with experiences.

Chapter Two

Overview of the Company 2.1 History of the Company: Bangladesh has been a land of splendid arts and artifacts. In ancient word, this was the very centre of sophistication and perfection in weaving and textile. Once, the muslin of Bengal was held as a unique symbol of beauty and aristocracy all over the world. The time has changed, yet we have successfully nourished our extraordinary craft and texture of our textile, in zamdani, handloom, silk etc. Khaleque Group of Industries has emerged as renowned Cosmetics & Toiletries manufacturers of Bangladesh as also as a leading manufacturers and exporter of Knit Garments products with 3 spinning mills as a backward linkage.


Mr. Abdul Khaleque Pathan, a very hard working young man started his business carrier as a Brick manufacturer in 1983 under the name and style of Khaleque & Co. with trademark ‘K & Co’. The bricks brought name and fame for unique quality of brick and for pleasant personality and integrity of Mr. Khaleque and to meet the market demand he soon started another brickfield named M/s. Bandu Bricks. He then embarked with production of garments products and cosmetics & toiletries items. However, in the age of globalization, another wonder that made Bangladesh distinct is the readymade garments industry and with a vision to enhance this field further Khaleque Group of Industries (KGI) started its journey in 1991. Khaleque group of Industries now consist of the following allied concerns:I. Khaleque Knitting & Garments Inds. (Pvt.) Ltd. II. Keya Cosmetics Ltd. (Public Limited Company) III. Keya Detergent Ltd. (Public Limited Company) IV. Keya Soap Chemicals Ltd. V. Keya Spinning Mills Ltd. VI. Keya Cotton Mills Ltd. (Spinning Mills) VII. Keya Yarn Mills Ltd. (Spinning Mills) VIII. Keya Knit Composite Ltd. (Composite Knit Garments project with 80MT daily production capacity) IX. Khaleque & Co. (Pvt.) Ltd. Keya Spinning Mills limited and Keya Cotton Mills Limited are spread in a complex of 30 acres. The factory has a state of art technology and it produces 40 tons of yarn everyday. The capacity of both spinning mill is 70 thousand spindles. The capacity of yarn mill is 50 thousand spindles. The factory is equipped with machineries manufactured by world leaders like Rieter, Toyota, Uster etc.Every step of production has to undergo modern and scrupulous quality control process. It also has a hi-tech testing lab to ensure desired quality standard both Keya Spinning Mills limited and Keya Cotton Mills Limited has proudly achieved ISO9001 certificate. The factory not only meets up the demand of Khaleque knitting and Garments Industries (PVT) ltd unit and Keya Knit Composite Limited but also get exported overseas too.


Keya Beauty Soap is a renowned Brand in Bangladesh as well as in India and huge exports are being done regularly in India, Bhutan & Middle East. In recognition of exceptional export performance of Cosmetics the Government of Bangladesh has honored Mr. Abdul Khaleque Pathan with export Trophy for consecutive 3 years 2002-2003, 2003-2004 & 2004-2005. In recognition of exceptional garments exports, Mr. Khaleque was awarded export Trophy in the year 1994 and for export performance of Knit Garments Mr. Khaleque was selected as CIP for year 1997 & 1998. The present employee/workers of Khaleque Group of Industries is about 12000 of which near about 900 male and female worker are “Deaf & Dumb” who have been turned into manpower from downtrodden social burden. Now they are happy efficient workers. Present Annual Turnover of the Group is about 1000 Crores which is ever increasing, but the recent global recession has caused much damage to the group emerging which will take some time for healing. Khaleque Group, a leading business conglomerates with firm mission and vision for creating new avenues for employment, improving quality of products with a team of efficient workers and IT based management will contribute significantly in the GDP of the country.

2.2 Mission of KGI Thus KGI mission is to satisfier the customers and to be the market leader, in providing all sorts of knitted garments from Bangladesh to customers around the globe. KGI is committed optimizing product quality and ensuring cost effective operations.

2.3 Vision of KGI KGI believes quality is not a miracle. It is indeed the result of sharp direction, perfect execution, sincere effort and high aspiration.

2.4 Organizational Goals of KGI “No compromise with Quality” is our key objectives. We are passionate to serve high quality Garments, Cosmetics & Toiletries products within an affordable price. We are committed to serve our best towards the stakeholders.


2.5 Objectives of KGI: •

A truly international outlook for exporting

A long-term commitment for exporting

A strategic approach to the development of new export market

Credibility and close and long-term relationship in export market

An international reputation for quality

Resources available for export support

2.6 Board Of Directors: 1. Abdul Khaleque Pathan Managing Director 2. Mrs. Feroza Begum Chairman 3. Mrs. Khaleda Parvin 4. Mr. Masum Pathan

2.7 Management Team: Executive Committee 1. Alhaj Md. Akkas Ali Pathan 2. Mrs. Shahrina Nasri 3. Mr. Anamul Haque 4. Syed Noorul Alam

I. Management Committee

1. Mr. Anamul Haque 2. Mrs. Shahrina Nasri 3. Mr. Faizuddin 4. Mr. Kazimuddin 5. Mr. M. A. Mannan


6. Mr. Parimal Kumar Pramanik

II. Share Management & Corporate Affairs 1. Syed Nurool Alam 2. Md. Robiul Awal 3. Md. Saiful Islam 4. Md. Noor Hossain

III. Audit Committee 1. Mrs. Khaleda Pervin 2. Mr. M.A. Mannan 3. Mr. M. Anwarul Ghani 4. Mr. Masum Pathan

2.8 Company Profile: Corporate Headquarter: Jarun, Konabari, Gazipur Liaison Office: House # 108, Mosque Road Old D.O.H.S. Banani, Dhaka 1206 Factory

:Jarun, Konabari, Gazipur

Year of Establishment: 1991 Business Lines: Garments products

Manufacturing and Marketing of Cosmetics & Toiletries Products, Knit

Export Outlets: USA, UK, India, Bhutan, UAE, Nepal, Arabia &Myanmar Number of Employees :

12000.

Kuwait, Srilanka, Saudi


2.9 Organizational Chart: Board of Director

Chairman/ Managing Director

Vice Chairman

Head Internal Audit Executive Director & CEO

Director Support Service

Director Finance & Planning

Administration

Director Customers Service

Director Manufacturing Factory

Commercial Design

Human Resource

Information

Procurement

Corporate Finance Accounting & Tax

Planning

Marketing Sales

Human Resourc e Quality Assurance Materials Managem ent

2.10 Social Responsibility:

Apart from contributing largely in the national economy and employment sector of the country KGI performs social responsibilities as well. It has helped physically challenged


people to establish in their lives. Out of a total of 12000 employees it has so far employed 600 deaf people in their factories. It further denotes a significant amount of money to different educational institutes. In addition to that KGI provides possible medical treatments free of charge as complimentary to the employees. Thus KGI intends to take part in the development process of the country and keep on prospering.

Chapter Three

Products Overview, Production Capacity and Export Import Analysis 3.1 Products Overview: 3.1.1 Knit Garments products: Khaleque Group of Industries has emerged as renowned Cosmetics & Toiletries manufacturers of Bangladesh as also as a leading manufacturers and exporter of Knit Garments products with 3 spinning mills as a backward linkage. •

T-Shirt

Polo Shirt

Tank Top

Vest

3.1.2 Cosmetics and Toiletries products: Keya Cosmetics Ltd., a reputed name in the cosmetics & toiletries products manufacturing & selling sector in the country. Keeping all our efforts concentrated upon product development, quality control and standardization, a philosophy of continuous improvement at all unit. All our products are derived through rigorous research and each of them is incorporated with globally recognized quality norms. That’s why, clients from all over the world rely upon as a brand synonymous to trust, reliability and innovative products. Products overview are presenting below:


Products of Keya Cosmetics Keya Super Beauty Soap

Weight Size: 125, 100 , 85 , 75, 50, 35 , 25 gm Color: Pink, Green, White, Lemon. Export Country: India, Bhutan.

Lifeguard Soap Weight Size: 100 gm & 75 gm Color: Red Export Country: India, Bhutan.

Keya Glycerine Laundry Soap Weight Size: 130 gm & 50 gm Color: Green & Yellow Export Country: Bhutan

Keya Power Ball Soap

Weight Size: 130 gm Color: White Export Country: Bhutan

Keya 777 Laundry Soap

Weight Size: 130 gm Color: Red


Keya Coconut Oil

Weight Size: 400 ml, 200 ml & 100 ml Color: Natural

Keya Active Tooth Paste

Weight Size: 200 gm, 100 gm, 45 gm Color: White

Keya Saving Cream

Weight Size: 50 gm Color: White

Keya Super Saloon Lather Saving Cream

Weight Size: 100 gm Color: White

Keya Prickly Heat Powder

Weight Size: 100 gm Color: White


Keya Natural Care Shampoo Weight Size: 100 ml & 7 ml Color: Black

Keya Dandruff Control Shampoo Weight Size: 100 ml & 5 ml Color: Sky Blue

Keya Petroleum Jelly Weight Size: 10 gm & 6 gm Color: Pink & Purple Ingredients: Liquid Paraffin, White Petroleum Jelly & Perfume.

Keya Lipgel Weight Size: 10 gm & 6 gm

Keya Glycerine Weight Size: 125 gm & 60 gm Color: Natural


Keya Pomade Weight Size: 50 ml Color: Orange Colour

Products of Keya Detergent Keya Lemon Detergent Powder

Weight Size: 30 gm, 200 gm, 500 gm & 1 kg

Keya Super Excel (Detergent Powder) Weight Size: 20 & 500 gm

Keya White Plus Detergent Powder Weight Size: 180 gm & 450 gm

Keya Super Jet (Detergent Powder)

Weight Size: 20 gm, 50 gm, 110 gm, 225 gm, 450 GM&1 kg


3.2 Production Capacity :

3.2.1 Garments Production Capability a) Knitting Department : Knitting Capacity: 1950 M.Tons/Month. Single Jersey, S/Lacoste, Double Lacoste, Rib, Interlock, etc. Flat Knit Collar Knitting capacity: 210,000 Pcs/Month. (Machine List are enclosed

b) Dyeing & Finishing Department:


Dyeing & Finishing capacity: 1650 M.Tons/Month. (Machine List are enclosed)

C) Garments Division: Total Nos. of Lines: 95 (Ninety Five) Production Capacity: 7 Million Pcs/Month. (Machine List are enclosed)

3.2.2 Cosmetics and Toiletries Item Production Capability •

Beauty Soap-----------------------375000 PCS/Day

Laundry Soap----------------------450000 PCS/Day

Detergent-----------------------------4 TONS/Day

Tooth Paste---------------------------10000 PCS/Day

Shaving Cream------------------------8000 PCS/Day

3.2.3 List of Machineries

Knitting Machine Profile


1x1, 2x2 With Lycra Rib 1x1, 2x2 With Lycra Rib

Origin

Total Producti on Per Day (Kgs.)

Brand

Sets

Gauge

Qty

Type of Dia Fabrics

Producti on Capacity (Kgs.) Per Machine

18

16

2

120x2

240

Keumyong

Korea

30

18/14

2

210x2

420

Fukahama

Taiwan

1x1, 2x2 With Lycra Rib

32

18

4

210x4

840

Fukahama Mayer

1x1, 2x2 With Lycra Rib

34

18

4

220x4

880

Fukahama Mayer

1x1, 2x2 With Lycra Rib

36

18

4

230x4

920

Fukahama Mayer

1x1, 2x2 With Lycra Rib

25

18

1

200x1

200

Mayer

17 Flat Knit Normal Design Collar & Cuff

14

3500

10

500x10

5000

Matsuya

Sewing Machine Profile Machine Details

Type

Plain Machine

Total

Country of Origin

505

Japan & Malaysia

Flat lock

Flat Bed(Hem)

86

Japan, Singapur & Malaysia

Flat Lock

Flat Bed(Tape Binding)

96

Japan, Singapur & Malaysia

Flat Lock

Cylinder Bed

185

Japan, Singapur & Malaysia

Over Lock

4 Thread

715

Japan, Singapur & Malaysia

Flat Lock

Taiwan German y Taiwan German y Taiwan German y German y

2 Niddle Chain Stitch 101 Feet of the Arm Febric Trimmer 10 (Dust Drum)

Japan, Singapur & Malaysia Japan, Singapur & Malaysia

Button Hole

8

Japan & Malaysia

Button Stich

8

Japan & Malaysia

Japan


Rib Cutting

32

TSSM (Taiwan)

Cutting Machine

32

USA

Thread Re- Winding

6

China

Vacuming Table

243

Indonesia

Kawakamp

1

Japan

Mini Compact Press

6

Taiwan

Stam Iron

324

Japan

Movable Heat Transfer 6 Machine

Bangladesh

Padprinting Machine

10

Japan

Total

2374

Dyeing Section Machine Type

One Time Loading Capacity in Kgs.

200 400 400 Vertical Winch (Comput erized)

600 600 800 1,200 1,600 2,400

Sample Winch

30

Quantity (Sets)

Total One Time Capacity in Kgs.

Loading

Brand/Country Of Origin

3

600

Fongs (China)

3

1,200

Fongs (China)

1

400

1

600

3

1,800

Fongs (China)

4

3,200

Fongs (China)

4

4,800

Fongs (China)

3

4,800

Fongs (China)

1

2,400

Fongs (China)

23 1

19,800 30

Fongs (China)

Fongs High Temp. Fongs High Temp.

(China) (China)


60 60 (Comput erized)

20 30 60

Vartical Winch (Semi Auto)

300 400 1,000

1

60

Fongs (China)

1

60

Fongs (China)

1

20

Fongs (China)

1

30

Fongs (China)

1

60

Fongs (China)

6

260

2

600

Korian

2

800

Korian

3

3,000

Korian

7 4,400

Finishing Section Machin e Type

Production Total Production Quantit Brand/Country Capacity Per Capacity Per Day y (Sets) Origin Day (Kgs.) (Kgs.)

Of

Squeezer

8,000

6

48,000

Akab (Sweden)

Wet Calender

3,000

1

3,000

Heliot (France)

Dryer

9,000

5

45,000

Fongs (Korea), Askme(Taiwan) L.K (Taiwan),Heliot(France)

Tube- Tex

6,000

8

48,000

USA

Stenter (Slitting)

7,000

2

14,000

Bruckner (Germany)

11,000

5

55,000

LC Loos (Germany)

Boiler

(Taiwan)

Water Treatment Plant Machine Type

Production Capacity Per Quantity (Sets) Hour

Brand/Country Of Origin


WTP-01, WTP-02, WTP-03, WTP-04, WTP05,WTP-06

100 m3/h

6

India

ETP-01

4000m3/day

1

Italy

Lab-Machine Profile Machine Type

Total (Pcs.)

Lab Machine

5

Ahiba (USA)

Light Box

4

Verivide (England)

PH' Meter

4

Germany

Crockmaster

2

Wash fastness

1

Washing

1

Washing

1

Wirlpool

Tumbler Dryer

1

Zanussi (England)

Tumbler Dryer

1

Wirlpool U.S.A

Datacolor

4

Spectro Photometer 600 (USA)

Woven

1

Binder Germany

INCUBATURWoven

Quantity

Machine Details

Crockmaster (James H. Heal & Co. Ltd.) England Gyrowash (James H. Heal & Co. Ltd.) England Wascator (James H. Heal & Co. Ltd.) England (Heavy Duty Series 8 ) U.S.A

James .H.Heal & co England

True Brust

3 1

Random Tumble Pilling Tester

2

Therma plate

1

James .H.Heal & co England

Perspirometer

1

James .H.Heal & co England

Orbitor Pilling & Snagging Tester

1

Pilling assesment viewer

1

James .H.Heal & co England James .H.Heal & co England

James .H.Heal & co England James .H.Heal & co England

3.3 Value Chain Of Khaleque Group: The following value chain of the companies belonged to the Khaleque Group. Keya Yarn Mills Ltd i. Manufacturer of knitting yarn ii. Proposed Project (Under Rating) iii. Capacity – 28 MT/day iv. Yarn internally sold

Khaleque Knitting & Garments Ind. (Pvt.) Ltd i. Incorporated in 1993 ii. 100% export oriented composite knit garments manufacturer iii. Capacity - 20 MT/ day iv. Internally purchased


Supplier of Raw Cotton Uzbekistan,USA etc

Keya Cotton Mills Ltd i. Manufacturer of knitting yarn ii. Incorporated in 2004 iii. Capacity – 25 MT/day

Keya Spinning Mills Ltd i. Manufacturer of knitting yarn ii. Incorporated in 1999 iii. Capacity – 25 MT per day

Keya Knit Composite Ltd i. Incorporated in 2003 ii. 100% export oriented composite Knit garments manufacturer iii. Present capacity – 40 MT/day iv. Internally yarn purchased 78% v. Expanded Capacity – 60 MT/day

Exhibit: Value Chain of Textile Companies belonged to Khaleque Group


3.4 Functional Departments for export and Import Analysis of KGI : All the functions of Merchandising Inc. are operated under four major departments: 1. Merchandising department. 2. Sampling department. 3. Commercial department. 4. Accessory supply department. 5. Production department. 6. Distribution department.

1. Merchandising Department: This department of M. Inc. is responsible for the following activities: •

Searching buyers: The task of this department started with the searches of buyers, who want to import garment products from our country, to get the order of the garment product manufacturing.

Introduce letter: After finding suitable buyers this department issues an introducing letter to the respective buyers which describes M. Inc.'s total years of experience, its parameter of total activities, efficiency and effectiveness and relationship with existing buyers.

Cost of Making: CM is another important activity that stands for Cost of Making. Here the merchandiser of this dept. determines what are the things are required to make a unit or dozen of an order. Then he makes calculation' of per unit cost on the basis of accessories consumption, fabric consumption, labor cost and other relevant costs.

Price negotiation: When this department has the clear idea about the cost involved in the desired transaction they start price negotiation to determine a final price that the buyer agrees to pay.


•

Select supplier: Merchandising department recognizes the effectiveness, of their commitment to buyers and there by it shoulders the responsibility of finding out efficient buyers. The bases of efficiency include supplier's adequate administrative setup to prepare all necessary documents for exports, supplier's financial status and adequate capacities etc.

2. Sampling Department: It starts its activities after receiving the original sample or sketch sample from the buyer with an, intention to testify the capability of M. Inc. to meet the desired standard of the products. Two people contribute toward the efficiency of sampling dept. They are sampling man and pattern master of M. Inc.

3. Commercial Department: The commercial department of M. Inc prepares pro-forma invoice for the respective buyer. The invoice includes the quantity of the buyer's order, its unit price and total price. The commercial department also transfers master L/C on the name of selected supplier. This department also maintains all clerical activities such as maintaining the accounts of daily transaction, maintaining payroll, keeping the accounts of daily expenditures etc.

4. Accessory supply department: For a smooth manufacturing, the assurance of on time delivery of fabric and accessories is must. The responsibility of supplying accessories to the suppliers landed on the ground of this department. To assure this supply Merchandising Inc. utilizes two sources. One is its sister concern FM. Printing and Packaging Company. Another is the outsourcing from its suppliers of long term relationship. As a result the manufacturer doesn't need to be worried about the availability of accessories.

5. Production Department: Although named as production department, this service department rather follows up production dividing its activities into following sections of Responsibilities: Quality monitor and control: This dept. supervises the manufacturing process to maintain the quality and scheduled progress of the manufacturing in behalf of merchandising Incorporation.


Final Inspection: For its reputation, buyers usually delegate the responsibility of final inspection on the shoulder of quality. Inspector of Merchandising Incorporation. The efficient inspection is the responsibility of the quality inspector of Merchandising Inc.

6. Distribution Department: As the name mentions the task of shipping department of M. Inc starts from -receipt of final goods from the supplier factory after the final inspection and ends- with loading of the goods bound for supplier. This department also prepares the supporting documents for export such as bill of exchange, bill of lading, commercial invoice, certificate of origin, packing list etc.

3.5 Export and Import Analysis of KGI: Keya Beauty Soap is a renowned Brand in Bangladesh as well as in India and huge exports are being done regularly in India, Bhutan & Middle East. In recognition of exceptional export performance of Cosmetics the Government of Bangladesh has honored Mr. Abdul Khaleque Pathan with export Trophy for consecutive 3 years 2002-2003, 2003-2004 & 2004-2005. In recognition of exceptional garments exports, Mr. Khaleque was awarded export Trophy in the year 1994 and for export performance of Knit Garments Mr. Khaleque was selected as CIP for year 1997 & 1998.

3.5.1 Export Analysis: The year 2008-09 a financial crisis became an economic crisis spanning the world and unparalleled in history. When the year came to a conclusion, there was no end in sight. Economic Uncertainty prevails throughout the year. We at Keya have responsibility to grow. Instead, of saying that there are only few ways rest for surviving, but also continuing to live profitably despite this economic uncertainty. We owe our stability to the strategy.

3.5.1.1 Export Analysis of Cosmetics& Toiletries Items: Our 100% Halal Beauty Soap of International Standard (TFM 80%) has earned wide fame at home and abroad. We are making substantial export in the country of India, Bhutan, Pakistan, Italy, KSA, UK, Djibouti, Mali, Chad, Senegal and etc. Our products are also in high demand in the Middle East. Due to relentless effort standard by the management and marketing professional the volume of sales increased in export sales.


Export Sales of Cosmetics& Toiletries Items Sales Revenue

2008-09

2007-08

2006-07

2005-06

(Tk.) Export Sale

135,397,055 114,817,326

106,172,510 113,541,230

Total exprt of cosmetics and toiletries items

Export Sales

150,000,000 100,000,000

Year 2009 2008 2007 2006 Export Sale

50,000,000 0 2009

2008

2007

2006

year

Fig: Last four years export performance of Cosmetics& Toiletries Item 3.5.1.2 Export Analysis of Knit Garments products: Khaleque Group of Industries is a leading manufacturers and exporter of Knit Garments products with 3 spinning mills as a backward linkage. The above mentioned value chain chart depicts that presently total daily capacity of two knit composite units is 80 MT, whereas the daily capacity of three spinning units is 78.4 MT yarn, which can fulfill 98%


of total yarn requirement.

List of Present Buyers: I. Hanes Brands Inc,Brasil II. Hanes Brands Europe GmbH, Germany III. Anvil Knitwear Inc. Newyork,USA IV. Roochi. Traders Inc, USA V. Solo Invest, Paris. Export Sales of Knit Garments products:

Export

Export

Export

Quantity

Value($)

Value(TK)

46,933,640

$41,886,245.80

2,865,019,212.72

2008

73,339,853

$70,030,122.11

4,790,060,352.32

2007

40,742,044

$40,439,546.93

2,766,065,010.01

Year 2009


Total Export of Knit Garments Products 80000000

Exprt Sales

60000000 Year 2007 2008 2009

40000000

Export Value($)

20000000 0 2007

2008

2009

Year

Fig: Last three years export performance of knit garments products. 3.5.2 Import Analysis: KGI is a 100% export oriented Knit Garments products manufacturing company. They mainly produce Yarn and export it to Fabrics manufacturing company and fabrics manufacturing company export it to garments industry through Back to back L/C. Garment industry export this fabrics against master L/C after certain process in this sense, KGI is an Exporter of garments products. But in the commercial term these kinds of exporter are called deem exporter. As main job of kGI is to manufacturing and exporting of Yarn so they need some raw materials and axillaries to manufacturing this product. Main raw materials of KGI are various types of raw cotton. As KGI is a vertical integrated company. So they have forward and backward linkage facility. They have fabrics manufacturing company and they have garments manufacturing company. Keya Knit Composit Ltd gets 100% L/C from their own garments Industry and Khaleque group of Industries Get 60% L/C from their own company. Import: As the main raw martial of Keya Yarn Mills Ltd is raw cotton. So the procure their raw materials under two ways.


I. Local import II. Foreign Import Local Import: As KGI is one of the largest finest yarn manufacturing companies of Bangladesh. So they need various types of raw cotton. But we cannot produce high quality of raw cotton in our country. So we are 100% depended on imported cotton, so that KGI’s local import is nil. Foreign Import: As we know that to produce high quality of yarn need high quality of raw cotton. High quality of raw cotton means which cotton exists length fiber is long and fibers are matured. To produce high quality of raw cotton mainly needs favorable weather condition but we have not. So ultimately we are fully depended on imported raw cotton for our textiles mills. KGI mainly procure central Asia’s cotton. Uzbekistan’s, Turkmenistan’s, Kazakhstan’s, and Tajikistan’s raw cotton as per their buyers satisfaction. Though the price of central Asia’s raw cotton are higher than the others cotton. Sonali Textiles also procure raw cotton from Zimbabwe, Syria, USA, India, West African, Indonesia, and Thailand etc through cash L/C.

Chapter Four

4.0 Bottlenecks Retarding Export and Import Operation: This vital and vibrant export oriented industry has been facing some problems from local forces, which may be termed weaknesses (or the Nation's weakness), and some problems caused by forces beyond our geographical/political boundary, whic may be termed as threats to our industry. The Readymade Garment Industry is already 20 years old but during the last two decades no planned, fruitful policy to build up a backward linkage textile industry to feed the RMG industry has been taken by the authorities. Even the existing textile industries are not capable of producing high standard fabrics to offset the foreign ones from the market. Shortage of capital necessary to develop local sources for quality raw cotton is a major weakness.


The reason behind the shortage of capital, however, can be attributed to the socio economic condition of the country; enabling foreign direct investment could however, compensate for this. Furthermore although the Government has responded to the RMG industry's requests for devaluation of the local currency – the Taka – from time to time, it has failed to decrease the current rate of interest. At the same time, our financial policy measures are not sufficient to attract entrepreneurs to invest in the textile industry. Anomalies in the banking sector, problems at the port, vindictive political environment, bureaucratic shackles, electricity crisis, and currency adjustment policy pursued by the country, and the lack of some policy support from the government to sustain the country's falling competitiveness against its competitors in the international market are other serious weaknesses. Without ‘miscellaneous’ expenditures no file moves, no UC is cashed, no imported raw material released. There are many eager hands in the public service agencies that the industries have to fill with ready cash. Without this practice no job can be done timely. The public service agencies work very slowly and ‘speed’ money becomes the only solution to hasten the procedure. This is however done increasing by miscellaneous expenditures. The raw materials the industry imports, say, within 7 days, take an additional 15 days to reach warehouses from the Chittagong port. About 54 formalities (with miscellaneous expenditure) have to be observed to release a shipment of raw materials. These formalities increased the industry's lead-time against overseas competitors. The weaknesses, which have been mentioned above, could be classified in following categories: 1. Unstable political environment and unfavorable law and order 2. Insufficient development of political measures for the RMG sector 3. Inadequate financial measures 4. Infrastructural bottlenecks 5. Inefficient service support 6. Inappropriate development management and institutional initiatives


4.1 Unstable Political Environment and Law and Order 4.1.1 Political Instability Due to the last non-cooperation movement in 1995-96 the industry suffered a loss of about Tk. 4,500 crore (Tk. 45 billion) and about 300 factories were forced to take loans of over Tk.200 crore (Tk. 2 billion). Due to hartal (general strike) and other such political programs, problems such as order cancellations and stock-lot gluts arose in the ready-made garment industry. Banks started showing its reluctance to open L/Cs. Ultimately many affected factories were on the verge of winding-up and declaring bankruptcy. The export oriented garment industry bore production losses equivalent to Tk 6-9 crore (Tk. 60-90 million) per hour. During the period of Caretaker Govt, the country went through emergency period. In the interest of 1.5 million workers and owners of over 3000 garment factories, the political differences should be solved politically in the parliament.

4.1.2 Unfavorable Law and Order Situation The disrupting law and order situation is another heavy constraint which hinders not only the development of the national economy but also the development of the export- oriented RMG sector. Due to the depreciating law and order situation, the interest of both the employers and the employees are being affected. In this relation it should be mentioned that the Factories' Act and labor laws of the country are old and do not support the development of the exportoriented RMG sector. The changed environment must be reviewed and in this process interested and involved parties should be integrated.

4.2 Infrastructural Bottlenecks 4.2.1 Port Congestion and Crisis Due to unchecked interest by a section of politicized dock laborers, the Chittagong Port has remained closed for about 30 days during g the last three years. Go-slow and congestion are chronic problems. Chittagong port being the largest seaport in the country contributes to 80%of import and 75% of export of the total international trade. As the normal activities in export and import are hampered due to the complexity created by various reasons like dock labor unionism, go slow principle, strike etc. usage of the seaport traders has been disturbed and declining. This is definitely influencing the national economy negatively. The Garment


Exporters and Garment input importers have been facing problems in export and import for years. It is worth mentioning that due to delay in unloading of raw materials for the Garment Industry, it is not possible for the entrepreneurs to produce the garments within the Letter of Credit (L/C) period. Thus the L/C becomes invalid and the exporters face great financial loss. Consequently, buyers are losing interest in trade with Bangladesh. Moreover the entrepreneurs have to take the responsibilities of the loss on their own shoulders. A large number of garment factories are classified as sick as they have been unable to recover from the stock-lot problem, which is also one of the causes for bottlenecks in the port area. Heavy congestion in the Chittagong port has been prevailing for the last four years. This congestion affects the normal activities of the port. Loading and unloading of goods are always delayed and ships remain in the outer anchorage for long periods of time. As a result, port utility has been lessened which is also damaging the reputation and image of the port internationally. The handling equipment at the port is insufficient to cope with the rising volume of the export-import business from the garment industry and other export oriented industries. The country should start setting up new jetties immediately to increase the loading and unloading capacity of the Chittagong Port because an average size jetty takes about 4 years to be set up. The port is taken hostage by a handful of people for their egotistic interest, posing a serious threat to the export-trade of the country. The government should play a stronger role in addressing the port crises. Handing over port activities to private sector enterprises perhaps can ensure a sustainable solution.

4.2.2 Frequent Interruption in Energy Supply For nearly the last two years the electricity crisis has been unparalleled. To better describe the situation it would be safe to say that the power grid has been at its peak capacity for the last decade or two. A survey in the RMG sector in May 1997, indicated that in Jan-May 1997, the RMG sector had already suffered losses in excess of Tk.1700 crore (Tk.17 billion). Presently on an average, we are losing production worth about US$ 1.6 million per day (or, US$ 46.4 million per month and US$ 561.6 million per

year) just owing to the electricity crisis

alone. For obvious reasons the chain-effect is more serious. RMG production could be increased by 10-15 % if reliable power supply was available.

4.2.3 Congestion in Road and Railway Communication and Traffic Jam A good transport system is a prerequisite for economic development. A lack of it creates road


congestion, as a result it may take a longer time to get imported raw materials from the port and transport the finished product to the port from the factory. It also causes additional transport costs. A congestion-free road and rail communication, especially between Dhaka and Chittagong, linking the garment industry is vital for further development of the exportoriented RMG sector.


4.3 Problems and Corruptions of Chittagong Port Chittagong Port is considered the heart of the economy of Bangladesh. The geographic location of this port creates the opportunity of easy and cost-effective foreign trade to be carried out through this port with all the South Asian countries as well as other Asian countries. Corruption has taken an institutional form in the offices of the Chittagong Port Authority and the Customs Department of Bangladesh. Everybody assumes that no job can be done here on time without taking recourse to bribery or tips. The rules of law and accountability have become almost non-existent. The labour organizations have made the port hostage in upholding the interests of political parties as well as their own.

4.3.1 Insufficient human resource and equipment Over 8,000 personnel are currently employed in the offices of Chittagong port and customs. 31.9% posts in port and 33.3% in customs are vacant against approved posts. Both these offices lack educated, experienced and efficient manpower, which is essential for operating highly technology-dependent environment. It was found that many officials working in Chittagong Customs House cannot verify import-export documents without the direct cooperation of C&F agents and cannot operate computers by running ASYCUDA++ software. Along with inadequate and inefficient human resource, lack of sufficient equipment is also quite apparent. At present, there is a 24% deficit with respect to sanctioned equipments. Besides, a large segment of existing equipments remains inoperative or out of order most of the time.

4.3.2 Irregularities in dock-worker management Because of inefficiency, lack of discretion and corruption of dock-workers’ management board, many dock-workers above 57 years of age still continue to work by showing themselves younger on paper. Many of them drew their wages on 28 February 2007 on the latest. The number of such workers is more than 400. There are also some laborers who draw wages by giving their cards to replacement workers, as they are either physically incapacitated or do not go to work for various reasons.


4.3.3 Illegal occupation of land 329.48 acres (which is 19% out of total 1708.63 acres) of land belonging to the port is currently under illegal possession. Of these, 232.31 acres are under possession of government/semi-government offices, 1.95 acres under trade unions or clubs and 95.22 acres under illegal possession of local people.

4.3.4 Irregularities in import and export A complex and lengthy procedure is followed at the port and customs for exporting and importing commodities via Chittagong Port. This encourages corruption. Besides, the ‘one-stop service’ turned into ‘one-room service’, where the representatives and agents of importers and exporters move from one table to another and invariably pay bribes. It was reported in the 2004 TIB study that a shipping agent had to pay bribes in at least 8-10 spots for anchoring a ship at Chittagong Port under normal circumstances. It was observed in March 2007 that corruption of almost the same degree was in vogue. However, now bribery takes place by reaching an understanding through agents located outside the port. The pilots of the port take Tk 10,000 as tips for anchoring a ship at the jetty and then for taking it to outer anchorage. However, in case of over- drafting of ships, this rate rises up to more than Tk 100,000 through negotiations. The main problems faced during loading and unloading goods into/from ships at Chittagong Port include: •

Unjustified formation of labor gangs.

Excessive bribes and tips.

Engaging staff from stevedoring staff union.

Inability to control workers by the dock-workers’ management board.

Frequent occurrences of worker movements and threats of movements under the influence of CBA leaders.

execution of tasks by inefficient workers,


Failure of equipment workers to join work on time and leaving the place of work before scheduled time. If tips are not paid at agreed rate, handling is not done and containers are deliberately damaged. The equipments remain out of order if the unjust demands of equipment workers are not paid attention to, and no replacement takes place if the equipment goes out of order. A ‘go slow’ policy is adopted if the amount of tips is not satisfactory. Artificial problems are created if one is asked to work according to the schedule.

4.3.5 Corruption and irregularities by Pre- shipment Inspection (PSI) companies The number of writ petitions in High Court and appeal cases in the Appellate Division is gradually rising due to detection of false declarations arising from non-transparent and weak PSI arrangement. As a result, indiscipline in revenue management is observed. According to Section 29 of Pre-shipment Rules, 2002, there is a compulsion to form monitoring committees comprising of maximum five members at customs buildings or stations for the purpose of monitoring at central and local levels under the PSI system. However, no such monitoring committees have been formed till now. Taking

advantage of this situation, incidents of importing goods through false

declarations are taking place. Among the consignments of CRF commodities brought between the periods July 2005 – February 2006 and July 2006 – February 2007, the total number of consignments imported through false declaration revealed through manual examination was 490. During the same period, the customs authorities detected 695 incidents of false declarations by examining the CRF certificates. The amount of revenue involved in such cases was Tk 4 crore. On the other hand, between July 2006 and February 2007, the number of consignments of imported commodities which did not undergo PSI/CRF despite their eligibility for such screening was 440. The credibility and performance of the PSI organizations has been put to question due to detection of such large numbers of false declarations from among maximum 5-6 percent on-the-spot random checks which are carried out by the customs.

4.3.6 Bribe givers, bribe receivers and the affected group The bribes and tips which are extracted by the officers-employees of customs and port from shipping agents, stevedoring agents and C&F agents are indirectly elicited from the buyers later. These agents collect the bribe money from the importers and


exporters under ‘miscellaneous head’ and then pass those on to the port and customs officials. But in reality, the agents siphon off a portion of the extracted bribe themselves. Actually, it is the importers and exporters who supply the entire amount given as bribes. Naturally, the importers raise the prices of imported commodities to compensate this loss. In this way, money is actually collected from the consumers and the common people. A win-win situation is created between the importers/exporters and officials of port/customs, while a win-loss situation is created between the businessmen and the common people.

4.3.7 Financial losses due to corruption It is observed that, if all papers are in order, bribes are usually paid at 12-13 spots for taking release order of consignment from the Customs House. This number increases at various levels if there is a problem with any of the documents. Bribes have to be paid at 8 spots when commodities are checked at the jetty. On the other hand, bribes have to be paid in at least 18 places for releasing a consignment from the port. Therefore, bribes have to be paid in at least 30 spots for releasing a consignment from the customs and the port. Speed money amounting to Tk 12,000 – 15,000 has to be paid at various layers for a 20-feet container during its unloading after payment of port charges and customs duties by the C&F and shipping agents. The situation in 2004, if compared to 2006, it is observed that the rate of bribes in some sectors for importing or exporting goods via Chittagong Port remained the same, while in some sectors, the rates increased. It can be claimed that the transaction of bribes and tips at every step of import and export via Chittagong Port has assumed an institutional shape. In 2006, 4, 40,982 Tees of import and 4,35,204 Tees of export via Chittagong Port took place. On the basis of Tk 13,500 to be paid for import and Tk 8,000 to be paid for export items as bribes on an average for a 20-feet container, bribes worth Tk 595 crore 32 lakh 57 thousand were transacted for import and Tk 348 crore 16 lakh 32 thousand for export during the year 2006 were paid. The total amount of bribes, therefore, was estimated at Tk 943 crore 48 lakh 89 thousand. Besides, corruption also takes place in various development projects of the port including procurement of equipments, repair and maintenance, and dredging of rivers.


4.3.8 Congestion surcharge and Rate Restoration (RR) charge The shipping companies extracted US$ 130 per container from the importers through their agents in the name of congestion surcharge during the period 5 June to 15 September 2006. During this period, total import stood at 133,356 TEUs (20-feet containers). As a result, US$ 1, 73, 36,280 was collected in the name of surcharge. However, once this surcharge was lifted, the shipping companies extracted US$ 200 per 20-feet container in the name of rate restoration charge between January and March 2007.The quantity of import during the period stood at 115,412 TEUs. On that basis, $ 2, 30, 82,400 was collected as rate restoration charge during this period. It indicates that the shipping companies collected US$ 4 crore 4 lakh 18 thousand 680 (Tk 274 crore 84 lakh 70 thousand 240) from the importers in the name of surcharge and rate restoration charge in approximately 6 months. Those charges have now been withdrawn.

4.3.9 Misappropriation of money in the name of fake workers The number of workers above 57 years of age is more than 400. They are still in service because of the inefficiency, indiscretion and corruption of Dock Workers Management Board. Around Tk 35 crore are wasted or usurped in the form of payment for wages of these workers.

4.4 Inefficient Development of Market for Garments: 4.4.1 Export competitiveness in the United States market Bangladesh has experienced some product diversification in its export of garments to the United States market in recent years compared with the early 1990s. However, the country’s performance in upgrading its products is not significant with regard to the United States market (Haider, 2006). The country experienced a sharp increase in the export of garment products to the United States market in the 1990s, but faced declines in export earnings from that country in 2002 and 2003, followed by slow increases since 2004. The exports of India also increased rapidly in the 1990s, although that country experienced comparatively slow progress in the last few years. However, the RMG exports of China to the United States have increased at a startling rate over the years. For example, the textile and garment export earnings of China, India and Bangladesh from the United States were $3.6 billion, $0.8 billion and $0.4


billion respectively in 1990, and increased to $22.4 billion, $4.6 billion and $2.5 billion respectively in 2005. Such rapid expansion in the exports of China represents a major challenge to other exporters. Bangladesh exported a total of 99 types of products in the textile and garment category to the United States in 2005, but most of the category’s contribution was minimal. For India and China, the number of textile and garment product categories exported in the same year to the United States was 161 and 167 respectively.

4.4.2 Export competitiveness in the European Union market Bangladesh has experienced both quantitative and qualitative changes in exporting garment products to the European Union market during the period 1996-2005. The textile and garment export earnings of Bangladesh from the European Union increased from 1.2 billion euros in 1996 to 3.7 billion euros in 2005. For India and China, the corresponding earnings increased from 3 billion and 5.3 billion euros in 1996 to 5.3 billion and 21.1 billion euros in 2005 respectively.

4.4.3 Price competitiveness due to phasing out of MFA. China and some other competitors of Bangladesh have implemented sharp pricecutting policies in exporting garment products over the last few years, but Bangladesh has failed to respond effectively to such policies. China was able to drop the export price of 29 garment categories by 46 per cent on average in the United States within a year. China rapidly managed to be price competitive in the European Union and other major international markets. For example, the average unit export price of garment products integrated in the third stage of the Multifibre Arrangement phase-out decreased from 11,600 euros per ton in 2001 to 9,500 euros per ton in 2002 for Bangladesh in the European Union, whereas the corresponding decrease for China in that market was from 13,500 euros to 8,800 euros per ton (European Commission, 2003). Bangladesh needs to respond to such price-cutting policies of its rivals in order to remain competitive in the quota-free global market.


4.4.4 Higher head lead time comparing to China/India: Lead time refers to the time required for supplying the ordered garment products after the export order has been received. In the 1980s, the usual lead time in the garment industry was 120-150 days for the main garment supplier countries of the world; it has been reduced to 30-40 days in the current decade. However, in this regard the Bangladesh RMG industry has improved little; for example, the average lead time is 90-120 days for woven garment firms and 60-80 days for knit garment firms.

In

China, the average ead time is 40-60 days and 50-60 days for woven and knit products respectively; in India, it s 50-70 days and 60-70 days for the same products respectively. Shortening the lead time is the most urgent priority task for Bangladesh. The best ay is to develop domestic backward linkages with the aim of reducing “production and distribution” time. Such a strategy would contribute to enhancing the deep-level performance of the industry and would have a positive impact on surface-level performance. An alternative solution would be to establish a central or common bonded warehouse in the private sector for storing raw materials usable in the exportoriented garment industry, with special incentives such as duty-free import. While such a solution is he fastest way to improve surface-level competitiveness by reducing lead time, it carries the risk of delaying deep-level competitive performanceenhancing initiatives and the long-term development of the industry.

4.4.5 Compliance issues In addition to speedy supply, the social dimensions of the RMG industry are getting more attention from consumers, social workers, welfare organizations and brand name international buyers. Currently, many international buyers demand compliance with their “code of conduct” before placing any garment import order.

Although

Bangladesh was able to solve the problem of child labour very successfully in the mid-1990s, the country’s performance in improving the factory working environment is not yet satisfactory. Informal recruitment, low literacy levels, wage discrimination, irregular payment and short contracts of service are very common practices in the RMG factories in Bangladesh.

It is true that the country still enjoys some

comparative advantage in manufacturing garment products based on low labor costs. The average garment- manufacturing labor cost of Bangladesh was $0.16 per hour in


1993, while the corresponding figures for India and China were $0.27 and $0.25 respectively in the same year (1999). The corresponding data for 2002 were $0.39, $0.38 and $0.68 for Bangladesh, India and China respectively (2002). However, such advantages cannot be sustained forever nor can they be expected from a humanitarian perspective. Labor organizations, social welfare organizations and humanitarian organizations are raising their voices against such low wages, which are considered labor exploitation.

Rented factory premises, narrow staircases, low roofs, closed

environments; common rooms for female workers are other concerns in the garment factories of Bangladesh. Bangladesh RMG firms need to deal with these issues in order to remain competitive in the global market.

4.4.6 Product and market composition is not well diversified The product and market composition of garments from Bangladesh requires special attention to ensure the long-term sustainability of the Bangladesh RMG industry as a prominent supplier in the global market.

The export-quota system diverted the

attention of some international garment suppliers from quantitative expansion to qualitative improvement of exportable garment products. China and other competitor countries took that opportunity, but Bangladesh failed to do likewise. The country stands far behind in the race to upgrade products compared with its rivals. Bangladesh is still focused on manufacturing lower-end products, although recently the country has emerged slowly from being a lower-end producer towards becoming a middle/high-end producer, from being a simple male-wear producer to become a producer of fashionable female wear. Strengthening the process of upgrading products is very important for the Bangladesh RMG industry if it is to enhance its competitiveness. As with China and other prominent garment suppliers, Bangladesh needs to address both the qualitative and quantitative expansion of its RMG industry simultaneously in order to sustain the business in the long run. The country needs to be capable of adjusting its manufacturing capacity to frequent changes in customer demand. In addition to upgrading products, the country should try to achieve product and market diversification in order to diversify risks, gain access to new markets/buyers and increase export volume.


4.4.7 Insufficient International Marketing Support In order to expand the market share and survive in the up coming free global competition in the international market, product diversification appears to be an indispensable strategy. The more varied the product line and range, the better the competitive strength. As for our access to other markets, efforts are being made to enter Japan and other Far East markets; however, presently we are mainly dependent on EU markets and the U.S. We know that if we put all our eggs in one basket, our risk is higher. We can reduce the risk by putting our eggs in several baskets. When the GSP crisis arose we knew that our whole EU market was going to be disturbed, when quota matters created a problem we had to give extra efforts to keep our export earnings from falling. The EU market share accounts for 50% and the U.S. market shares for over 40% of our RMG exports. The above statistics justifies further market diversification. The government should ensure assistance from international organizations like WB, IMF, UNDP, WTO and international Chambers to support the export-oriented RMG sector.

4.5 Inefficient Financial Measures 4.5.1 Inefficient Financial Support For Backward Linkage Industries Since 1974 international trade in textiles and clothing has been guided by various restrictions on a global or regional basis under MFA. The entire business in apparel and garment industry has been subjected to bilateral quota negotiated under MFA. The arrangement of bilateral quotas and restrictions on import under MFA has begun phasing out from January 1995 and the process will be complete by 2005. Therefore there will be no more quotas and the only barrier to import penetration will be the normal rules of competitiveness such as price quality, service, fashion and tariff. Again, the GSP scheme is keen on the basic rules of origin and to meet this rule we need to mobilize the textile sector to feed the RMG sector. Investment in a textile industry will not be viable unless the government reforms its policies for financial support. The cost of financing the linkage projects must be brought down, as was done by India and other competitors of Bangladesh during the initial period of developing their textile sector. Cash incentives should continue. In addition, long term loans must be available at reasonable interest rates. Although the current nominal rates are around 12%, the actual cost of fund to the entrepreneurs amounts to between 20% and 24% after various adjustments. This is quite high a rate and discourages


investment in this sector. The Commercial Banks need not maximize its profits at the cost of the RMG industry. The government may direct the Banks to make reasonable profit and lessen the rate of interest for the RMG sector substantially, say, to 6% to 7%. This of course does not mean that the Bank should not take necessary precautions against possible defaulters. Investment in backward linkage industries for greater supply of raw materials to the RMG sector, particularly in composite textile mills, is quite large. The entrepreneurs will need equity capital from financial institutions. Currently a 50:50 debt-equity ratio is enforced. To encourage investment in this sector, the Government should moderate the ratio to a reasonable 80:20 level. Subsequently Bangladesh must create opportunities to generate a certain new capacity to spin yarn, weave cloth and process Grey fabric. Like Hong Kong and Singapore, which trade quite normally, RMG will have to remain partly dependent on imported yarn and fabric. This, however, should not create a serious problem for Bangladesh to remain competitive in the world market after 2004.

4.5.2 Unfavorable Taxes and VAT for RMG Exports The tax burden on the export oriented garment sector is reducing the competitiveness of Bangladesh ready-made garments in the international market against products from competing countries. In Addition to incentives for aggressive marketing, several countries, including our neighboring ones, are totally exempting their export sectors, including RMG, from all export taxes to help supplement competitiveness and boost exports in the international market. Although included in the 1996-97 Export Policy, the export oriented RMG industry has not yet been brought within the purview of taxation. While the world is in transition from MFA to GATT to WTO, the country is still being constrained further, partly through old ideas. The industry has got to take its best lead before the international players in the industry are at full pace, otherwise there will be little scope for recovery.


4.5.4 Inadequate Adjustment of the National Currency with the urrency of International Competitors With Bangladesh's competitor countries adjusting their currencies downward, ranging from 25 percent to even as high as 550 percent, the downward adjustment of our local currency –the Taka has become imperative. Considering currency devaluation by competitor countries like Indonesia, Thailand, Korea, Philippines, India, Pakistan, Sri Lanka etc., to successfully pursue the exportled growth, our government should have a similar strategy to increase the country’s external competitiveness. Against aggressive currency devaluation by our competitor countries, our real trade –weighted effective exchange rate is still insufficient to maintain competitiveness vis-à-vis our neighbors and potential competitors in the world export market. It must be properly adjusted. We cannot back step from steadily adjusting our currency by observing the strategy our competitors are taking. If devaluation is not conducive to the general national economic development of the country, an alternative must be worked out which best make more of our exporters competitive in the international market.

4.5.5 Anomalies in the Functions of the Banks The RMG sector has been one of the main catalysts contributing to the tremendous development of the banking and insurance sector of the country. While foreign banks, under different heads, charge only 0.25% for first the US$50,000 + 0.125% for whatever rest amount, our banks charge rates from 10-16% straight. Presently our commercial banks are earning over Tk 2,000 crore (Tk. 20 billion) per year from the export-oriented sector. Over the years some bank charges have increased to even three times the charges from 1985. Even now there are some regulations and services which hinder performance of the export-oriented RMG enterprises. These are: •

Regulating approval from the Bangladesh Bank for creating Forced/Demand Loan by lien banks.

Considering of Back -to-Back PAD/Forced Loans as default loans.


Considering overdue FBP against the liability of any UC as default loans.

Enforcing mandatory compulsions in the ECG policy.

Regulating the obtaining of prior permission from the Bangladesh Bank for exporting goods against stock-lot.

Regulating prior approval for discount from the Bangladesh Bank and EPB.

Allowing 45 days from the date of document negotiation for fund remittance in the event of remittance being delayed.

Allowing private commercial banks to charge "UC Acceptance Charges" fees which the Nationalized Banks do not.

Applying the Banking Companies Act, passed by Parliament on 13 March 1997, also for the export-oriented Readymade Garment Sector of the country.

Holding the readymade garment exporters responsible if the proceeds against their exports are not realized owing to the reasons beyond the exporters’ control.

Banning of the Realization Clause when opening L/Cs.

4.6 Inadequate Service Support 4.6.1 Unfavorable Service Charges for Air Cargo It is a common practice that garment factories import goods by air, paying very high freight rates, only when the speedy delivery of finished goods is the prime requirement of the buyer. Thus, damage, misplacement, dislocation of raw materials and delay in clearance thereof grossly affect the delivery schedule of the finished goods. The replacement of damaged or missing raw materials is not only expensive, but also time consuming and involves onerous Customs/Bank formalities. In the seaport at Chittagong, the Port Authority acts as Bailee on behalf of all carriers and thus goods land under the port's tally along with remarks as to the condition in which goods have out-turned, stored consignment-wise/shipping mark-wise etc., no such system prevails at ZIA. Neither the Civil Aviation nor Bangladesh Biman act as


"Bailee" and as such there remains a vacuum of accountability for misplacement and/or damage to goods. Unlike the seaport at Chittagong or Mongla, at ZIA the importer or their C&F agents are unable to see the condition or storage position of the goods and have to depend on Biman Loaders for "produce of goods". In the examination section a highly irregular practice is being followed by Biman when certain a percentage of goods are required to be produced for inspection purpose, the C&F agents are made to sign that all goods have been duly produced before the actual inspection. Only then does Biman produce the goods. Therefore at the time of delivery if the loaders fail to detect any goods, in that case only tally marks are made on the reverse side of the photocopy of Air Way Bill which is retained by Security and only an entry for short received is made in their Delivery Register. The C&F agents are not given any official documents for the short receipt. Even inside the canopy area there are storage tracks where goods are required to be stored according to the last digit of Air Way Bill Number, but the loaders for obvious reasons scatter single consignments in different tracks while stacking.

4.6.2 Incompetent, Slow Services: Therefore it is not enough to employ sufficient personnel in the custom office but they must also be trained. The custom office must be provided with modern technical support and its ser vices must be computerized. The government has already taken some steps in this direction, but it has to be strengthened.

4.7 Inadequate Development Management and institutional Initiatives 4.7.1 Inadequate Exchange of Views between BGMEA and the Board of Directors of the Nationalized Commercial Banks BGMEA, the single largest trade organization, has been leading the RMG industry to become the biggest export-earning sector in Bangladesh. This sector has propelled the financial sector of the country to new heights. The sector also involves a huge amount of capital investment from the Nationalized Commercial Banks (NCB). The Bank's recovery of loans from this sector has been positive and the sector's contribution to the Bank's earning has been quite considerable. But the financial activities of the NCBs are not sufficient to fasten the export-import procedure for this industry.


Moreover, the government's policy to reform the public sector banking institutions has not been working to simplify the complex sys tem. If representatives from the BGMEA could be included in the Board of Directors of Nationalized Banks and the Bangladesh Bank, this would help solve the different banking problems faced by the garment industry and thus help the economy in a positive way.

4.7.2 Unequal Opportunity for RMG Export Oriented Industry The government's policy to attract foreign investment in Bangladesh is quite impressive. This policy, however, show some inequalities. Under the bonded warehouse system every export oriented garment factory is an EPZ, but factories in the EPZ enjoy more benefits than those outside the EPZ. Even in Japan, all exportoriented factories enjoy such benefits. If these inequalities were eliminated and export oriented garment units outside the EPZ were provided with similar benefits to those industries in the EPZ, it would certainly support to increase export and earn more foreign currency for the country.

4.7.3 Indecisive regional Re-location Policies for Export-Oriented RMG Enterprises To help reduce the environment pollution in the city and provide garment workers with adequate residential facilities, garment factories need to be shifted to the outskirts of the city. Government's "khas� (own) lands beside the Dhaka-Chittagong highway could be allocated for setting up of garment villages and to accommodate the workers of the export oriented garment industry. This could relieve not only the pressure on the environment of the city but also traffic jam and population and other related pressures.

4.7.4 Acknowledge ment for the Needs of a Cabinet Committee for export-Oriented RMG A cabinet committee headed by the Humble Prime Minister of the country should be formed to solve specific and unforeseen problems in the export-oriented RMG sector. The committee may meet quarterly to review the overall situation of the export-import oriented RMG and take necessary measures to promote RMG exports.


4.7.5 Recognition of the Necessity for an “Apparel Board” Solving specific and unforeseen problems of the exporters of the RMG sector from policy making to implementation in every phase needs prompt service from the Government. Following the example of the Tea and Jute Board, the setting up of an “Apparel Board” has become very essential to free the industry from time wasting bureaucratic shackles and make it more dynamic.

4.8 Risk factors & Management perceptions about the risks The Company is operating in a field involving a great deal of external/internal risk factors and the management of Khaleque Group of Industries perceives the risk factors which are as follows simultaneously: -

4.8.1 Interest rate risks Interest rate risk arises due to fluctuation of interest rate in money market. Volatility in money market and increased demand for loan presses on interest rate structure to be fixed in high. Raising of interest rate increases the cost of fund for a company, which have borrowed fund, and consequently profit is squeezed.

4.8.2 Exchange rate risks Devaluation of local currency against major international currencies affects business performance of import based companies or companies borrowed in foreign currency adversely. Management perception Import of the machinery/raw materials may be affected by the local currency devaluation.


4.8.3 Industry risks The company is operating in a highly competitive industry. Textile is the largest industrial sub-sector in Bangladesh. It contributes highest in the country’s total export earnings, gives employment to over four million people, meets the second basic need for clothing of the country and contributes around 50% of the industrial value addition. But after phasing out of the MFA, the global textile trade is now free from quota restriction. The phasing out of MFA has created a tough competitive environment, where Bangladesh is now competing the countries like China, India, Pakistan, Indonesia, Thailand, Vietnam etc. countries that is very strong in production of textile goods. All sectors of the textile industry face many of the same challenges. These problems include lack of power, obsolete technology, low capacity utilization, lack of machinery maintenance, a workforce that is not adequately trained, problems with labor unrest and militancy, political unrest causing disruption such as hartals, and a lack of working capital.

4.8.4 Market and technology related risks (i) Market related risks Serving as a backward linkage, the spinning industry depends heavily on exportoriented knitting and weaving industries. Any fall in demand of the latter in the export market will naturally cause shrinking of the market for spinning industry. (ii) Technology related Risk: Technology always plays vital role for existence of any industrial concern. Innovation of new and cost effective technology may obsolescence existence technology, which may cause negative impact.

4.8.5 Potential or existing government regulations: The Company operates under companies act, taxation policy adopted by NBR, Security and Exchange Commission (SEC)’s rules and rules adopted by other regulatory organizations. Any abrupt changes of the policies formed by those bodies will impact the business of the Company adversely.


4.8.6 Potential changes in global or national policies The performance of the company may be affected by the political and economical instability both in Bangladesh and worldwide. Any instance of political turmoil and disturbance in the country may adversely affect the economy in general. .

4.8.7 Operational Risk Difficulty in raw material import, increase of raw material price, strikes or other disruption within production premise may hinder regular flow of operational activitie


Chapter Five Swot Analysis

5.1 Strength : • •

Energy at low price Easily accessible infrastructure like sea road, railroad, river and air communication

Accessibility of fundamental infrastructure, which is about 3 decade old, mainly established by the Korean, Taiwanese and Hong Kong Chinese industrialists.

FDI is legally permitted

Moderately open Economy, particularly in the Export Promotion Zones

GSP under EBA (Everything But Arms) for Least Developed Country applicable (Duty free to EU)

Improved GSP advantages under Regional Cumulative

Looking forward to Duty Free Excess to US, talks are on, and appear to be on hopeful track

Investment assured under Foreign Private Investment (Promotion and Protection) Act, 1980 which secures all foreign investments in Bangladesh

OPIC's (Overseas Private Investment Corporation, USA) insurance and finance agendas operable

Bangladesh is a member of Multilateral Investment Guarantee Agency (MIGA) under which protection and safety measures are available

Adjudication service of the International Centre for the Settlement of Investment Dispute (ICSID) offered

Excellent Tele-communications network of E-mail, Internet, Fax, ISD, NWD & Cellular services


Weakness of currency against dollar and the condition will persist to help exporters

Bank interest@ 7% for financing exports

Convenience of duty free custom bonded w/house

Readiness of new units to enhance systems and create infrastructure accordant with product growth and fast reactions to circumstances

5.2 Weakness: •

Lack of marketing tactics

Dependence on others for raw materials

Low productivity.

limited knowledge in international marketing information .

Poor infrastructure.

Political instability.

Disruptive trade unionism.

Inefficiency in port management.

The industry is heavily dependent on others for outsourcing of raw materials such as clothing and accessories. Bangladesh is currently importing raw materials (gray fabrics) for its RMG factories from countries like India, China and Thailand under back-to-back L/Cs. In a quota free environment, these countries will obviously try to export finished apparels to North American markets rath than sell fabrics to countries like Bangladesh (Bhattacharya 1999b). With equal access to the world market, these direct competitors will either stop selling materials to their competitors like Bangladesh (a strategic move) or charge higher prices for their materials (because of increased internal demand). In either case, Bangladesh will face difficulty in procuring the required raw materials at reasonable prices.


The country is deficient in creativity

Absence of easily on-hand middle management

A small number of manufacturing methods

Low acquiescence: there is an international pressure group to compel the local producers and the government to implement social acquiescence. The US GSP may be cancelled and purchasing from US & EU may decrease significantly

M/c advancement is necessary. The machinery required to assess add on a garment or increase competence are missing in most industries.

Lack of training organizations for industrial workers, supervisors and managers.

Autocratic approach of nearly all the investors

Fewer process units for textiles and garments

Sluggish backward or forward blending procedure

Incompetent ports, entry/exit complicated and loading/unloading takes much time

Speed money culture

Time-consuming custom clearance

Unreliable dependability regarding Delivery/QA/Product knowledge

Communication gap created by incomplete knowledge of English

Subject to natural calamities

5.3 Opportunity •

The greatest opportunities lie on the unlimited market outside Bangladesh. In a quota free world, the United Nations Commission for Trade and Development (UNCTAD 1986) estimated that removal of the MFA and tariffs by developed countries will expand exports of clothing by 135 percent


using a global general equilibrium model, estimated that the change will be much larger: the value of imports of textiles and clothing will rise by 305 percent in the US, 200 percent in Canada, and 190 percent in EU. This indicates that phasing out of quota will expand the market tremendously.

EU is willing to establish industry in a big way as an option to china particularly for knits.

Bangladesh is included in the Least Developed Countries with which US is committed to enhance export trade

Knitwear are very economical even with china and is the prospect for Bangladesh

If skilled technicians are available to instruct, prearranged garment is an option because labor and energy cost are inexpensive.

Foundation garments for Ladies for the FDI promise is significant because both, the technicians and highly developed machinery are essential for better competence and output

5.4 Threats: •

The biggest threat will be the fierce competition from efficient producers like Hong Kong, China, India, Thailand, and Sri Lanka, Vietnam and many SSA and Caribbean countries.

Threats might come not only from marketing but also from outsourcing. Asmentioned earlier, more than 95 percent fabrics areimported from direct competitors. The potentialdanger after 2005 is that these countries might either stop selling their raw materials to Bangladesh or increase the price of their materials tremendously. Whatever may be the case, Bangladesh will lose some competitive edge in the world market.

Environmental issues, labor standard, Trade Related Aspects of Intellectual Property Rights (Trips) etc. might also appear as a deadly threat to developing countries like Bangladesh.


Chapter Six

6. 0 Recommendation To ensure expected development of the export import oriented sector and the use of its full potential and capacity to increase the foreign exchange income of the country, the following measures must be introduced:

6.1 National Political Measures •

Introducing measures to ensure a national political consensus so that the export oriented sector would remain unconditionally unaffected under any political circumstances.

Introducing measures to ensure a sound law and order situation so that all operations of the export-oriented factories can take place without any kind of interruption and hindrance.

6.2 Developmental Measures •

Introducing attractive financial incentives and other incentives to promote investment in the export oriented RMG sector.

Introducing non-bureaucratic and easy operating practical policies to encourage foreign direct investment in the export oriented RMG sector.

6.3 Marketing Support Measures •

Providing international marketing support for the export-oriented RMG sector, i.e. helping exporters from the RMG sector visit international Trade -Fair and buyers abroad.

Supporting quality management, proper export documentation, and, in cases of difficulties, ensuring payment from abroad.

6.4 Financial Measures •

Providing financial, legal, institutional and all other support for backward linkage industries in the export-oriented RMG sector, so that this sector can be relatively independent from import and improve its competitiveness in the international market.


Exempting taxes and VAT for RMG exports, so that the exports can become more competitive in the international market.

Providing long term Tax Holidays to encourage new national and foreign investment in the export-oriented RMG sector.

Carefully adjusting the exchange rate of the national currency to the currencies of the international competitors so that national economic development is not affected but the export -oriented RMG sector gets the necessary financial incentives and the support.

Making value addition for high value items flexible, so that high valued RMG exports can become competitive in the international market.

Removing all anomalies from the functions of the Banks and introducing the following steps to support export-oriented RMG enterprises: •

Requirement of obtaining approval from Bangladesh Bank for the issuance of Forced/Demand Loan by the lien banks should be withdrawn.

Back-to-Back PAD/Forced Loans should not be considered as default loans.

Loans of this nature should be converted into interest-free block Accounts and amortized against future export proceeds.

Overdue FBP created against the liability of any VC should also not be considered as default loans.

Mandatory compulsions set forth in the ECG policy should be waived.

Procedure of obtaining prior permission from Bangladesh Bank for exporting goods against stock-lot should be withdrawn.

Condition for obtaining approval for discount from the Bangladesh Bank should be relaxed and discount approved by the EPB should be treated valid.

Forty-five days, from the date of document negotiation, should be allowed for fund remittance. Overdue interest should not be charged in the event that the remittance is delayed.

Private commercial banks should immediately cease charging "VC


Acceptance Charges" as done by the Nationalized Banks of the country. •

Laws should be enacted announcing that the Banking Companies Act passed by the Jatiya Sang shad (the P arliament) on 13 March 1997 is not applicable to the export-oriented Readymade Garment Sector of the country.

Readymade garment exporters should not be held responsible if proceeds against their exports are not realized owing to the reasons beyond their control.

Working out policies in co-operation with BGMEA providing cash support to encourage better export performance.

6.5 Infrastructural Supporting Measures 6.5.1 Measures to Remove Transport Congestion •

Removing port congestion so that export-import operation can take place without

Any kind of delay, a holding export schedule is not only a precondition to satisfy he buyer but also to improve the business image of the country abroad.

Ensuring a rush-free and well-developed Road and Railway communication, so that urgent transport between the export-oriented RMG enterprises can take place without delay.

Ensuring prompt transportation of export goods to the port and transport of import goods from the port to the corresponding enterprises.

Regulating air cargo charges so that it does not affect the competitiveness of export-oriented RMG sector.

Ensuring the delivery of air import shipment so that delivery without any delay is assured.

6.5.2 Measures to Ensure Uninterrupted Power Supply Introducing measures to ensure uninterrupted power supply to all export-oriented RMG enterprises, so that they can operate normally and at its full potential and Capacity.


6.6 To establish Chittagong Port as a modern and efficient port A set of recommendations are offered below. It is hoped that the government will keep up its efforts to establish Chittagong Port as a modern and efficient port through implementation of these recommendations. •

The Port Authority Act 1976 should be amended for reducing bureaucratic complexities involving port authority and the ministry, and for increasing decision-making powers to resolve problems.

Online methods should be introduced in the operations of the port and customs house in place of the present manual system. This would lead to enhanced coordination between the customs and port authorities. Banks having online facilities may be deployed to reduce hassles faced by importers, exporters and other service receivers.

The manpower structure of the port and customs should be reviewed immediately and vacant posts should be filled up with efficient human resources equipped with modern technological knowledge. Adjustments should be made after examining the need for manpower in the customs house in the light of increase in private ICD.

A committee should be formed comprising of service recipients, serviceproviders and specialists; the number of layers for import and export should be reduced on the basis of its recommendations.

All political activities should be banned in Chittagong Port after declaring it as an ‘Essential Service Providing Organization’.

A ‘zero tolerance’ policy should be pursued by the authority with respect to irregularities and corruption in Chittagong Port.

Taking into consideration the importance of the port in the national economy and incidence of corruption in the sector, the Anti-Corruption Commission can form a monitoring cell at Chittagong Port.

For the purpose of commercialization, the loading and unloading


operations at the port should be handed over to private management under ‘land-lord’ system. For increasing competition and reducing discretionary powers, some organizations can be given this task with attached conditions for specific periods through open tenders. •

A 10-member autonomous regulatory body may be formed like the shipping maritime council for supervision of all stakeholders of the port.

Arrangements should be made for exemplary punishment of the corrupt after identifying corrupt officers and employees in the port and customs. Much information on corruption would emerge if stock is taken of their wealth.

In accordance with the Public Procurement Act 2003, agreements may be made with two companies for container handling at New Mooring Container Terminal (500 meters for each company) under the ‘Land Lord’ system once 3-4 gantry cranes are procured. Transparency should be maintained in this award process.

The number of Inland Container Depot (ICD) should be increased to increase space for containers.

Arrangements should be made for transfer of officers/employees from/to Mongla Port, BIWTC, Marine Academy and Shipping Ministry as and when required.

Proper investigation of the financial solvency of businessmen should be done before opening of an LC. Steps should also be taken for verifying the addresses of importers for opening the LC in order to deter imports made through false declarations. The instructions of Bangladesh Bank should be followed strictly regarding verification of the address and identity of the subscriber during opening of LC.

Security should be ensured by installing CCTV and VTA system. All commodities should be checked through scanner machines. No commodity should be released without the consent of the customs authority as well as examination of the scanning report.


The customs authorities should take steps for checking misuse of green channels by approved garments factories. At the same time, BGMEA and BKMEA should also undertake intensive supervision.

An analysis for identifying revenue risks should be undertaken on the commodities under HS code which have been granted special waiver.

Intensive monitoring of the work of PSI companies for proper realisation of revenue should be done. Allegations of irregularities and corruption against them should be sent to the ACC and appropriate measures should be taken after proper enquiry.

An effective one-stop service centre should be launched at the customs house. Booths of other relevant organisations should also be set up in the same building.

The auditing function in the port and customs should be strengthened. Joint auditing ventures should be undertaken for observing the present state of those commodities which have not been released despite noting in the bill of entry or where duties have not been realised despite their imposition, or where noting has not been done at all.

Domestic communication network inside the country should be developed rapidly.

Arrangements should be made for auctioning of the containers that are not delivered on time or were seized.

The container handling capacity of the railway should be strengthened.

An additional 2.5 megawatt generator should be procured for gantry cranes during load-shedding hile placing in the Customs House from the National Board of Revenue as class one/two non-cadre officers, candidates should be assessed on the basis of educational qualification, computer expertise, knowledge of issues related to customs, experience, age, and dedication to duty.


6.7 Development of Institutional Measures •

Integrating BGMEA representatives in the Board of the nationalized Banks to ensure prompt financial operation in the export-import business of the export-Oriented RMG enterprises and to speed up and promote investment in the export-Oriented RMG sector.

Providing the export -oriented RMG sector similar facilities given to the enterprises in the EPZ, because in fact there is no difference between these two groups of enterprises

Establishing RMG villages so that unhindered operations of the exportoriented RMG enterprises can be ascertained and the productivity increased by providing healthy accommodation to the employees of these enterprises. This will help keep the capital city free from environmental pollution, which is partly done by these enterprises. This will also relieve city from the unbearable traffic jam.

Establishing an Apparel Board composed of persons from the policy making and implementing body of the government to ensure support and assistance for the export-oriented RMG sector.

Forming a Cabinet committee headed by the Humble Prime Minister, which should meet quarterly to solve especially unforeseen problems of the export oriented RMG sector instantly.

Privatizing EPB or permitting a parallel private institution for the services that are provided by EPB so that prompt and qualified services are ensured.

6.8 Measures to Ensure Development of Human Resource •

Creating educational facilities for the labor force from export-oriented RMG enterprises.

Providing training opportunity for labor and management from exportoriented RMG sector.


Organizing workshops, seminars and symposiums to explain the necessity and importance of discipline, qualified workers, and improved productivity for export, national economy development & the welfare of the workers themselves.

Arliament) on 13 March 1997 is not applicable to the export-oriented Readymade Garment Sector of the country.

Readymade garment exporters should not be held responsible if proceeds against their exports are not realized owing to the reasons beyond their control.

Working out policies in co-operation with BGMEA providing cash support to encourage better export performance.

6.5 Infrastructural Supporting Measures 6.5.1 Measures to Remove Transport Congestion •

Removing port congestion so that export-import operation can take place without

Any kind of delay, a holding export schedule is not only a precondition to satisfy he buyer but also to improve the business image of the country abroad.

Ensuring

a

rush-free

and

well-developed

Road

and

Railway

communication, so that urgent transport between the export-oriented RMG enterprises can take place without delay. •

Ensuring prompt transportation of export goods to the port and transport of import goods from the port to the corresponding enterprises.

Regulating air cargo charges so that it does not affect the competitiveness of export-oriented RMG sector.

Ensuring the delivery of air import shipment so that delivery without any delay is assured.

6.5.2 Measures to Ensure Uninterrupted Power Supply Introducing measures to ensure uninterrupted power supply to all export-oriented


RMG enterprises, so that they can operate normally and at its full potential and Capacity.

6.6 To establish Chittagong Port as a modern and efficient port A set of recommendations are offered below. It is hoped that the government will keep up its efforts to establish Chittagong Port as a modern and efficient port through implementation of these recommendations. •

The Port Authority Act 1976 should be amended for reducing bureaucratic complexities involving port authority and the ministry, and for increasing decision-making powers to resolve problems.

Online methods should be introduced in the operations of the port and customs house in place of the present manual system. This would lead to enhanced coordination between the customs and port authorities. Banks having online facilities may be deployed to reduce hassles faced by importers, exporters and other service receivers.

The manpower structure of the port and customs should be reviewed immediately and vacant posts should be filled up with efficient human resources equipped with modern technological knowledge. Adjustments should be made after examining the need for manpower in the customs house in the light of increase in private ICD.

A committee should be formed comprising of service recipients, serviceproviders and specialists; the number of layers for import and export should be reduced on the basis of its recommendations.

All political activities should be banned in Chittagong Port after declaring it as an ‘Essential Service Providing Organization’.

A ‘zero tolerance’ policy should be pursued by the authority with respect to irregularities and corruption in Chittagong Port.

Taking into consideration the importance of the port in the national economy and incidence of corruption in the sector, the Anti-Corruption


Commission can form a monitoring cell at Chittagong Port. •

For the purpose of commercialization, the loading and unloading operations at the port should be handed over to private management under ‘land-lord’ system. For increasing competition and reducing discretionary powers, some organisations can be given this task with attached conditions for specific periods through open tenders.

A 10-member autonomous regulatory body may be formed like the shipping maritime council for supervision of all stakeholders of the port.

Arrangements should be made for exemplary punishment of the corrupt after identifying corrupt officers and employees in the port and customs. Much information on corruption would emerge if stock is taken of their wealth.

In accordance with the Public Procurement Act 2003, agreements may be made with two companies for container handling at New Mooring Container Terminal (500 meters for each company) under the ‘Land Lord’ system once 3-4 gantry cranes are procured. Transparency should be maintained in this award process.

The number of Inland Container Depot (ICD) should be increased to increase space for containers.

Arrangements should be made for transfer of officers/employees from/to Mongla Port, BIWTC, Marine Academy and Shipping Ministry as and when required.

Proper investigation of the financial solvency of businessmen should be done before opening of an LC. Steps should also be taken for verifying the addresses of importers for opening the LC in order to deter imports made through false declarations. The instructions of Bangladesh Bank should be followed strictly regarding verification of the address and identity of the subscriber during opening of LC.

Security should be ensured by installing CCTV and VTA system. All commodities should be checked through scanner machines. No commodity


should be released without the consent of the customs authority as well as examination of the scanning report. •

The customs authorities should take steps for checking misuse of green channels by approved garments factories. At the same time, BGMEA and BKMEA should also undertake intensive supervision.

An analysis for identifying revenue risks should be undertaken on the commodities under HS code which have been granted special waiver.

Intensive monitoring of the work of PSI companies for proper realisation of revenue should be done. Allegations of irregularities and corruption against them should be sent to the ACC and appropriate measures should be taken after proper enquiry.

An effective one-stop service centre should be launched at the customs house. Booths of other relevant organisations should also be set up in the same building.

The auditing function in the port and customs should be strengthened. Joint auditing ventures should be undertaken for observing the present state of those commodities which have not been released despite noting in the bill of entry or where duties have not been realised despite their imposition, or where noting has not been done at all.

Domestic communication network inside the country should be developed rapidly.

Arrangements should be made for auctioning of the containers that are not delivered on time or were seized.

The container handling capacity of the railway should be strengthened.

An additional 2.5 megawatt generator should be procured for gantry cranes during load-shedding hile placing in the Customs House from the National Board of Revenue as class one/two non-cadre officers, candidates should be assessed on the basis of educational qualification, computer expertise, knowledge of issues related to customs, experience, age, and dedication to


duty.

6.7 Development of Institutional Measures •

Integrating BGMEA representatives in the Board of the nationalized Banks to ensure prompt financial operation in the export-import business of the export-Oriented RMG enterprises and to speed up and promote investment in the export-Oriented RMG sector.

Providing the export -oriented RMG sector similar facilities given to the enterprises in the EPZ, because in fact there is no difference between these two groups of enterprises

Establishing RMG villages so that unhindered operations of the exportoriented RMG enterprises can be ascertained and the productivity increased by providing healthy accommodation to the employees of these enterprises. This will help keep the capital city free from environmental pollution, which is partly done by these enterprises. This will also relieve city from the unbearable traffic jam.

Establishing an Apparel Board composed of persons from the policy making and implementing body of the government to ensure support and assistance for the export-oriented RMG sector.

Forming a Cabinet committee headed by the Humble Prime Minister, which should meet quarterly to solve especially unforeseen problems of the export oriented RMG sector instantly.

Privatizing EPB or permitting a parallel private institution for the services that are provided by EPB so that prompt and qualified services are ensured.

6.8 Measures to Ensure Development of Human Resource •

Creating educational facilities for the labor force from export-oriented RMG enterprises.

Providing training opportunity for labor and management from export-


oriented RMG sector. •

Organizing workshops, seminars and symposiums to explain the necessity and importance of discipline, qualified workers, and improved productivity for export, national

Economy development & the welfare of the workers themselves.

Chapter Seven

7.0 Conclusion The largest hurdles faced by Bangladesh’s economic driving force, its export import sector, are the inefficient Customs and administrative export trade processes, as well as the inadequacy of the current transport and shipping infrastructure. The duplication of Customs formalities low operational efficiency at the Port of Chittagong, and poor transport infrastructure result in lengthy delays and exorbitant shipment costs that constrain the Bangladesh economy. The shortcomings of the Customs and administrative procedures should be addressed through phased trade facilitation initiatives that are synchronized with upgrading of vital transportation infrastructure. This will enable Bangladesh’s economy to significantly progress and the export import sector will remain one of the most competitive in the world.The most urgent and important task for the Bangladesh RMG industry is shortening the lead time; otherwise, international buyers may divert their attention towards other suppliers for the importation of garment products in the current quota-free business environment. The best option for Bangladesh is to improve its deep-level competitiveness by reducing total “production and distribution” time, which will improve surface-level competitiveness by reducing lead time. An important precondition for implementing that strategy is the existence of a strong domestic textile industry. Bangladesh faces significant constraints in this regard and hence it is not possible to establish strong backward linkages overnight.

Therefore, to retain competitiveness in the global

market, Bangladesh has to think of other alternatives. The establishment of common bonded warehouses in the private sector for storing raw materials for use in exportoriented garment factories under some special incentives, such as duty-free imports, could play a significant role in reducing lead time. Such a policy runs the risk of delaying the initiatives that are necessary in order to strengthen deep-level competitiveness. However, globalization is putting pressure on the country to accept


that risk.

The establishment of common bonded warehouses and the expansion of

backward linkages are two options for the Bangladesh RMG industry. While the establishment of common bonded warehouses will improve only surface-level competitiveness, the latter will improve both surface and deep-level competitiveness. A good balance between these options will sustain and enhance Bangladesh’s position in the world market, and at the same time upgrade the country’s current status of being only an assembler so that it could become a full-package supplier of garment products.Export import sector needs to concentrate on improving the working environment in factories and address other social issues related to the garment industry. The RMG firms in Bangladesh have been facing immense pressures from international buyers for compliance with their codes of conduct. In contrast, the big buyers are interested in continuing and expanding their business with Bangladesh if shorter lead time and compliance standards can be met.

Therefore, Bangladesh

should address these two issues very carefully and immediately, which are the least conditions necessary to survive the competition.

Reference 1.

"Bangladesh: Key Challenges for the Next Millennium", The

World Bank, April 1999. 2."Crisis in Governance", Center for Policy Dialogue, June 1998. 3."Bangladesh: Strategy for Establishing a Sound and Competitive Banking Sector", World Bank, April 1998. 4."Electricity & Gas Consumption by Readymade Garment Sector of Bangladesh", Mohammad Mesbahul Karim, BGMEA, 2000. 5."Measuring the Dynamic Gains form Trade", Remain Wackier, World Bank, I998. 6."Foreign Director Investment", Foreign Investment Advisory Service, Occasional Paper 7 . "The Consequences of the GATT Uruguay Round for the Textile and


Garments Sector in Bangladesh", C. A. F, Dowlah, August 1998. 8."Annual MIS Report for Textile Report for Textile Sector", Ministry of Textiles, November 1997. 9."The Impact and Implications of the Agreement on Textiles and Clothing", Uruguay Round Study Project, Ministry of Textiles, Govt. of Bangladesh. 10."Bangladesh Trade Liberalization: It’s Pace and Impacts", World Bank, November 1999.


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