Policy support in powering accessories sector ahead by Abdul Kader Khan

The local accessories makers meet more than 90 per cent of the country’s readymade garment (RMG) sector’s demand and also that of the pharmaceuticals, leather, frozen fish and agro-based industries, especially in the form of packaging products.

The sector now imports only 5-10 per cent of the accessories as referred to by the buyers while the rest of the demand is sourced locally. Add to it the 20 per cent of the accessories now directly being exported to the global market.

But, for the sake of helping the sector flourish further, the government should come forward with policy support including cash incentive, cut in corporate tax rate and funds at low interest rates, especially for the SMEs (small and medium enterprises).

Unless the support is there, it will stunt the growth of the readymade garment (RMG) sector’s very import backward linkage industry, says Abdul Kader Khan, chief of the local accessories trade body, in an interview with the FE.

“The backward linkage accessories industry has flourished over the decades pushing up the country’s ‘deemed export’ earnings significantly,” says the president of Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA).

In the last fiscal year the sector earned $6.7 billion (670 crore) in form of ‘deemed exports’ through the local apparel makers, a big jump from $2.75 billion in the fiscal year 2010-11.

The accessories makers sell their products to the local apparel makers. These accessories are used for packaging and other purposes by the apparel makers before the export of their finished garment products across the globe, the BGAPMEA chief says while explaining the ‘deemed export’.

The industry is also facing some challenges along the road which may erode its competitiveness and put its survival at stake, says the managing director of Khan Accessories and Packaging Co Ltd.

It is a matter of great concern that the industry is not getting the required government policy support and it is facing discrimination, the association chief claims.

“Though we have reduced import dependence, we are yet to get any cash support from the government,” he said. He seeks cash incentive at the rate of three per cent on FoB.

He also says the corporate tax rate for the accessories industry is 35 per cent, though green and other RMG factories pay only 10 per cent and 12 per cent respectively, he mentions. He requests the government to charge the accessories industry the same tax rate as provided to the RMG sector.

Mr Khan calls on the government to take measures so that SMEs get loans from banks at low interest rates to help them sustain their competitive edge and stay in business.

During the last five years, a total of 579 units were closed down mainly because they did not get the required financial support, he alleges.

During the period more than 400 new mills have been established while many are enhancing their existing capacity to meet the growing demand for accessories, mainly following the RMG sector’s expansion, Mr Khan discloses.

The fall in RMG products’ prices is another challenge the accessories sector is currently facing, as they are also under pressure to cut their prices, he says.

The RMG makers should take measures to reduce production costs so that they can keep prices of raw materials at a reasonable level, he suggests. “They (RMG makers) should support us in their own interest,” he hastens to add.

The industry helps the local apparel makers by providing a wide range of accessories ranging from cutting to shipment of finished products and thus helps them in meeting their lead time, he claims. The backward industry saves a large amount of foreign currency unlike the past when the demand for accessories was met with imports just decades back.

The RMG sector, one of the lifelines of the country’s economy, is moving ahead with a target to fetch $50 billion by 2021. No doubt, the accessories industry has an important role to play in achieving the target, he observes.

“We also have set a target to double our export earnings, keeping pace with the RMG sector.”

He also stresses the need for setting up an institution for skill development and doing research on the market, trend and innovation to cope with the demand.

The government should solve the energy supply problem within the shortest possible time as it is severely affecting the entire textile and clothing industry and also the other backward linkages, the BGAPMEA chief makes a clarion call.

A good number of factories failed to utilise their full capacity mainly due to short supplies of gas and electricity and many cannot go for expansion programmes despite having no alternative to making the existing projects viable and sustainable in the long run, he says.

Some 1,587 accessories makers are registered with the BGAPMEA that was launched in 1991 with only 17 members.

According to the association, Tk 320 billion has so far been invested in the sector, creating employment for more than 0.4 million (4.0 lakh) workers.

Out of the 1,587 factories, about 687, the largest number of them, are corrugated carton makers followed by 323 multi item makers while 148 are poly and 125 elastic and drawstring makers. The rest produce different products including button, hanger, packaging, labels, sewing thread, zipper and screen print.

The majority of the units, 849, are located in Dhaka while 266 are in Gazipur, 163 in Narayanganj and 239 in Chittagong. The rest are located in different other parts of the country, according to the association.