H&M’s Bangladesh plan is big

A senior official at the Swedish retail giant says

Business Desk : dhakamirror.com

H&M has a big plan for sourcing from Bangladesh, but prices will rise by up to 12% after the country graduates from the least-developed countries group in 2026.

Bangladesh will lose preferential market access and face 10-12% export duties after becoming a developing nation.However,the European Union has extended a three-year grace period, so it can enjoy duty-free status until 2029.

“Our suppliers are important. Bangladesh is the safest source among H&M’s 19 sources, “H&M’s regional country manager for Bangladesh, Pakistan, and Ethiopia is Ziaur Rahman said.

“We’re staying here.”

As a member of the panel, Rahman discussed “Bangladesh’s LDC graduation-Impediments and Way Forward” during Made in Bangladesh Week in Dhaka’s International Convention City, Bashundhara.

H&M is the single largest foreign clothing buyer in Bangladesh, sourcing $3.50 billion last year. The Swedish clothing retailer imports 20% of its goods from the country.

Rahman’s remarks come as the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has set a goal of increasing the country’s share of the global apparel market to double digits in three years and earning $100 billion by 2030.

Despite global economic slowdown, the country exported $42.61 billion in garments in the last fiscal year, ending in June. It has a 6.8% market share in the global apparel supply chain.

Rahman said 18% to 20% of his company’s Bangladesh-sourced products would be affected by the duty imposition after graduation.

He suggested Bangladesh improve product diversity because 75% of exported garment items are limited to the top five products, despite being the world’s second-largest apparel supplier.

“Improving efficiency and making more garments from manmade fiber can help overcome the challenges of the duty imposition after the LDC graduation,” he said.

Rahman also promised that if garment worker wages in Bangladesh rise, H&M will raise the prices of products sourced from the country to help manufacturers offset additional costs.

Bangladesh is M&S’s top sourcing destination. Shwapna Bhowmick, its regional head for Bangladesh and India, said local manufacturers should use more MMF to boost garment exports.

Artificial fiber use is growing globally.

MMF apparel accounted for $222 billion of the $440 billion global garments market last year, compared to cotton’s $190 billion.

A recent study found, Bangladesh’s apparel exports will top $95 billion by 2030 if the country can increase its MMF market share to 12% from less than 5% at present.

Almost half of all clothing exported around the world is made from MMF, while 42% is made from cotton. Seventy-two percent of Bangladesh’s garment exports are cotton-based, while only twenty-four percent are made from man-made fibers.

Sharifa Khan, secretary of the Economic Relations Division, suggested local manufacturers ship more MMF-made garments for better prices.

She said Bangladesh has already secured five years as the transition period when it comes to duty benefits instead of three years supposed to be granted.

The United Nations Conference on Trade and Development is reviewing extending the transition period. Bangladesh doesn’t expect another extension, she said.

Bangladesh’s economy is resilient, but we must stand on our own.

She suggested aligning GSP with the SDGs so all LDCs benefit.

The ERD secretary also claimed international retailers and brands pressure local suppliers to raise conditions.

Such as, formerly it was said obtaining GSP Plus status in the European Union market Bangladesh required to comply to 27 international conventions. According to Khan, now the number of conventions has increased to 32.

Ahmad Kaikaus, principal secretary of the prime minister, said Bangladesh is the largest denim supplier to the United States despite a 16.50 per cent duty.

“This indicates that the export of garments will not be affected after the LDC graduation.”

Kaikaus also said a team from the International Monetary Fund (IMF) that visited the country recently did not come to rescue Bangladesh by providing loans.

Rather it was a regular visit and they wanted to know about the government’s preparation for the LDC graduation, he said.

The IMF has agreed to provide $4.5 billion in loans to Bangladesh.

The IMF team also did not attach any condition to the loan except for enquiring about the situation of the Export Development Fund (EDF), according to Kaikaus.

The IMF has long been prescribing Bangladesh calculate and regularly publish the net foreign currency reserves.

The central bank currently shows gross foreign currency reserves by including $7 billion of the EDF.

“LDC graduation is a challenge but it is possible to overcome it and grow,” Kaikaus said.

Nazneen Ahmed, the country economist of the UNDP, said if Bangladesh can continue its manufacturing growth even after the LDC graduation, it will not fall into the middle-income trap.

“The conventional country branding will not do. Branding should include all of the potential sectors,” said Riaz Hamidullah, Bangladesh’s ambassador to the Netherlands.

He called for using technology, innovation and design in products.

Asif Ibrahim, a director of the BGMEA, demanded signing trade deals with major trading partners to avail more market access after graduation.

In another session styled “Responsible Business Needs Global Alliance on Due Diligence – the Perspective of Manufacturers & the Western Buyers”, Senior Commerce Secretary Tapan Kanti Ghosh said Bangladesh signed the Global Sustainability

Compact a long ago that called for shared responsibility. But it is not discussed with importance, he said.

The senior secretary said Bangladesh has improved a lot in line with EU due diligence over the past decade.

He is concerned that the EU’s due diligence requirements could be used as a non-tariff barrier.

Made in Bangladesh Week, which co-organized by the BGMEA and the Bangladesh Apparel Expo, will wrap up today.

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