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Kenya's private sector is one of the most advanced and dynamic in Sub-Saharan Africa. Cotton production was introduced in Kenya in the 1900s by the ..." /> Logo

Problem : Prospect : Challenges


Contd from page 45 :
Kenya's private sector is one of the most advanced and dynamic in Sub-Saharan Africa. Cotton production was introduced in Kenya in the 1900s by the colonial administration. To protect the local cotton industry, the Kenyan government introduced 100 per cent duties on imports after independence. The industry was also heavily subsidized.
The 70s and the period up until the mid 80s, the Kenyan textile industry experienced a rapid growth. However, this boom didn't last very long. It had already started declining alarmingly from the mid 80s and by the 90s the textile industry collapsed altogether. The availability of used cloths - locally known as 'mitumba' - at a very cheap price crippled the textile industry and was the sole reason behind the sudden fall of the garments industry.
The textile industry in Kenya transformed once again in the 2000s, and this time it transformed for the better, thanks to Kenya's inclusion in the African Growth and Opportunity Act, (AGOA) for short. AGOA presented the Kenyan textile industry with a much-needed lifetime as it opened the doors to huge market prospects. Since Kenya's inclusion in AGOA, in a mere six-year period (2000-2006), Kenya's clothing sales to the United States alone increased from US$44 million to US$270 million.
AGOA attracted FDI
Since the joining AGOA, Kenya's impressive performance in the global markets has attracted a significant amount of foreign direct investments in the textile industry. In numerous ways Kenya is the ideal investment ground for the investors. Kenya has a ready farming community,which only requires enough seeds and irrigation schemes to be put in place. The climate of Kenya is also ideal for growing cotton as cotton grows well in semi-arid areas. Kenya also offers large areas of cultivable land mass for cotton. Kenya has abundant and relatively well-educated population.
Therefore, skilled and unskilled labour forces are readily available at reasonable rates. The manufacturing industry in Kenya is viable enough to absorb all the cotton production, which ranges from ginneries to garments manufacturing. The infrastructure in Kenya is by no means shabby .
The sea port at Mombasa - located at the East African coast - is linked to the mainland by rail ways and the Great North Road. Kenya is strategically located for investors wanting to access the East and Central African market . Kenya has a very healthy political stability in the whole of Africa. This is always favoured by the foreign investors. As a result, foreign investment in Kenya is increasing steeply.
Kenya'sapparel industry, which currently specializes in supplying high volume bulk items, such as trousers, benefited greatly from AGOA. Kenya exports the biggest share of its apparels to the USA alone. In 2013, some 92 per cent of Kenya's apparel exports went to the USA. Currently, over 40 billion ($400 million) worth of apparels, including jeans and towels, consumed in the US are manufactured in Kenya's Export Processing Zone (EPZ). This is projected to hit 100 billion shillings by 2018. Kenya's performance in the global textile market is turning out to be hugely impressive.
Government's active role
The Kenya's government is playing more of an active role to bolster Kenya's performance in the global textile market even more. The government has acknowledged the importance of a strong foothold in the global garments sector. The government's medium-term economic growth strategy - dubbed Kenya Vision - 2030 - has identified the textile and clothing sector as a potential key driver of the country's industrialization.
If Kenya can develop and improve its infrastructure, it is expected to achieve a permanent spot at the top of the global textile market. China, the world number apparel player, has been working closely with the African industry. We expect that Bangladesh RMG industry, the second largest global exporter, can and should play a collaborative role with the Kenyan as well as African RMG and textile industries.
Sustaining RMG growth:
The RMG industry's steady growth has encouraged Bangladesh to set as ambitious export target of $50 billion by 2021.However, export in recent years has been declining. According Export Promotion Bureau (EPB)data, RMG exports in the fiscal year (FY 2016-'17) stood at $ 48 billion.
Factors like movements of buyers to other RMG destinations, like Vietnam and India, increased facilities to the RMG sector in several Asian nations, gradual fall in prices in importing nations and internal chaos are affecting the competitiveness of Bangladesh of Bangladeshi RMG sectors. In the last two years, production cost has increased by up to 17 per cent due to gas crisis, devaluation of Euro and price fall in EU and US markets.
The government, policymakers and entrepreneurs are mainly concerned with rising labour costs and export restrictions but have been overlooking few important factors vital to sustaining this growth. They are not actively considering positive image branding of this industry which can possibly boost sales by attracting foreign buyers and many manufacturers are not considering branding our local fashion and retail industry.
On the other hand, skilled human resources - one of the biggest factor which greatly adds to cost - was also not being addressed until recently. These two factors must be considered for long-term growth of the industry. Even if Bangladesh loses competitive edge in terms of cheap labour, cutting costs in other areas and boosting sales can effectively help manufacturers maintain their existing margin and can even raise it.
Serious gap in skills
Researches and studies suggested that there is a serious gap in skills all around in RMG sector starting from workers to operators, as wellas entrepreneurs. As of 2017, an estimated 2,00,000 foreigners working in industries in Bangladesh remitted $ 5 billion annually, majority of them are occupying supervisory and managerial positions. This greatly adds up to the cost of manufacturers. Given the current situation of workers unrest, compliances and strict requirements from buyers, manufacturers are bound to cut down their product margin to bear with these added expenditures.
As per BIDS report, demand for skill labours in approximately 10 years eill be as high as 122 per cent. If the skill gaps are not addressed by that time, the productivity will be hampered and Bangladesh will lose its edge with available pool of labour.
'BrandingRMG' has been a notable issue in recent years, especially after the 'Rana - Plaza disaster' and 'Tazreen Garments Fire' which killed thousands of RMG workers and formed a negative image of RMG industry of Bangladesh. Experts have urged garments owners and the authorities concerned to invest in positive brand building of this industry. However, this concept still remains unappreciated. Even if some owners reluctantly agree to invest, many of them still consider this a waste of resources.
First generation entrepreneurs
One of the most important reasons behind this thought process is that the industry is still headed by first-generation entrepreneurs who barely grasp the concept and importance of brand building. These entrepreneurs have been making enough profits just by being suppliers of readymade garments and never had to care about branding since buyers would be attracted by cheap labour anyway. They definitely do not realize that increasing labour costs and globally unfavourable image of Bangladesh is driving buyers to other destinations and only a good image-branding can reverse the situation.
Fortunately, few big manufacturers and exporters, many of them led by second-generation entrepreneurs, are investing in brand-building. In fact, they have gone a step ahead and started creating local retail brands, few of which have gained a footing in the international market and opened up a new arena in RMG exports.    
Transparency in garment trade
Former apparel trade body chief MdAtiqul Islam mentioned:
Though Bangladesh is the second largest exporter of apparel items, most of the work orders still come through agents, including buying houses and other third parties.
To bag the orders directly, the country needs to improve knowhow about fashion, design development, market trend and the product-wise market demand. It also needs to do research on those pressing issues.  
The exporters get about 40 per cent of the work orders directly from global apparel buyers, brands and retailers while the remaining 60 per cent fetched through agents.
The receipt of orders through agents one of the major challenges and causes of the low apparel prices. The agents come up with their latest innovation, design and value-added products and show those to the buyers and take orders from them. Then they contract the local makers to deliver the orders thus cutting their profit margin.
If the entrepreneurs, could show our own designs and sample of value-added products, that could help get the orders directly paving the way for better prices for the apparel makers.
Skill development of not only workers but also the mid-level management officials and entrepreneurs is also important in this case.
The backward linkage of the garment industry strong enough to supply the required raw materials. Now there is a need for focus on forward linkage.
Keeping this reality into consideration, the CEBAI was established in 2014 to help the apparel sector grow further. The industry has an enormous scope to improve productivity through skill development and by doing research on the current issues and challenges that the sector is facing. The objectives of the CEBAI are not only to import skill training but also prepare the sector to meet the ever-changing challenges to remain among the top RMG exporters of the world.
The sector needs to have updated and relevant information on all countries involved in RMG trade, research findings and in-depth studies on issues affecting the sector. The sector needs to analyse the world statistics on garments and the demand.
It is the time to brand the country after the Rana Plaza building collapse as the sector has undergone significant improvement in terms of work place safely, compliance and other related issues.
After 2013, Bangladesh is the only country that maintains transparency in garment trade. Any buyer or anyone else involved in the trade can go through the factory information. But it is not possible in the event of other garment manufacturing countries.
The country also needs to focus on apparel diplomacy in attracting foreign buyers and showcasing the country to the international community.
Remediation of left-out factories
According to a report of the NYU Stern Centre for Business and Human Rights, an estimated US$ 1.2 billion would be required for remediating the safety hazards in the readymade garment factories left out of the safety inspection and remediation process so far. Most of them are subcontracting factories where no inspections were carried out and others are monitored by the government under a national initiative.
Some 7,000 factories, including garment, textile, dying and washing units, are operating across the country and some 3,000 of them are subcontracting units. The remaining 4,000 factories are currently overseen under three initiatives. The foreign initiatives - the Accord and the Alliance - have improved the conditions in about 2,300 factories serving their member companies, while the Bangladesh government under a national initiative monitors another 1,650 factories.
The report proposed forming a multi-stakeholder taskforce to fund and oversee the remediation efforts in those factories and subcontracting units where safety issue still remains a cause for concern.
The report titled 'Five Years After Rana Plaza: The Way Forward' found that many garment factories are now safer following the initiatives sponsored by Western apparel brands and retailers. The moves have made a difference in about 2,300 factories employing some 2.0 million workers.
Michael Posner, the director of the NYU Stern Centre mentioned, 'While there has been great progress in many of the largest and best factories, workers in thousands of subcontracting factories, many of them young women, continue to work under unacceptably dangerous conditions.'
Many of the factories that so far have been remediated fully - or at all - cannot afford expensive safety improvements on their own. They lack direct relationships with Western brands and realities. Their margins often are even slimmer than those of Accord/Alliance suppliers. And because of their shaky financial profiles, they do not have access to local bank loans. Without outside aid in the form of grants or low-interest loans, these factories simply will not get safer.
This reality motivates our determination to raise a substantial fund to be distributed by a task force to those most in need. We approach this effort from the perspective of workers whose safety will be compromised until improvements are made. It estimated dollar value for National Initiative remediation at $413 million and contracting units.
Western consumers are the beneficiaries of the cheap cloths produced in Bangladesh. Therefore, it is incumbent on Western brands and retailers, as well as Western government, to step up to the plate. We are calling for a model of shared responsibility, led by the government of Bangladesh that will generate the needed funds to fix these dangerous factories.
Apparel sector leaders in the country, however, differed on the number of factories, saying such move would only create new complexities. They could not provide any specific statistics though.
Abdus Salam Murshedy President of Bangladesh Exporters Association said, the NYU Stern Centre might have taken all production units into consideration, irrespective of whether they export or not, and included the small units in Keraniganj that supply garment items to only local markets. It is easy to propose anything but the reality is different. Small and medium-sized factories need easy loan at low interest rate to relocate, as many of them are operating in rented buildings where remediation is not possible.
Fazlul Hoque, former President of Bangladesh Knitwear Manufacturers and Exporters Association, also differed with the report that there are 7,000 export-oriented garment factories in the country.
Rubana Hoque, Finance Director of Mohammdi Group, said, the cost of relocation and the cost of remediation of factories are not the same and that the costs can't be based on the amount spent on remediating the factories under the initiative of Accord or Alliance. Land costs are high and many factories need to relocate: there are other infrastructural needs as well, that the needs cannot be standardised and costs can't be averaged.
Regarding the proposed multi-stakeholder taskforce, the leaders came out favour of strengthening the remediation coordination cell (RCC), saying that all the activities under the initiatives are expected to come under the purview of RCC soon. The remediation of safety issue came to the fore in the wake of Rana Plaza tragedy that killed more than 1,100 people, mostly garment workers, and injured 2,500 on April 24,2013.
The industrial disaster shook the global fashion industry, leading to protests at major clothing stores around the world and pledges from major brands and retailers to protect workers in their supply chain.            
Took some hard knocks
Though minimal, the 9.11 per cent rise in the export of Bangladesh's readymade garments is encouraging and this trend of growth should continue for placing sector even firmer footing. After the Rana Plaza tragedy in 2011, in the face of worldwide criticism, many assumed that Bangladesh's readymade garments might lose international markets as it was difficult for many factories to meet the demands of international buyers.
At that time the sector, the first major driver of Bangladesh's economy in importance, indeed took some hard beating. The conditions of compliance, especially on safety and wage of workers were logical, but it involved substantial cost for the factory owners. In the face of newer challenges, a good number of factories indeed closed down.
But soon the resilient sector overcame the challenges and according to the President of Bangladesh Garment Manufacturers' Association, country's garments factories have completed almost 90 per cent of the requirements set by the Accord and Alliance.
Environment-friendly path
Also Bangladesh is now on the path of building environment-friendly, green factories and it is really a heartening price of news that the top three environment-freely garment and textile factories in the world are located here. These are certainly very welcome developments. But the life blood of the industries is its workers, specially the female workers whose toil is vital in helping the Finance Minister to place an ever bigger annual budget every year before the nation. It expected that the rights of workers including their right to trade union would gradually be achieved fully, not just for the welfare of the workers, but for the overall development of the industries themselves and, putting it even broadly, for the economic development of the country.
Bangladesh's graduation to a developing country from a least developed one hinges on the sustainable development of country's garments industries. None would disagree on it. The contenders of Bangladesh has to seize all opportunities as and when they appear. According to news, the increase in production of high-valued items is significantly responsible for the recent rise in the percentage of garments export and it is expected that Bangladesh would be able to expand its potential in this regard before countries like China overtake the market.
(Dr. Anu Mahmud (Md. Mahmudur Rahman):  Member of Bangladesh Civil Service and also an Economic Analyst, Researcher, Columnist and writer of more than 125 nos. of books in his credit.)