The Garments Industry In Bangladesh

Published Date: 02 Nov 2017

The ready-made garment (RMG) industry of Bangladesh has started in the late 1970s and became a well-known player in the market in a short period of time. The industry has made a payment to sell overseas income, foreign exchange income, employment conception, poverty mitigation and the empowerment of women. The export-share system and the convenience of not expensive labor are the two main causes at the back the achievement of the business. In the 1980s, the RMG commerce of Bangladesh was concerted mainly in manufacturing and exporting natural fiber products. Since the early 1990s, the join section of the industry has started to make bigger. Shirts, sweaters, trousers, T-shirts and jackets are the main products exported and manufactured by the industry.

Bangladesh exports its ready-made garment products frequently to the European Union and the United States of America. These two destinations account for more than a 90 per cent share of the country’s total income normally come from garment exports. The country has attained some product diversification in equally the United States and the European Union. Recently, the country has attained some stage of product promotion in the European Union, but not to a major amount in the United States. Bangladesh is less forceful evaluated with China or India in the United States and it is slightly spirited in the European Union.

The time-out of the export-share system from the beginning of 2005 has elevated the competitiveness subject of the Bangladesh RMG industry as a top major concern topic. The most significant job for the industry is to decrease the guide time of garment manufacturing. The development of deep-level competitiveness during a declining in total "production and distribution" time will get better surface-level competitiveness by reducing lead time. Such a policy is important for long-term steady development of the industry, but its execution will take time. In contrast, the organization of a central or common bonded storehouse will get better surface-level competitiveness by plummeting lead time, but deep-level competitiveness will not be improved and long-term industry growth will be belated. Therefore, granting authorization to found in the private sector such warehouses with particular incentive, such as the duty-free import of raw resources working in the export-oriented garment industry for plummeting the lead time in garment manufacturing is a solemn matter for Bangladesh.

What is countervailing duty? 

Countervailing duty is a supplementary import duty imposed to recompense the effect of concessions and subsidies decided by an exporting country to its exporters. Obligation of

Countervailing duty is an effort to transport imported prices to its accurate market price, and thus provide a level-playing position to importing country's producers.

A job placed on imported goods that are being subsidized by the importing government. This helps to still the playing field between the home producers and the overseas producers receiving subsidies. Subsidized goods permit a manufacturer to sell at a lower price than it could without the funding recompense. If this manufacturer sells into the global market, they can often face the pricing of producers in new countries who don't obtain subsidies from their government. If the subsidized overseas producer goes unhindered, the home producers could be run out of business, the reason is lost jobs and other financial losses.

Why countervailing duty is important?

Countervailing duty or supplementary duty of customs is levied to make up for the disadvantage to like Indian goods due to high expunge duty on their inputs. Obligation of a countervailing duty is an effort to bring the imported price to its factual market cost, and thus provides a height playing field to the importing country's producers. This supplementary duty will not be included in the measurable value for levy of education cuss on imported goods.

Users of CVD

Until the 1990s, the United States, followed, to a lesser extent, by Australia and Canada, were the main users of countervailing duty actions. However, since that time, the EC and some developing countries have also started to apply countervailing measures. According to WTO statistics, the current main users include the EC and Brazil in addition to the three traditional users.

Garment industry hails Countervailing Duty (CVD) on Bangladesh goods

The decision to oblige Countervailing Duty (CVD) on garments imported from Bangladesh is being professed as a game-changer for the industry. 

The union budget for 2013-14 has forced countervailing duty of 12.36% and supplementary curse of 3% on garments imported from Bangladesh. This was one of the key stresses of the woolens and ready-made garment manufacturers here, who were complaining regularly that the duty-free import of garments from Bangladesh was excruciating the Indian industry badly. The decision to take out the central expunge duty on branded garments was also a cause to applaud for them.

Now, the industry is certain that three factors, including extraction of 12.36% of middle excise duty on branded garments, burden of CVD and instructive cuss would cooperatively bring about a change in their situation. Chairman of knitwear club, Vinod Thapar said: "The imposing CVD and educational cuss on garments imported from Bangladesh will make sure a level-playing field to Indian manufacturers, whose prospects were being harm due to a tough rivalry from neighboring country." "Due to some technological reasons the industry came to know about the budgetary conclusion late," he added. The textile industry of Bangladesh was enjoying a duty free right of entry to the Indian market after Prime Minister Minoan Singh's visit to the neighboring country in September 2011. The decision had permitted 46 textile items from Bangladesh to the Indian market without any duty. It was a long-awaiting authority of the Indian manufacturers to enforce the duty on Bangladesh garments claiming that the judgment was badly throbbing their happiness by representation their products uncompetitive in the market in conditions of price.

Indian CVD and Bangladesh RMG exports

The issue of the countervailing duty (CVD), which is a necessary appendage to the Indian duty arrangement, has been a cause for argument for quite some time. The Union budget of India has levied new countervailing duty on import of apparels that are supposed to sternly harm Bangladesh's exports to India. Important to note, this is going to cancel the duty-free action of Bangladesh attire exports that India had earlier permitted.

The countervailing duty is a much discussed subject in trade-related two-sided and local level talks. Ever since the operationalisation of South Asian Preferential Trading Arrangement (SAPTA) followed by South Asian Free Trade Agreement (SAFTA), exports from Bangladesh has bearded on account of the countervailing duty that prevailed on most imported products as well as those which got full or incomplete duty payment under these agreements. Excess duties on account of countervailing duty and other taxes borne by Indian importers of Bangladeshi products approximately amount to the decay of duty concessions. The matter has caused stern anxiety this time as the largest export division of the country, garments, is overstated.

Controversy over the Indian countervailing duty is not a new one for the easy reason that it is by its very meaning 'Indian', and most observers while trying to tell it to the WTO explanation of the term tend to puzzle it in total. Preferably, below the WTO rule-based trading system, countervailing duty can be applied to imports to aggravate the effects of undeserved pricing, consequential from subsidies that the imported manufactured goods may have received at one or more phases of manufacture in its country of source. The quantum of countervailing duty should be equivalent to the extent of financial support received to ensure a consistently balanced ground for domestic product by way of suspicious it from unfair competition of the imported product.

Obligation of countervailing duty is a systematic process involving a careful examination by the importing country into the practices of financial maintain in the exporting country. The countervailing duty that India imposes from time to time on imported products, as formerly declared, is not WTO-driven. Hence from the Indian viewpoint, trying to stature out the lacuna in the background of WTO disciplines is not suitable. The Indian authorities have been resorting to this position as and when countervailing duty featured as an issue of talk about with their trading associates. The Indian countervailing duty is distanced as a means of ensuring national action by way of balancing home taxes, explicitly excise duty -- which limited producers pay for the products. But the inquiry that one needs to find out is: can India as an associate of the WTO plan its own tool in the name of suspicious home products and ensuring national action? A reply in the apathetic is what most experts will not waver to utter. The crux of the substance is still a small deeper. What had been resorted to as a complementary of excise duties appropriate to the home industry, has, of late, taken an accidental stance. India, according to a report, has raised the remove duty payable by Indian garment business, but has reserved the 12 per cent countervailing duty on imported garments. Bangladesh Garments Manufacturers and Exporters Association sources have reportedly intended the total amount of billed responsibility which comes to 13.24% on Bangladeshi garments, together with 3.0 per cent education cuss on the countervailing duty and a additional 4.0 per cent particular countervailing duty.

The extraction of the cut out duty has been hailed by the Indian home apparel industry, as it would make their products far more spirited as beside the imported products, particularly those from Bangladesh. The ministry of finance in India has given a letter to the establishment worried about the Finance Bill, 2013 that brought changes in civilization and center excise law and accuse of duty. The correspondence said zero remove duty, as existed earlier to Budget 2011-12, is being reinstated on readymade garments and made-ups. The zero remove duty will now be available to manufacturers of garments, in addition to the center VAT below which manufacturers can pay remove duty on the final product and advantage of credit of duty paid on inputs. It is believed that this, as well making the domestic products spirited, will also provide protection to the home industry from cheap imports. The Indian media also wonder that the zero expunge duty will give confidence foreign retailer to set up shops in India to produce their supplies in India, rather than import from other countries. Now the essential issue is erosion of duty profit allowed to Bangladesh. The Federation of Bangladesh Chambers of Commerce and Industry have in the temporary taken up the substance with the government of Bangladesh in regulate that the matter is discussed at degree with the India government. The subject that need to be decorated in the joint speak with the government level are: a) the duty-free rank is nullified due to the CVD and taking away of excise duty, and b) it is equal to refutation of market access -- an obvious sign of 'yes', meaning 'no'

Conclusion

The expunge duty on documented readymade garments was detached in the budget in the wake of industry witnessing about zero per cent increase in 2011-13. The industry will also be benefited by annoyance of 12 per cent countervailing duty on import of garments from Bangladesh. Proceeding, import of garments from Bangladesh did not sketch import duty nor there was any share and Bangladesh was used to elimination not expensive garments made of Chinese fabrics in India. Now, budget has compulsory 12 per cent Countervailing Duty (CVD) plus Education Cass on garment exports to India from Bangladesh which will afford buffer to domestic industry. This will also give confidence overseas retailers setting up shop in India to manufacture their necessities in India, rather than import ended garments from other countries. The industry is expected to be value about Rs 2 lakh crore with exports secretarial for another Rs 60,000 to Rs 70,000 crore.