The country鈥檚 apparel makers are facing significant challenges in banking processes, particularly with issues related to raw material imports and export proceeds receipts, according to a study.
The most pressing concerns include delays in opening letters of credit, high bank charges and payment receipt delays, which are disrupting trade operations, Bangladesh Institute of Development Studies research director Monzur Hossain said while releasing the study.
The study findings presented on the second day of the four-day Annual BIDS Conference on Development 2024 at the Lakeshore Hotel on Sunday.
It showed that a staggering 40 per cent of surveyed firms reported delays in opening LCs as key bottleneck, hampering supply chains.
Three per cent of them faced difficulties in opening LCs due to the dollar crisis.
Sixteen per cent of respondents expressed concerns over delays in receiving payments, which impacted their cash flow and operational continuity.
Thirteen per cent reported that higher charges were adding to operational costs.
The study 鈥楽upply chain dynamics for sustainable RMG growth in Bangladesh鈥� conducted on 63 medium and large garment factories revealed that on average 38 per cent of the firms sourced raw materials such as yarn, fabric, chemicals, trims and accessories domestically.
Another 24 per cent relied on intermediaries or third parties for international sourcing, while the remaining 38 per cent directly sourced from international markets, the study found.
In terms of recommendations, 46 per cent of respondents suggested reducing bank transaction costs or charges, while 22 cent called for the use of TT payments.
Other recommendations included establishing precise exchange rates for the dollar, standardising LC charges across banks, reducing taxes and adopting advanced technologies.
Some also stressed the importance of increasing domestic sourcing to avoid banking complications.
Monzur highlighted the challenges faced in timely sourcing of raw materials from foreign suppliers.
He suggested that direct marketing and eliminating intermediaries could help improve supply chain efficiency by meeting lead times, avoiding air shipments and preventing order cancellations.
Addressing the impact of Bangladesh鈥檚 post-LDC graduation, Monzur said that the country would lose its duty-free market access to developed markets, including the European Union.
Citing the reference of previous studies, he said that Bangladesh鈥檚 RMG exports could face duties ranging from 7 per cent to 14 per cent, and the sector could see a decline of 10.8 per cent in exports by 2031.
The total exports might decrease by 6 per cent, it mentioned.
The study suggested strengthening backward linkages by expanding fabric production capacity, which would enhance the competitiveness of the RMG sector.
BIDS research director Kazi Iqbal also presented findings from a study titled 鈥楾echnology upgradation of the RMG industries in Bangladesh鈥�, which examined eight products, 36 processes and 136 sub-processes across 43 firms.
The study revealed that as the industry became more capital-intensive, the number of factory workers per machine had decreased over time, particularly affecting machine operators and helpers.
The last decade saw significant capacity expansion, along with a rise in technical professionals, including BSC and Diploma textile and industrial engineers, it found.
The study said that there was also an increase in the use of software, direct exports and certification, reflecting improved firm capabilities.
Investment in research and development has been higher for certain products such as home textiles, lingerie, sweaters, woven shirts, and trousers. Productivity has increased across various sub-processes, with the highest gains in jackets, home textiles and lingerie, the study mentioned.
The study also said that the share of female workers in the labour force decreased from 56 per cent in 2014 to 53 per cent in 2023, with a significant drop in the jacket sector.
The study also noted that higher capital intensity had both displaced and reinstated workers.
Another study presented at the conference found that a 50-per cent increase in the adoption of advanced technologies, such as automation, could lead to the elimination of 17.57 lakh manufacturing jobs in Bangladesh.
The study 鈥楬ow would technological progress impact employment in the manufacturing sector of Bangladesh? An empirical projection鈥� analysed the potential impact of technological advancements on the country鈥檚 labour force, estimating job losses under three scenarios: a 15-per cent increase in technological efficiency, a 30-per cent enhancement and a 50-per cent adoption of advanced technologies.
The findings painted a stark picture of the challenges ahead for apparel and textile workers in the face of rapid automation and innovation.
The study identified apparel sector as the most affected sector.
It projected potential job losses of 2.55 lakh at a 15-per cent productivity increase, rising to 6.51 lakh for a 50-per cent increase in the apparel sector.
According to the study jointly presented by Dhaka University economics department assistant professor Mahtab Uddin and the BIDS research associate Farhin Islam showed that textiles could be the second hardest hit manufacturing sector with up to 2.95 lakh jobs at risk under a 50-per cent technology upgradation.
The study mentioned that the non-metal products sector could see up to 4.34 lakh under a 50-per cent increase in technological efficiency.
Similarly, the food production sector, known for its reliance on manual labour, faces potential job cuts of up to 1.14 lakh the leather and leather goods industry could lose up to 45,697 jobs, pharmaceuticals sector, despite being less labour-intensive, may see 34,145 jobs displaced.
The furniture industry could lose up to 36,317 jobs as technological improvements in wood processing and assembly reshape production processes, the study said.
