RMG exports to benefit from relaxed EU rules

Jon Fredrik Baksaas, president of Telenor, speaks at a press conference at Radisson Hotel in Dhaka yesterday. Oddvar Hesjedal, chief executive officer of Grameenphone, is also seen. Photo: Amran HossainRefayet Ullah Mirdha

Bangladesh's apparel exports will benefit from Europe's relaxed rules for the least developed countries (LDCs) under the generalised system of preferences (GSP) in textile trade, experts said.

The new rules of origin (RoO) adopted by the European Union will be effective from January 1.

The biggest change is that single-stage processing (manufactured from fabric) will be allowed in many cases, instead of only two-stage processing (manufactured from yarn).

It means most apparel items from all LDCs will get duty-free access, no matter where the raw materials originate. The standard import duty for readymade garments in the EU is 12 percent.

The GSP is a trade arrangement allowing reduced or zero tariff on imports from developing countries; and the RoO determines whether imported goods really do originate in the countries covered by the GSP.

Mustafizur Rahman, executive director of Centre for Policy Dialogue (CPD), sees the new move as a boon for Bangladesh.

"Once implemented, if any exporter uses imported fabrics, manufactures in Bangladesh and exports to the EU, he will get the GSP facility."

A majority of the woven garment exporters import fabrics from China because the backward linkage industry is not strong like knitwear, Rahman said.

He, however, thinks the domestic backward linkage industry will face slight competition because many manufacturers import fabrics from other countries, especially China.

Rahman suggested the government continue an adequate supply of gas and power to the backward linkage industries so that they can produce fabrics and yarn in time to tackle competition.

"Apparel exports to the EU will increase manifold for the new move."

Zillul Hye Razi, trade adviser of EU trade delegation to Bangladesh, is also upbeat on reaping more benefit from the new move by woven and knit exporters.

"It may also provide opportunities for the local exporters to go for the higher end of the EU market as Bangladesh could not benefit from the GSP under the existing rules, as a high quality fabric is not sufficiently manufactured locally."

Abdul Hai Sarker, president of Bangladesh Textile Mills Association, said the backward linkage industry is fully equipped to take on the challenge, at least for knitwear.