RMG 2021 Session 2:  Infrastructure – The Road to Chittagong and Beyond

RMG 2021 Session 2: Infrastructure – The Road to Chittagong and Beyond

April 11, 2015

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) jointly organizing a 3-day event “Bangladesh RMG 2021 – 50 Billion USD in 50 Years” with Alliance, American Apparel & Footwear Association (AAFA), German Development Cooperation (GIZ) and Bangladesh Brand Forum (BBF) during 7 to 9 December 2014 at the Bangabandhu International Conference Center (BICC) in Dhaka.

The event chalked out a sustainable road map for the ready-made garment industry to reach USD50 Billion exports by 2021 when Bangladesh would be celebrating her 50th Anniversary. This unique engagement brought together the industry and its valued stakeholders to put forward their best effort in realizing the vision and take the sector forward. The 3-day event shed lights on the important concerns surrounding the vision from some of the best global minds, experts, journalists, investors, global brands & policy makers to present the true spirit of Bangladesh embodied by millions of workers and entrepreneurs.

In this series RMG 2021, we share the detailed discussions from the second session, where industry experts and key stakeholders give an in-depth analysis and recommendation on Infrastructure, which is a critical component to achieving the vision.

 

Infrastructure – The Road to Chittagong and Beyond

 

Session 2 brought the summit on the most important prerequisite for the RMG sector to become a US$50 billion industry – infrastructure. This session focused on critical issues like transport, energy supply and the need to build special economic zones. Moderator for this session was distinguished Asif Ibrahim who has held respectable positions in a number of organizations including the Dhaka Chamber of Commerce and Industry (DCCI), Federation of Bangladesh Chamber of Commerce and Industry (FBCCI), Bangladesh Philippines Chamber of Commerce and Industry (BPCCI), the BGMEA, etc. He asked the panel of speakers for this session – Do we have the capability to reap the 50 billion market?

Largest Freight Operations in Bangladesh and Recommendations for Improvement

Opening this session, Shamim Ul Huq, Managing Director of Maersk Bangladesh Limited, began by noting Bangladesh’s RMG sector’s outstanding growth over the last 4 years. Marking a near 70% growth, he mentioned how this growth has been maintained with a poor infrastructure. “When I tell my (foreign) colleagues that it takes 10 hours to reach Chittagong port, they are surprised,” he went on. Does this mean that we cannot reach US$50 billion with existing infrastructure?  “Save; that means a lot,” Mr Huq recommended to the RMG entrepreneurs. While Singapore’s infrastructural development and investment climate is incomparable to that of Bangladesh’s, Sri Lanka can be taken as an example. Efficiency, as Mr Huq put it, can go a long way even with existing infrastructure. He raised the concern about being over dependent on one port in Bangladesh. He further mentioned the possibility of using the Mongla port as a middle point for import or export hub for finished goods. “Finished goods can be sent to us, and we can send it to where they need us to ship,” explained Mr. Huq.

Research for Power Investment to Serve the Purpose of Foreign Investors

After touching on the importance of upgrading the Mongla Port and using it for more income generating purposes, Dr. Zaidi Sattar, Chairman of Policy Research Institute of Bangladesh, stressed on the importance of policy relevant research. He explained how evaluation of macro situation including politics, Economic Intelligence, Logistics Performance Index, etc as reported by the reputed organizations like the World Bank, The Economist, etc, shows how Bangladesh has not been ranking too well. “Foreign investors look at a cross-country analysis,” Dr. Sattar point out. When foreign investors come to Bangladesh, they look at the returns they will gain. “Give investors an idea about a positive investment climate,” he suggested. Of objective is to reach US$50 billion, then export has to grow by 10%. Currently, the annual growth rate has been 11-12%. Infrastructure, according to Dr. Sattar, is a binding constraint. “We must invest on energy and power,” he concluded.

Regional Development for Better Connectivity

Former United States Ambassador James F. Moriarty who is now a Board Member of the Alliance for Bangladesh Worker Safety (ABWS) and Senior Advisor for South Asia, began his speech by noting he believes that Bangladesh has a bright future ahead of itself. He stressed on the importance of aligning the forces which will prove ideal for Bangladesh. “Government needs to seize the opportunity,” he stressed. Mr. Moriarty explained how power trade agreement with India is a possibility for Bangladesh. He visited the options of hydroelectric plants and collaboration with India through regional trade. Right now, according to him, Bangladesh has to push to connect to China, India and Nepal. “Bangladesh is a hub,” he explained how the country’s location and help it reap immense opportunities. Stressing on the fact that infrastructure development is quickly becoming a prerequisite as competing countries like China and Vietnam are speeding up fast, Mr. Moriarty said that Bangladesh does have a plan, sooner the results starts coming in, the better. He ended by touching on the importance of confidence of investors for a sustained growth in the future.

The Priority Areas to Reach 50 billion Target

Bringing the session to a new dimension, Dr. Towfiq-E-Elahi Chowdhury, Advisor to Honorable Prime Minister for Power, Energy and Mineral Resources Affairs, pointed out 6 key areas in Bangladesh with infrastructure deficits. Namely, these areas are – Transport, Electricity, Water, Telecommunication, Irrigation, Solid waste. Accumulating these deficits, according to Dr. Chowdhury, Bangladesh’s need for investment amounts to a minimum of 75 billion to 100 billion which requires 7.4 to 10% of GDP. Public spending on infrastructure, from a ball mark, is 2-3% of the GDP. “The needs are vast,” he stressed, “we require to meet the needs as much as possible,” he continued. As a learned person, he believed that neither policies, nor financing, nor opportunities, were the major constraint for Bangladesh in reaching its targeted 50 billion. “Our constraint is that we don’t walk the talk,” Dr. Chowdhury explained. Lastly, he stressed the importance of preventing depreciation of assets like buildings due to neglect of regulatory and institutional rights.

JICA’s Contribution to Long-term Infrastructure Projects

“JICA is at the forefront in coming up with big projects,” began Mikio Hataeda, the Chief Representative of the Bangladesh Office of Japan International Cooperation Agency (JICA). The organization, in the past, successfully completed transportation projects. Now it is considering long terms projects like deep sea ports and air projects. “JICA has been time tested since 1973,” he pointed out how Japan has been Bangladesh’s friend soon after the Liberation War. The Big B Project, the Bay of Bengal Industrial Growth Belt initiative (BIG-B) seeks to take full advantage of the trend globalization of the economy.  Bangladesh, in other words, is the linchpin of the Indo-Pacific region. It stands to gain a great deal from the shift in global economic dynamism toward the Indian Ocean. Mr. Hataeda went on to stress the advantages Bangladesh can reap off its position in the Bay of Bengal. Deeply integrated for such development, are the areas of supply of energy and power. Due to the surging demand in the market, there is a need to find alternate sources of energy. Already, coal power plants have initiated to meet the needs. “Comprehensive master plan is required,” reiterated. He touched on the many big projects including the Dhaka-Chittagong Highway, elevated railways, suburban road network, etc. “Link governance and infrastructure,” he pointed out. Scaling up these projects and creating specialized Economic Zones, as Mr. Hataeda explained, are the ways to increase the country’s capacity to habilitate the growing needs of the RMG sector. Mr. Hataeda ended by mentioning JICA’s continuing support to the RMG industry of Bangladesh.

Making Investors Interested in Bangladesh

After Mr. Mikio Hataeda, Ipsita Dasgupta, the Chief Commercial Officer of General Electric, South Asia, explained how General Electric, a multinational corporation, has been lighting up the whole world. It has been operating in Bangladesh for 40 years. Currently as Mr. Dasgupta pointed out, General Electric is working on water treatment solutions – a topic which was discussed in detail in the next session. “Bring in more and more solutions,” Mr. Dasgupta suggested the RMG stakeholders present in the session.

Role of Banks in Financing the RMG Sector

S.M Fazlul Hoque – Chairman of Winwear Ltd, Chairman and Managing Director of Choice Group, pointed out how lofty the vision of US$ 50 billion is. “From 25 billion to 50 billion,” he remarked. “People who are in the trade are the main force,” Mr. Hoque, who is among the Leaders of the Trade Body in Bangladesh, noted. To achieve anything, peace is essential and that includes political stability, Mr. Hoque pointed out. “Investors will feel hesitant,” he said. Role of bank is another crucial issue. As noted by previous speakers, 500 RMG factories have already closed due to bankruptcy. Bangladesh Bank, which is the guiding bank, must look into the issue, according to Mr. Hoque. “The 50 billion dream is impossible is without support from bank,” he explained, “Banks have helped in reaching US$ 50 billion,” he went on. However, he observed that on every step of doing business, there is extra money to be paid which is not earned. “If we do not solve this problem, then it is hard to go ahead.”

Differences of Political Parties and Economic Agenda of the Country

One of the most crucial issues affecting businesses in Bangladesh including the RMG sector, is political instability. Dr. Abdul Moyeen Khan, Member of the National Standing Committee, BNP, put out his views on this issue from his experience in Bangladesh politics. “Political parties have different views,” Dr. Khan confessed. However, the economic agenda of all political parties needs to be same. “How can this gap be filled between different political parties?” Dr. Khan asked. Firstly, it is important to realize that the RMG sector, contributing a staggering 10% to the GDP of Bangladesh, is essentially the country’s life line. “7 years ago, our RMG export size was less than 10 billion,” Dr. Khan pointed out on the progress since that time as now it is an outstanding 25 billion, making Bangladesh the second most lucrative destination for RMG manufacture. “Is it possible to reach 50 billion by 2021?” he asked himself, “I would say yes,” he remarked.

Dr. Khan, who had conducted time series analysis on the export figures of last 30 years, explained how a marked trend or pattern is there. “A third degree polynomial fit shows an absolute fit,” he emphasized on his findings. The correlation ratio also shows a strong positive relation. According to his projections, reaching the 50 billion target for the RMG sector is imminent. Highlighting the importance of infrastructure, Dr. Khan suggested businesses should stay far away from politics and work independently. “The less you depend on the government, the better for you,” he explained. According to him, the most stressing problem is the increasing land price. The simplest solution, as he mentioned, is to spread out to the whole country side. Filling in the communication gaps by building the Chittagong-Dhaka highway – trucks and busses can constantly move from Dhaka to Chittagong in a matter of 8 hours. Stressing on the importance of social infrastructure as well, Dr. Khan explained the importance of involving women. “50 billion is just a peanut,” he maintained.

Government’s Role in Providing Gas and Electricity

Dr. Towfiq-E-Elahi Chowdhury, Advisor to Honorable Prime Minister for Power, Energy and Mineral Resources Affairs, lauded JICA’s BIG B initiative. To achieve the status of becoming a middle income country by 2021, everyone must get electricity, he said. “Helping in qualitative change is important.” he mentioned. Leadership must be visionary which dares to take up lofty goals that were never seen before. In order to meet the infrastructural needs, US$ 100 billion may be required. In the power sector, the importance of conserving energy is crucial. Also, the primary use of natural gas is inefficient as it is eating away resources really fast. The government is aiming to curb the usage of natural gas as it must be used for deep sea ports. “At the mean time, we are planning to import liquid natural gas to meet the primary energy needs of RMG,” he explained. “Put our heads together and no problem will be impossible to solve,” he concluded on an encouraging note.

 

 

 

No Comments so far

Jump into a conversation

No Comments Yet!

You can be the one to start a conversation.

Your data will be safe!Your e-mail address will not be published. Also other data will not be shared with third person.