The European Union is the largest export destination of Bangladesh. Being a least developed country (LDC), Bangladesh has been enjoying the zero-duty benefit on export to the EU under its Generalised Scheme of Preferences (GSP) since 1971.
The zero-duty benefit to the EU in force, Bangladesh’s exports to EU over the years rose significantly. According to data from Bangladesh’s Export Promotion Bureau (EPB), Bangladesh exported garment items worth US $ 21.13 billion to the EU in 2018-19 fiscal year – up from US $ 19.62 billion and US $ 17.75 billion in the previous two fiscal years.
However, the relation between the EU and Bangladesh is not just restricted to trade and commerce. The bloc of 27 European nations has always been with Bangladesh through the thick and thin.
As part of this, the European Union, the largest export destination for the country’s apparel offerings, has decided to provide Bangladesh with a €113 million grant to pay 3 months of wages to 1 million workers laid off by the readymade garment factories amidst the coronavirus pandemic. Under the grant, a worker will get Taka 3,000 a month for June, July and August.
Workers who were laid off due to the closure of factories, after the Government decided to shut down all businesses in March, and did not join another factory and are still unemployed, will be eligible for the cash support.
Paying a worker Taka 3,000 a month translates to about Taka 300 crore for payments to be made to 1 million workers.
The EU’s kind gesture to provide financial assistance to the industry at such trying times have been confirmed and praised by all quarters including the labour leaders and trade unions, officials of the apex garment makers’ body of the country – the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), among others.
“The EU agreed to pay 1 million workers for 3 months and the amount would be Taka 3,000 a month. This money will be given through mobile financial services (MFSs),” confirmed Nazma Akhter, President, Sammilito Garments Sramik Federation.
Dr. Rubana Huq, President of BGMEA says on her part, “The EU is front-loading €93 million to support the export sector and the rest goes to the social safety net. The EU is currently still in discussion with the ERD about the modalities of this fund utilisation. We will keep everyone updated after the Government finishes the negotiations and loops us, the private sector, in, as the fund will be disbursed through our database.”
It may be mentioned here that according to data from BGMEA and BKMEA, over 400 RMG factories laid off workers due to cancellations of orders by global apparel brands and retailers and lack of new orders from foreign buyers amidst the COVID-19 pandemic. Global buyers and retailers have so far cancelled work orders worth over US $ 3 billion, leaving these factory owners in financial crisis and forcing them to lay off workers.
These factories together reportedly employed over 1 million workers, mostly women.
As per BGMEA, 46 factories have retrenched a total of 12,510 workers, the number of which continues to grow with each passing day, as factories have started to cut down on costs since there are not enough work orders.
“Many of them had no option but to lay off factory workers as the buyers cancelled existing orders, and there are no new orders,” underlined First Vice President of BKMEA Mohammad Hatem, adding that many global retailers have also held back orders and delayed payments for already shipped goods, which are compounding the problems further.
Even as the country was going through large-scale order cancellations by buyers, many European countries including names like Sweden, Netherlands and Germany stood by Bangladesh and pledged their support during this period of crisis.
It may be mentioned here that a day after it emerged that high street retailers in the UK alone cancelled a massive £2.5 billion worth work orders in Bangladesh, the Swedish Prime Minister assured, it will not be the case as far as Stockholm is concerned.
Stefan Lofven called Sheikh Hasina to confirm that his country would continue to import apparels from Bangladesh and there won’t be any order cancellations. “We will continue importing RMG products from Bangladesh,” assured the Swedish Premier in his around 15-minute-long telephonic conversation with Sheikh Hasina.
Soon followed assurances from Netherlands which informed Bangladesh that the Dutch buyers would not cancel or suspend their orders from the local readymade garment (RMG) factories. Minister for Foreign Trade and Development Cooperation Sigrid Kaag conveyed this to Foreign Minister AK Abdul Momen, mentioning that the Dutch Government would ensure the RMG value chain would not be disrupted.
Similarly, Germany’s Federal Minister of Economic Cooperation and Development Gerd Muller assured that Bangladesh’s garment sector will have his country’s full support in coping with the coronavirus fallout. Muller issued this notice in response to a letter from Rubana Huq, who wrote to the minister urging him to request German retailers to not cancel their work orders with Bangladeshi factories.
“I greatly hope that we can find an approach that will safeguard the textile industry’s survival in both Bangladesh and Germany since millions of people work in that sector,” Muller said in a letter, adding, “I hope that for the interim, Bangladesh will receive orders. Bangladesh is one of the most important partners to the German textile industry and I understand all of your concerns.”
He further assured Rubana saying, “Let me assure you that I share your concerns regarding the social distress and the threat to garment factories and their workers in Bangladesh. In response to your letter, I am informing you about my intent to pass your urgent request to the representatives of the German textile industry.”
Meanwhile, as to the EU’s grant of €113 million, industry people reportedly maintained that the tenure of the compensation might be extended to 6 months from 3 months.
In its ongoing development cooperation programmes in Bangladesh, the EU is already addressing many areas crucial in the COVID-19 response and the recovery of the economy. On top of that, the EU has been pleased to announce that €334 million have been allocated to help fight the pandemic and that more funds may be mobilised in the near future, said a statement from the EU’s Bangladesh mission issued on 20 May.
Of the allocation, €263 million will help mitigate the economic and social impacts of the pandemic. Of the allocation, €93 million — alongside a €20 million grant from Germany — will help the Government to provide cash assistance to workers in the export-oriented industries adversely affected by coronavirus, and contribute to boosting the resilience of the national social protection system, it added.
Apart from readymade garments and other sectors, the EU has offered to help in other areas as well. It has provided Taka 428 crore (€46.12 million) to Bangladesh as part of its support for education reform.
This money has been provided under the programme of the ‘Human Capital Development Program-2021’ of the European Union. With this money, the education sector of Bangladesh will be strengthened for skill development, especially in primary and technical education.
The EU has provided this assistance as part of the implementation of the Government of Bangladesh’s commitment to human development, poverty and inequality eradication in order to achieve sustainable development.
The bloc of the European nations is also helping and aiding Bangladesh in many other areas, more so in view of the COVID-19 outbreak, which is taking a tremendous toll on the economy and the lives lost, which if at all, proves beyond doubt that the European Union-Bangladesh mutual relation has moved beyond the realms of just trade and commerce over the years.