Debates on the issue of efficiency and wastage rates continue unabated in the Bangladesh garment industry even as the Commerce Ministry, recently (in August), reportedly decided to increase the maximum wastage rate in producing apparel products from raw materials from 16 per cent to 28 per cent — as per the decision, from now on, the maximum wastage rates will be 28 per cent for specialised items, 25 per cent for basic apparel items, and 3 per cent for sweaters and socks — even if it (Commerce Ministry) was also supposed to issue a circular in this regard soon.
Increase in the wastage rate, which translates to effectively garment makers being allowed to import more yarn and fabrics duty-free than the present level for the same volume of export, with probable overall implications on the industry including possibility of the extra raw materials making its way into the domestic market, has once again raised the question of the rationale behind increasing the wastage rates, with all the stakeholders involved, coming up with their very own justifications either against or in favour of this move.
Speaking to the media, Research Director at the Centre for Policy Dialogue (CPD), Dr. Khondaker Golam Moazzem, voiced his disagreement with this decision to increase the wastage rates when he said, “Currently, the global practice is to try to bring the wastage rate down to zero. In this situation, it is not logical to increase it. The Commerce Ministry should look for ways to reduce the existing 16 per cent wastage rate,” even as he went on to add that at a time when the garment industry is flourishing with the use of modern technologies and by improving quality of products, scope is little that wastage would go up and, more so when the world is moving to reduce wastage to zero, such a move seems impractical as well, he claimed.
The Commerce Ministry, instead of agreeing to the industry’s demand to revise the wastage rate upward, should rather call for lowering the existing rate (of 16 per cent), stated CPD’s Research Director even as according to some reports, in 1998, the RMG industry calculated 16 per cent wastage in various stages of production – cotton to yarn to fabric to finished products for shipment even if the industry now demands that the rate be 40 per cent, which effectively means their wastage has gone up by almost 150 per cent over the past two decades.
This has reportedly come as a surprise to some concerned officials and analysts, who do not see a point in the sharp rise in wastage when technologies have improved and the fashion industry too is moving towards zero-waste.
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Meanwhile, interacting with the media, a senior Commerce Ministry official, who has been a part of the discussion over wastage rate revision with apparel associations in Bangladesh, reportedly maintained that use of technology had increased a lot in the last 22 years and this should have reduced wastages even as Dr. Moazzem, on his part maintained the Ministry should investigate the factors cited by the industry, which they said contribute towards the higher wastage and, come up with concrete guidelines accordingly to help reduce wastage using the central bank’s technology upgradation fund.
It may be mentioned here that in January this year, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) sent a proposal to the Commerce Ministry to increase the maximum wastage rate to 40 per cent even as later on, the Export Promotion Bureau or EPB, on its part, reportedly sent a letter to 20 companies, asking them to find out the actual wastage rate even if only two companies reportedly responded to the EPB’s letter, underlining that their wastage rate was more than 40 per cent, after which, the Commerce Ministry reportedly formed a committee to verify the actual wastage rates in garment factories.
After inspecting six factories (each producing basic knitwear, specialised items, sweaters and socks), the committee concerned reportedly recommended setting the maximum wastage rate by averaging the amount of wastage of similar factories even as it proposed 28 per cent for specialised items like rompers, tank tops, dresses, gowns, hoodies, and lingerie items; 25 per cent wastage rate for basic knitwear including T-shirts, polo shirts, trousers, shorts, skirts, pyjamas; and 3 per cent for items like jumpers, pullovers, cardigans, vests and socks.
Explaining why they proposed the same, a member of the said committee reportedly maintained that they have found differences in the wastage rate depending on the types of machines used by the factories.
Therefore, we have recommended that the Ministry determine wastage rates based on the average wastage, reportedly claimed the person concerned.
So, even as the debate was on, on this issue, came up the apparel manufacturers with their side of the story while informing the Government negotiators that fashion changes and types of fabric and cotton mattered for wastages ranging from 20 per cent to 40 per cent, even more and went on to add further that earlier they used to make seamless T-shirts, which needed stitches only in sleeves; but, now they need to sew both sides, and thus fabric is required to be cut and stitched from both sides, causing more wastage, a viewpoint that was backed by many including officials from BGMEA and BKMEA
As per First Vice-President of BKMEA and knitwear manufacturer Mohammad Hatem, marking and cutting account for 15-20 per cent wastage in knit units, while adding use of yarn made of better-quality cotton, like that from the USA and Australia, reduces the wastage, even as he stressed on maximum use of technology to enhance the overall efficiency.
Our workers are not skilled enough in these two areas; if they are trained and upskilled, wastage can be reduced, reportedly claimed the first VP of the garment makers’ body even as BGMEA Director Abdullah Hil Rakib, on his part maintained, “There is no standard rate for wastage, but we are lagging behind our major competitors who are well ahead of us in technology,” even as he went on to underline that some leading factories in Bangladesh were improving their efficiency.
But that cannot be generalised for the whole industry’s position, reportedly said Abdullah Hil Rakib while claiming that the industry’s wastage is close to 40 per cent, which eats into the profit margin of the garment makers, he added further.
However, even within the garment makers, differences in opinion as to the new rates seem apparent with woven apparel exporters reportedly terming the decision ‘better than nothing’. Even knitwear manufacturers are not very happy with the new wastage rates and maintained wastage rate should be at least 35 per cent even as according to some people in know of things, with this new wastage rates, if the production wastage rate of an export-oriented apparel manufacturer (who enjoys duty-free facility for raw material imports) is less than the prescribed rate, there’s a probability that excess raw materials might make their way into the open market, which eventually damage the business of local companies that produce raw material while on the other hand, if the actual wastage rate is higher than the rate set by the Government, the authorities impose duty, supplementary duty and VAT on the extra wastages.
Given the existing scenario, the issue of revising the wastage rate seems to be rather complicated and it would perhaps be in the best interest of all if the Ministry considers all the factors concerned before initiating any conclusive step in this regard.
