GLOBAL TRENDS IN THE GARMENT SECTOR AND OPPORTUNITIES

GLOBAL TRENDS IN THE GARMENT SECTOR AND OPPORTUNITIES FOR BANGLADESH: THE DUET OF SUSTAINABILITY & COMPETITIVENESS Faruque Hassan, Senior Vice President, BGMEA CONFERENCE ON SUSTAINABLE SOURCING IN THE GARMENT SECTOR Dhaka, 29 September, 2016

INTRO • Dynamics of global sourcing has been evolving with the changes in global trade and tariffs, realities, rules and policies. • The emerging sourcing opportunities are creating opportunities for all – – Entrepreneurs – Workers – Buyers – Consumers • Bangladesh being the second largest apparel sourcing country and a leader in sustainable and responsible business has immense potentials to further grow its market share.

TIMELINE 1978 RMG industry started its journey with $10000 exports made by 1200 workers 1985 Export reached $116 million 0. 12 million workers and 384 factories 1995 2005 Export hit $2. 2 billion Export $6. 4 billion Eliminated Child Labor through Earn & Learn program MFA Quota phased out which was predicted to have severe consequen ce Rise of purpose built compliant factories 2010 2013 Export $12. 5 billion Export $21. 52 billion Ranked 2 nd largest RMG exporting country despite global recession Rana Plaza & Tazreen accidents erupted the issue of workplace safety 2016 2021 Export $28 billion Vision has been set at $50 billion exports 10 -years of MFA phase out. Export quadruple d, employme nt 4. 4 mil. Major progress in safety & workers rights Workplace safety, environme ntal sustainabili ty, & excellence in product & market diversificat ion envisioned

WORLD CLOTHING TRADE 2015 IN BILLION US DOLLAR 500 450 445 400 350 300 250 175 200 150 26 22 18 15 7 6 6 Viet Nam India Turkey Indonesia Cambodia USA 50 Bangladesh 100 China World 0

ASIA EMERGING GLOBAL TEXTILE & CLOTHING HUB Share of Asia and rest of the world (ROW) in global clothing exports, measured in US$ 2000 ASIA, 40. 92% ROW, 59. 08% 2025 2015 ? ROW, 37. 59% ASIA, 62. 41%

Y-O-Y EXPORT GROWTH% OF MAJOR CLOTHING SUPPLYING COUNTRIES, MEASURED IN US$ 140, 00% 120, 00% 100, 00% 2015 80, 00% 2014 60, 00% 2013 2012 40, 00% 2011 2010 20, 00% 2009 -60, 00% Pakistan Cambodia USA Indonesia Turkey India Viet Nam Hong Kong EU (28) Bangladesh -40, 00% China -20, 00% World 0, 00% 2008

APPAREL EXPORT OF BANGLADESH VALUES IN BILLION US$, FY 1985 -FY 2016 50, 00 45, 00 24, 49 25, 49 2014 -15 21, 52 6, 42 19, 09 0, 62 1989 -90 2, 23 0, 12 5, 00 1984 -85 10, 00 4, 35 15, 00 2011 -12 12, 50 20, 00 17, 91 25, 00 2010 -11 30, 00 2013 -14 35, 00 28, 09 40, 00 2015 -16 2012 -13 2009 -10 2004 -05 1999 -00 1994 -95 0, 00 Last 10 years compound annual growth rate (CAGR) is 12. 43%

SNAPSHOT: TEXTILE & CLOTHING INDUSTRY IN BANGLADESH Number of Clothing Factories 3800 around Investment $11 billion around Exports to 130 around countries 4. 4 Million workers 394 spinning & 777 textile mills 99% accessories made locally Export $28 billion

MAJOR MARKETS OF BANGLADESH’S APPAREL Bangladesh's Major RMG Export Markets FY 2015 -16 2. 29% 19. 67% 2. 35% 2. 76% 16. 56% 2. 97% 3. 55% 4. 55% 12. 54% 6. 10% USA France Japan 20. 02% 6. 63% Germany Italy Netherlands U. K. Canada Denmark Spain Belgium Others Countries

WHY BANGLADESH 35 years experience Backward Linkage Price Versatility & Adaptability Quality STRENGTHS Market Access Workforce Safe & Compliant Commit ment Green Transparent

SAFER PRODUCTION IN BANGLADESH Inspected factories: 3746 (100%) Fit for Operation: 98. 94% Remediation completed by 70% ACCORD suppliers and 63% of ALLIANCE suppliers

WORLD’S TOP RATED LEED CERTIFIED INDUSTRIAL ESTABLISHMENTS ARE IN BANGLADESH GLOBAL AWARD WINNER GREEN LANDSCAPING APPAREL FACTORY AT DHAKA A PLATINUM LEED CERTIFIED WOVEN FACTORY AT DHAKA 33 LEED certified factories 150 more factories in LEED certification pipeline World’s highest rated knitwear, woven, washing and Denim mills A PLATINUM LEED CERTIFIED WASHING FACTORY AT DHAKA

BANGLADESH IS BLESSED WITH HUMAN RESOURCES • 70% of the population is under 40 yrs old • Large educated and motivated youth • High literacy rate (72%) among youths aged 15 -24 • Inspired young, hungry for work and growth • 2 million youth entering in job market each year • Labor cost advantage • 117 million mobile phone users • 33% internet penetration

THE NICHE PROJECT • • • Within the Niche project "CSR & SRHR in the RMG sector in Bangladesh", funded by the Ministry of Foreign Affairs, an international consortium and the BGMEA University for Fashion & Technology (BUFT) is working to improve vocational training on CSR & SRHR in the textile sector in Bangladesh. Part of the project is the establishment of a Centre of Excellence (Co. E) which will offer research, training and consultancy services to the textile sector in Bangladesh. The Co. E will be operational in 2017. The Co. E will mainly respond to the changing (market) demand for Dutch buyers because of the textile covenant, the sustainable procurement policy of the government and the transition trajectories by CSR Netherlands. It involves, for example, the increasing demand for circular fabrics and mass customization. BUFT and the Co. E will provide the industry in Bangladesh soon the opportunity to get familiar with these new trends and developments and how circular garment concepts in Bangladesh can take shape. A well-functioning technical university as BUFT is indispensable to maintain the Bangladesh textile industry modern and competitive in a rapidly changing world.

MARKET ACCESS FOR BANGLADESH EU (28) GSP: Duty free access for apparel on 1 -stage Rules of Origin. Japan GSP: Duty free access for apparel on 1 -stage Rules of Origin. Canada GSP: Canada provides Zero duty access on 25% value addition requirement Switzerland GSP: Duty free access for apparel on 1 -stage Rules of Origin. Norway GSP: Duty free access for apparel on 1 -stage Rules of Origin. Australia & New Zealand GSP: Australia & New Zealand provides Zero duty access on 25% value addition requirement (subject to additional 25% sourcing from GSP beneficiary countries) China Duty Free: China provides Zero duty access for 60% items under global initiative through WTO, this will be enhanced to 97% products. India: Zero duty access to all apparel items under SAFTA. Chile: Duty free access for apparel. Malaysia, Thailand & South Korea: Provide duty free access to a number of apparel items from Bangladesh.

OUR PRIORITIES Product & Market Diversification OPPORT UNITIES Developing Professionals & Skills Technology & Efficiency Enhancement

BANGLADESH IS GETTING READY PADMA BRIDGE – connecting people to prosperity 100 Special Economic Zones in next 15 years Enhancing electricity supply to 20, 000 MW from 13280 MW at present LNG terminals being set up to meet demand for gas Mega projects on rail, road, sea and airports going on The Padma bridge will open a new horizon of opportunities Focused drive on Cleaner Production

BANGLADESH ECONOMY STANDING STRONG Bangladesh has become the Lower Middle Income Country from an LDC based on GNI performance Vision to graduate to a Middle Income Country by 2021 Becoming a Developed Country by 2041 July 2008 June 2009 July 2015 June 2016 5. 74% 7. 05% 6. 68% 10. 30% Export $15. 57 billion $34 billion Import Private Investment as % of GDP $22. 51 billion $40. 03 billion FDI Inflow (In US$) 19. 67% $960. 50 Million $2. 24 billion Per Capita GNI (US$) $676 $1466 Poverty rate 40% 22. 4% GDP Growth Manufacturing Growth Remittance Foreign Exchange reserve Inflation 21. 78% $9. 69 billion $14. 93 billion $30. 14 $15. 57 billion Billion 8. 7% 5. 92%

COLLABORATION MODEL FOR WIN-WIN Responsible Production & Supply Chain Ethical Sourcing & Fair Price Happy Workforce

WELFARE ACTIVITIES • • • BGMEA has been providing Grievance Management facilities to the garment workers at free of cost since 1998. The Committee is headed by a retired District Judge and participated by workers and owners representatives. BGMEA is providing regular training programs on worker-management relations and Bangladesh Labor Act for both factory management and workers. Already 1072 workers and mid-level management staffs have been trained. BGMEA has opened a Trade Union Advisory cell having an ex-Joint Director of Labor as its head. The BEF, BGMEA and BKMEA with the support of ILO (ITC) has trained 114 senior master trainers. These master trainers will train 8, 000 midmanagement officials and 8, 000 workers gradually by end of 2016. Such programs should be continued and expanded to build the capacity of the industry to facilitate harmonious industrial relations. 12 Health Centers for the workers; serves more than 60, 000 patients per year

WELFARE ACTIVITIES • • BGMEA is constructing two full-fledged Hospitals for the workers, one 100 bedded in Chittagong (part of it came in to operation already) and another 150 bedded in Dhaka Awareness raising for prevention of HIV/AIDS, Tuberculosis, reproductive health and the use of contraceptive devices BGMEA in collaboration with the Govt. runs several Skills Training Centers in different areas of the country. BGMEA runs Five Schools for the workers’ children and provides books & study materials at free of cost. The BGMEA University of Fashion & Technology (BUFT) BGMEA jointly with the Government of Bangladesh has taken initiative to establish Dormitories in Chittagong and Ashulia BGMEA organizes musical talent hunt program GORBO

SUSTAINABILITY BGMEA runs awareness program on regular basis to motivate the entrepreneurs in adopting energy efficient technologies, machines and work process In order to institutionalize the process, BGMEA has set up an Environment Cell “Partnership for Cleaner Textile - Pa. CT” between BGMEA, the Government of the Netherlands IFC and a number of apparel buyers Toward Resource Efficiency & Environmental Sustainability (TREES) with GIZ to build capacity of relatively smaller factories on environmental best practices. People Planet Profit

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