Dhaka's mistake: Why Bangladesh's garment industry will pay for the country's trade war with India

Bangladesh's recent decision to stop the import of yarn from India through its land ports will hit the country's garment exporters hard, according to a report. This ban is the recent one in a series of actions both countries initiated against each other after the interim government led by Mohammed Yunus came to power last year.

 

India's recent decision to cancel Bangladeshi cargo transhipment to third countries dealt a blow to Dhaka, which exports garments worth $47 billion to Western countries, mainly from airports in India. Bangladesh's Trade Advisor Sheikh Bashiruddin stated that the move had cost the country Tk 2000 crore. Though he expressed optimism that the country will bring down the cost and a project has been devised for the same, Dhaka's latest attempt to act against India has only pushed the country's garment industry into further chaos.

 

Two days ago, Bangladesh's National Board of Revenue (NBR) suspended the import of yarn from India through Benapole, Bhomra, Sonamasjid, Banglabandha, and Burimari land ports in Bangladesh. It was through these ports that yarn was imported into the country from India. Though the order was passed now, the move has been in the offing for some time.

 

Dhaka claims the decision was taken to protect the use of locally produced yarn in the garment industry. The yarn imported from India was cheaper and was causing local producers heavy financial losses, the authorities claimed. 

 

They claim India used to export yarn at a lower price than Bangladeshi yarn - at a price 3 to 5 per cent lower than the domestic market price. Yarn was stored near the Benapole border and Indian exporters would ship the products within a day or two of receiving the import order. Moreover, the yarn that used to come into Bangladesh from India was more than what was declared at these land ports. Bangladesh's land ports do not have sufficient equipment to measure the fineness and thickness of yarn, following which many importers brought yarn with higher counts by making false declarations, according to local media reports.

 

Due to this, Bangladesh's local yarn producers couldn't survive the competition, according to the Bangladesh textile mill owners.

 

While the decision will favour textile mill owners who can now sell off the yarn easily, the ready-made and knit garment manufacturers and exporters are bracing themselves for a hard time. The garment industry will now have to shell out more to buy yarn from domestic producers at a relatively high cost. The other option is to import yarn by sea from India, China, Turkey and Uzbekistan which takes more time and money.

 

The price difference between local yarn and yarn imported from India is 20 to 50 cents per kilogram, according to Jagonews 24. Businessmen and economists in the garment sector have called the decision to ban yarn imports by land route 'immature' and 'wrong' as it will result in the competitiveness of ready-made garment businessmen, who are already reeling from the impending Trump tariff aftermath.

 

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) president Mohammad Hatem told Jago News that the decision was an unfair one. "Due to this decision of the government, ready-made garment exports will be hampered. Small factories will be in more danger," he said. 

 

"As a result, small and medium entrepreneurs will face huge losses. Until now, if export orders were received, 10 to 20 tons of yarn could be imported from India within two days. Now the production time will increase," he said. 

 

Bangladesh Institute of International and Strategic Studies research director Dr. Mahfuz Kabir, told Jagonews that there is no profit gained from this. "Amidst Trump's trade war on one hand and the country's proposed increase in gas prices for industrial plants on the other, the decision to import yarn will harm the economy. It was not appropriate to make this decision when the cost burden on garment exporters is increasing. Exporters could have been given more time," he added.

 

World