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Dr Khondaker Golam Moazzem on effect on US TPP on Bangladesh’s RMG export

while addressing a research presentation organised by BGMEA on 25 June 2015.

View more news reports on the event

 

Published in The Financial Express

Buyers’ ‘monopsony’ in US causes price fall of BD RMG

FE Report

The US apparel buyers are still dominating in fixing prices of garment items, which are declining in their market since 2000, said a US researcher in his paper, presented on Thursday.

Associate Professor Mark Anner attributed the ‘monopsony’ of the big buyers for the declining price trend of apparel products.

‘Monopsony’ is a market condition similar to monopoly, except that a large buyer not seller controls a major proportion of the market, and drives the prices down. It is sometimes referred to as buyer’s monopoly.

Mr Anner of Penn State University of US said these while presenting his research paper – “Prices and Development in the Global Apparel Industry: Bangladesh in Comparative Perspective” – at the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) headquarters in the city.

He said Bangladesh became the largest exporter of men and boys cotton trousers to the US in 2014, superseding China and Mexico.

But the price of per square meter of Bangladeshi products declined by 40.89 per cent since 2000 to 2014. The price of per square meter of cotton trouser was more than $4.0 in 2000 which stood at $2.5 in 2014, he added.

He, however, did not go through the details of the same of China and Mexico.

The paper also showed that Bangladeshi products are facing stiff competition with those of Vietnam, with a 12.36 per cent share in the US market, which was only 0.19 per cent in 2000.

China is the largest exporter to the US with 36.07 per cent market share, while Bangladesh 7.67 per cent from 6.03 per cent in 2000.

Mr Anner also suggested sharing information, creating awareness and the government’s initiatives to break the ‘monopsony’ as well as coordination among the weaker actors to address the ‘power imbalance’ in supply chain.

He, however, did not mention who will take the lead role – the supplier side or the buyer side. Executive Director of Policy Research Institute (PRI) Ahsan H Mansur said RMG prices declined for various reasons, including fall in raw material prices as well as technological advancement.

He rather recommended following the Chinese strategy of enhancing productivity and manufacturing high value added products to increase Bangladesh’s market share in the US.

BGMEA President Md Atiqul Islam said at present Bangladesh’s RMG sector is facing a very critical time.

“Cost of production has gone up by 10 per cent in recent times due to wage hike and ongoing safety initiatives by the western retailers and the government,” he added.

Additional Research Director of Center for Policy Dialogue (CPD) Khondaker Golam Moazzem said the US is going to sign TPP with 12 countries, including Vietnam, and so, the US government should safeguard other exporting countries.

“If TPP is signed between Vietnam and the US, Bangladesh will be affected. Both Bangladesh and Vietnam export the same top 10 products to US.”  He stressed on ethical profit, so that suppliers can ensure compliance requirements.

Senior Research Fellow of Bangladesh Institute of Development Studies (BIDS) Nazneen Ahmed recommended that the US government should take some steps in fixing price slabs.

 

Published in The Daily Star

American retailers lowering prices of Bangladeshi apparel

Star Business Report

The American retailers have progressively been lowering the prices they pay for Bangladeshi garment items, a recent study found.

For instance, trousers, the most popular export item from Bangladesh to the US, saw its prices decline 40.89 percent between 2000 and 2014, said Mark Anner, an associate professor of the Pennsylvania State University, who conducted the study.

Anner compared the import prices of items from top 20 of the US’s sourcing nations like China, Vietnam, Bangladesh, Mexico and India between 1989 and 2014.

The findings of the study were presented yesterday at the office of the Bangladesh Garment Manufacturers and Exporters Association.

At the same time, the prices of garment items from China and Vietnam have increased, according to the study.

Bangladesh is the largest exporter of men’s and boy’s trousers to the US, followed by China, Mexico, Vietnam, Pakistan and Indonesia.

To improve the situation, Anner suggested three options: information sharing and awareness, government’s initiatives to break up the unfair competition, and coordination among weaker actors (suppliers’ coordination) to address the power imbalance in the supply chain.

Khondaker Golam Moazzem, an additional director of the Centre for Policy Dialogue, said practising ethical profit sharing can ensure proper pricing of items.

He also said Bangladesh will face further competition in the US market if the proposed Trans-Pacific Partnership (TPP) is finalised, as the top 10 garment items from both of Bangladesh and Vietnam are the same.

Vietnam is the only garment producing country that is included in the proposed TPP.

BGMEA President Atiqul Islam said the garment sector has been facing stiff competition for different reasons and in such a critical time, the government increased the tax at source.

Subsequently, he urged the government to reinstate the previous source tax rate of 0.80 percent instead of the proposed 1 percent.

 

Published in New Age

Experts want end to global buyers’ control over apparel prices
Buyers cut RMG price by 7pc in last few years

Experts on Thursday observed that the prices of apparel products decreased significantly on the international market in last couple of years as the global buyers controlled the market and mounted pressure on suppliers to lower the prices.

They suggested that the governments of the supplier countries should break the monopsony power of the global buyers as the power instigated unfair competition among the suppliers.

They also urged the US government to play a role in raising the prices of the Bangladeshi apparel products in its market.

Their observation and suggestion came at the launch of a study ‘prices and development in the global apparel industry: Bangladesh in comparative perspective’ conducted by Mark Anner, an associate professor at Pennsylvania State University.

The Bangladesh Garment Manufacturers and Exporters Association launched the study report at its office in the city.

In the research paper, Mark said the prices of apparel declined on the global market due to monopsony power of the global buyers.

He said that the prices of RMG decreased by more than seven per cent in the world market in last couple of years.

Mark said, ‘Monopsony helps big buyers to put pressure to reduce the prices of products.’

In the research he showed that the prices of Bangladeshi cotton trouser in the US market decreased by 40.89 per cent in last 14 years.

Bangladesh is the number one exporter of the cotton trouser to the US market. China is the second largest exporter of the item while Mexico is the third.

According to the research by Mark, the prices of apparels also declined below the level required to ensure worker rights.

He said the buyers were getting benefits of the decreased prices of apparel products not the consumers.

Saying that continuous fall in the prices of products has put pressure on the suppliers and exporting countries, Mark suggested that suppliers should reach a consensus on price per unit.

Bangladesh Institute of Development Studies senior research fellow Nazneen Ahmed said that it would not possible to reach a consensus among the suppliers as competing countries would try to garb more market share.

Bangladesh government has nothing to do in this case but the US government has some role to pay in lifting the prices of apparel products, she said.

Nazneen said that the bargain power of exporting countries was very low as the number of suppliers was much higher than that of buyers.

‘The US government has a role to play in raising prices of the Bangladeshi RMG products as the buyers are offering lower prices to the manufacturers and selling the products at higher prices to the consumers,’ she said.

Khondaker Golam Moazzem, additional research director of the Centre for Policy Dialogue, said once the Trans-Pacific Partnership Agreement between US and Vietnam is signed, Bangladesh would have to face tough competition as 10 products of Bangladesh matched with that of Vietnam.

He urged the US not to change the rules of origin saying that if the US changes its rules of origins following the TPPA, Bangladesh would be affected.

Policy Research Institute executive director Ahsan H Mansur, BGMEA president Md Atiqul Islam, former BGMEA president Shafiul Islam and vice-presidents Shahidullah Azim and Reaz-Bin-Mahmood were present, among others, in the programme.

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