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Will the Lights be on in Bangladesh in 2014?

Akramul Qader, the Ambassador of Bangladesh to the United States, sat down with Sourcing Journal and several other industry experts at Sourcing at Magic in Las Vegas, on Tuesday. He spoke about the country’s recent compliance problems, but also mentioned several other long-term trends in the country.

Production in the critical apparel and garment sector may be at risk from several sources, including political instability that is leading to 24 to 48 hour hartals (general strikes), coming power shortages, and the uncertain state of the country’s manufacturing infrastructure.

However, Qader said, “Export growth is not only sustainable in the near term, but we believe we can go further.”

Bob Berg, Director of International Business for Sourcing at Magic, said, “Bangladesh is such a great supply chain to the United States and Europe.”

Qader agreed, but pointed out that the coming export numbers will be the first to be based on orders placed after the Rana Plaza collapse.

“September is a very crucial month for us, because we will find out how much we can achieve, and how quickly we can do it. These two accidents [Rana Plaza and Tazreen Fashions] have actually provided an opportunity for those who failed to deliver earlier. Now is the time that they must, because the European market is very important to us, and so is the US market.”

Many of the factories in Bangladesh – particularly those constructed at the start of the garment export boom, in the 1980s and 1990s – are housed in buildings that are unsuitable for production. Those factories are current being inspected by the BGMEA and the government. Ultimately, many of them will need to be relocated.

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The government has created a relocation program aimed at moving those factories to Export Production Zones (EPZs). Those new zones will have dedicated power and water, along with preferential treatment in customs.

“The government will definitely be supporting those relocation programs,” Qader said.

However, there are serious doubts about the ability of the government to relocate factories and provide power at the same time.

“Right now we’re very short of gas,” Qader said. “Unless new sources are found, it might become very difficult for us to produce electricity.”

This issue, which has crippled the export industry in nearby Pakistan, may be alleviated by major foreign investments in power and energy. Chevron, for example, is supplying more than 50% of Bangladesh’s natural gas. It’s hoped that by encouraging outside investment, the government will be able to keep the lights on, relocate unsafe factories, and use economic growth to calm political unrest.

There are many positive trends in Bangladesh as well, Qader pointed out. The country has almost completed all the Millennium Development Goals, a set of standards designed to raise the level of human development in participating countries. No other country in the region has done that.

“Population growth has also been reduced and we have attained gender parity in education. The government provides free education to women up to the high school level, and the parents are provided incentives, either cash or food, to make sure they don’t remove their girl children from school.”

These efforts are improving equity, and setting the stage for long-term Bangladesh growth, said Qader.