Bangladesh does not have basic raw materials for the readymade garment and textile industry. The desired efficiency and productivity could not also be achieved yet. These two export products are competitive in the world market relying on cheaper energy and workers. The recent price hike of primary fuel, particularly diesel, would definitely create an adverse impact on the industry. That is why, I strongly believe, it is essential to exploit our own coal resources and use it efficiently for keeping the energy price within the affordable limit over the next decade. It would not even affect Bangladesh’s achieving the climate change benchmarks as the carbon footprint of the country is negligible.
Faruque Hassan, President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Managing Director of Giant Textiles Limited said the above in an exclusive interview with Energy & Power Editor Mollah Amzad Hossain.
Almost 100% of the population has come under the power supply coverage. How would you evaluate this?
It's a great achievement indeed. This success has definitely opened the avenues for improvement of living standard of rural population, modernizing and increasing output of agricultural products, facilitating fresh investments in industry, trade and commerce. In the past, the investors had to hesitate or think a few times for investment due to 5-6 hours of chronic power loadshedding. That situation no longer exists now. The present success is the outcome of the achievement in the power sector.
RMG tops the list of export earnings. What are your views about the emerging future challenges of fuel supply and other infrastructure development?
The RMG and textile industry, including spinning and weaving, is the backbone of Bangladesh economy. This sector has created huge employment. It has opened the door for women empowerment. A huge investment has already been made in the backward and forward linkages, and the flow of investment continues. New investment decelerated a bit for a government decision of “no supply of gas and electricity in areas outside specific industrial zones”. For this, many interested entrepreneurs cannot avail the opportunities created in the spinning sector. Those who are involved in both RMG and textiles can only invest for expanding their businesses.
Huge investment is now essential in the RMG sector for meeting various conditions of compliance and others of the buyers of global market. Most of the Special Economic Zones of the government are not yet ready for setting up industries. I hope the government would make all SEZs ready with electricity and gas supply infrastructure and ETP in 2-3 years. Till then, say for 3 years, the government should withdraw embargo on power and gas supply elsewhere. That would ease investment in the sector.
How do you evaluate the preparedness of Bangladesh for meeting the challenges emanated from graduation to developing country from LDC? What are the new challenges of RMG sector?
Graduation would mature in 2026. Bangladesh has requested for 3 years of grace period till 2019. The GSP plus for textile sector would come into effect then. That would create impediment. We do not have main raw materials and chemicals. These are the main challenges of the textile sector.
On behalf of BGMEA, we have already started analyzing market and commodity. But for effectively managing the challenges, signing FTAs and PTAs with other countries would be better. For different reasons, the export-import processes of Bangladesh are complex. We must have to expedite the process at every point of exit and entry. Warehouses need to be set up at every land ports. That would increase revenue earnings of the government alongside easing the export-import activities for the industry.
Captive power is still more popular than grid power in RMG and textile sector. Despite efforts, distribution utilities have not made much headway. Experts observe that this issue cannot be tide over without rationalizing price of grid and captive power. What are your views?
Please note that the price is not the main problem; quality power supply on uninterruptible basis is the main roadblock. If this can be ensured, grid power would have no issue. I personally believe using gas in boilers would make better value addition than using gas for captive power generation. But for issues of unreliable supply of quality power dying and textile industries have to rely on captive power now.
Bangladesh RMG sector is now the global leader as far as green industry endorsement. More investments are flowing in the sector. Despite huge investments, the higher price incentives are not being received from the buyers. How do you look at it?
Higher investment had to be made taking into consideration the national and social obligation for efficient use of natural resources, electricity and primary fuel. Fresh investments are flowing. But it is also true that commitments or assurances of higher price from the buyers have not been received as expected. But I believe in the evolving global perspectives, the buyers would soon come up with higher price and other incentives.
On the other hand, the National Board of Revenue has given 2% rebate on corporate income tax for the green industries. This should be increased to 5%.
You are working with SREDA and GIZ for efficient use of energy and other primary resources. Introduction of Net Metering Policy has opened new avenue for use of renewable energy. What are your views? What are the barriers here you think?
Let me address the last section of your question first. We are discussing with local institutions and foreign agencies about low cost financing. But there are some real issues. It is like “Oiling the Oily Surface”. Fund is being provided to those industries which are already efficient. Those who are wasting 20%, they are given fund for reducing 1%. But it would be possible to reduce 30% for those who are wasting 50% if fund is provided to them. But for equity and mortgage issues, they are not getting finance. BGMEA has talked with relevant authorities but of no avail so far.
Introduction of Net Metering has definitely created great opportunity for RMG and textile industries for using the roofs for solar power generation. But for this, access to finance must be made easier. Many industries do not have capacity for financing on their own. They are not able to meet all the conditions of borrowing from banks. But they are keen to achieve energy efficiency. Greater success can be achieved if these genuine issues are taken into considerations.
Bangladesh is steadily turning into a net primary fuel importing country. Consequently, the price of energy and power is also increasing as domino effect. Further price increase of power and gas in 2022 is under consideration. In this situation how do you think Bangladesh export products can remain competitive in the global market?
It goes without saying that it would be a steep challenge for the Bangladesh RMG and textile industries retaining competitiveness in the global market if price of electricity and gas is further increased from the present level. We must keep in mind that despite continuous efforts Bangladesh RMG could not achieve the desired productivity yet. Efficiency also is not up to international standard. Cost of doing business is relatively higher in Bangladesh. For huge size of industries, China is in a position to lower the cost. Our advantages are cheaper labor and fuel.
On the other hand, after one year of low international demand due to COVID-19 impact, fresh orders are piling up now. The government must ensure that fresh price hike of electricity and gas does not create new impediment.
The business community is demanding long term price forecasting for a while. But that could not be done yet. What do you think about it?
Please note that the proven reserve of natural gas is depleting. The import of fuel is on rise. A long-term price forecasting is now essential. I think the government should work on announcing short, mid and long-term pricing forecast of electricity and primary fuel. The government should also consider ways on how the factories that are struggling for existence amid higher fuel and electricity prices can be provided with necessary support.
Actually the government has moved out of coal. That has been vindicated from the announcement of shelving 10 coal-fired power plants. There is no positive mindset for mining own coal. What are your views?
Carbon emission is a global issue. But Bangladesh has no obligation for reducing emission. Our carbon foot print is negligible. Even if we reach zero emission, it would have no impact on global emission. Even then Bangladesh has updated its NDC for reducing GHG emission. Looking at India and China, we find that they would continue using coal. We started using coal by adopting latest technologies. We must have a right balance in the fuel mix for keeping price within the affordable limit.
I do not think that time has come yet for us to phasing out coal. Not only imported coal, we must exploit our discovered coal resource. We have to use it for power generation. That would be the cheapest source of power generation. Bangladesh cannot attain long-term energy security relying exclusively on imported primary fuel. I believe that there is no better alternative now than exploiting our own coal resources.