Summary

Bangladesh government has allowed taking the facility of subcontractors like the Ready-Made Garments (“RMG”) industry because some large industries are burdensome with a large number of export orders while the medium and small companies can not wield their resources. This facility along with the guidelines of 2019 can bring asymmetrical progress in the growth of economical development of Bangladesh. The subcontractor facility will help to secure the employments of the existing employers, increase the mills capacity and to build rapport in the foreign market.

Content

Major foreign exchange earnings come from the exports of garments and textiles. The operation of the garment industry of Bangladesh as an open trade regime is a more effective form of assistance than the foreign aid Bangladesh receives. According to the Bangladesh Textile Mills Association (“BTMA”), the investment in the Textile industry is 70,000 crores. It also ensures about 90% of the country’s knitwear and about 40% of the raw materials for woven garments. In 1972, the world Bank approximated the GDP of BD at USD $6.29 billion and In 2016, it took the second position in exporting the garments which took place right after China. So, the export demand of the spinning and weaving companies got increased.

Export-oriented spinning and weaving mills import raw materials under the bonded warehouse facility. As per the previous rules, there was no scope for the transfer of these materials to the other companies. Under the subcontract facility, the subcontractor factories can manufacture products by using these raw materials and the main contractor company can export these products as their own products. Moreover, the Contractor Companies will be able to show the production capacity of the subcontractor companies as their own capacity.

Moreover, the Ministry of Commerce’s this initiative will be able to balance and utilize the orders in the most effective way. According to this facility, the large companies will be able to manufacture goods at the other companies on a subcontract basis and then export them as their own goods.

Mansoor Ahmed, the secretary of BTMA told the Business standard that as a result of this decision, the mills in this sector that do not get work and are not being able to sustain themselves will now get work, get investment protection and employment of their workers will continue to exist. He added that the mills will be able to repay the bank loans with the revenue that they will get from working under the subcontracts.

BTMA president wrote a letter to the commerce ministry in January this year, stating that due to the high demand, the large companies were receiving more export orders than their production capacity while others were suffering from a lack of work. So, the subcontracting works will balance the employment and resource utilization while the export rate will also increase. In this context, the Commerce Ministry has given permission to the textile factories to subcontract from this March.

Source: The Business Standard, Wikipedia