This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 DHAKA 004643 
 
SIPDIS 
 
DEPT FOR EB/TPP/ABT FOR EDWARD HEARTNEW 
DEPT FOR SA/PAB 
STATE PASS USTR FOR ABIOLA HEYLIGER 
USDOC FOR COMMERCE/ITA/OTEXA FOR MARIA D'ANDREA 
 
E.O. 12958: DECL: N/A 
TAGS: KTEX ECON ETRD
SUBJECT: REPLY TO STATE 146213 
 
REF: A. DHAKA 4154; B. STATE 146213 
 
¶1.  Summary: Post collected data on textile and apparel 
labor and production statistics of Bangladesh per ref 
¶B. request.  Information sources included trade 
associations and government data.  There is no 
consistent, reliable, current source of data for the 
information requested.  Early indications are that 
export prices have fallen but volumes have increased, 
resulting in an overall increase in apparel exports. 
End summary. 
 
¶2. Post collected information from BGMEA (Bangladesh Garments 
Manufacturers and Exporters Association), BTMA (Bangladesh 
Textile Mills Association), and the World Bank.  Data is seldom 
disaggregated by month and is collected according to the fiscal 
year of the government of Bangladesh, which runs from July 1- 
June 30.  The BDG FY 2004 year ended June 30, 2005.  Thus, 
FY 2004 data includes the data for the first six months of 
calendar year 2005.  Moreover, data from these different sources 
are inconsistent and the reliability of the data can not be 
independently verified. 
 
¶3. Responses to questions posed ref B., para. 4, follow: 
 
   ¶A. Total industrial production during FY 2004 was 15 billion. 
 
   ¶B. Total textile production in FY 2004 was 2.7 billion meters 
(no data based on price is available) and apparel production was 
USD 7 billion (both estimated). 
 
   ¶C. Textile share could not be compared with the import and 
export figures because data on the value of textile production 
is not available.  During FY 2004, apparel share was 52% of the 
total imports and 81% of the total exports. 
 
   ¶D. Total manufacturing employment was 4.9 million (estimated) 
in FY 2004. 
 
   ¶E. Total textile employment by the BTMA member organizations 
was 250,000 and by BGMEA member organizations was 2.0 million 
during FY 2004. Women are estimated to comprise 80% of the 
textile and apparel workforce. 
 
¶3. Responses to questions posed ref B., para. 5, follow: 
 
   ¶A. Bangladeshi apparel manufacturers are receiving lower 
prices due to heightened international competition.  In the 
beginning of 2005, they received a lower number of orders 
compared to the same period of 2004.  However, some 
manufacturers report that orders are now coming back and there 
are indications that total volume is up over the previous year. 
To date, no foreign investor in the sector has left Bangladesh. 
The knitwear sector has shown significant growth, particularly 
in European markets where Bangladesh qualifies for GSP 
preferences.  Knitwear also benefits from stronger vertical 
integration and domestic production of inputs, reducing costs 
associated with Bangladesh's inefficient ports. The woven sector 
has not benefited significantly from these advantages, and has 
experienced only limited growth in volumes but declining prices. 
 
   ¶B. The U.S. and the EU are the two principal export markets 
for Bangladesh textile and apparel products.  Bangladeshi 
manufacturers benefit from limits on and uncertainty over 
continued U.S. and EU access to Chinese goods, as buyers retain 
their relationship with Bangladesh manufacturers to ensure a 
continued source of supply.  The BDG has not implemented, nor is 
it considering, its own safeguard measures against China.  The 
BDG is encouraging Chinese investment in its textile and apparel 
industry. 
 
   ¶C.  Increased global competition is squeezing margins in the 
textile and apparel sector, but has not led to reduced wages or 
requests for waiver of minimum wage laws.  Wage reductions to 
address competitive pressures are rare in Bangladesh industry 
generally.  There has been some upward wage pressure at 
companies located in export processing zones (EPZs), due to 
recent labor legislation unrelated to the end of the MFA. 
Overall, wages and benefits paid by companies operating in the 
EPZs are higher than those paid by companies located outside the 
EPZs. 
 
   ¶D. The private sector continues to invest to improve the 
competitive position of the industry.  This investment, both 
before and after the expiration of the MFA, is largely 
responsible for the continuing competitiveness of the industry. 
The BDG and industry have identified the major infrastructure 
and policy impediments to improving overall competitiveness. 
These include an inefficient and costly port, absence of a deep- 
water port, poor transportation linkages between the port and 
major manufacturing centers, inadequate and unreliable power, 
poor telecommunications infrastructure, particularly in land- 
lines and high-speed internet access, corruption and a lack of 
transparency in government. 
      Although the BDG has made sporadic attempts to address 
these failings, implementation has been weak, inconsistent and 
subject to substantial delays.  The ADB is helping the 
Chittagong port to develop its infrastructure and 
computerization of the customs procedures.  The port is now 
constructing a container terminal, which will be operated by a 
private sector operator yet to be selected.  The Dhaka- 
Chittagong highway is being expanded to ease transportation of 
goods to the port, which will speed up transportation of apparel 
goods too. Post is not confident, however, that significant 
progress will be made to address these issues prior to the 2008 
end of MFA provisions on safeguards. 
 
   ¶E. Bangladesh's eligibility for GSP benefits in the EU is a 
significant factor behind increased knitwear exports to the EU. 
The industry is concerned, however, that changes in the EU GSP 
program, especially concerning rules of origin, could make 
Bangladesh knitwear less competitive in the EU.  Bangladesh 
textiles and apparel do not benefit from regional free trade 
agreements; however, some benefit is possible once the South 
Asia Free Trade Agreement (SAFTA) is implemented.  U.S. GSP 
benefits have a limited impact on the textile and apparel 
industry.  Bangladesh does not benefit from other U.S. trade 
preference programs.  The industry, led by BGMEA, is lobbying 
for passage of the Trade Relief Assistance for Developing 
Economies Act of 2005, which would grant U.S. duty free access 
to textiles and apparels from several developing countries, 
including Bangladesh. 
 
   ¶F. Bangladesh should be able to remain competitive in the 
short to medium term.  The country benefits from low labor costs 
and a good reputation in its export factories for compliance 
with "social" standards, such as lack of child labor.  Buyers, 
who do not want to become dependent on China as a sole source of 
supply, continue to rely on Bangladesh as an alternative source. 
The longer term health of the industry, however, will depend on 
the government's ability to improve critical infrastructure and 
improve the underlying business climate by addressing corruption 
and simmering political unrest. 
 
Chammas