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Manufacturers need to invest on product diversification and skill development of the workers- H.E. Peter Fahrenholtz, Ambassador of the Federal Republic of Germany to Bangladesh

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Germany was one of the first countries to recognize Bangladesh’s independence from Pakistan in 1972, establishing diplomatic relations, and is respected as a long-standing and reliable partner in development cooperation and also as a trade partner and an important member state of the European Union. Germany is one of the biggest export markets for Bangladesh and the two countries’ bilateral trade volume is growing steadily. Over 90 percent of imports from Bangladesh are textiles. Other exports to Germany include deep-frozen foodstuffs and leather products. German exports consist predominantly of machines as well as chemical and electrochemical products. Bangladesh is among the countries engaged in close development cooperation with Germany on the basis of intergovernmental agreements. The jointly agreed priority areas, including on renewable energies and energy efficiency as well as good governance and adaption to climate change, form the substantive framework in this regard.

Recently Textile Focus special correspondent Rakibul Islam had a conversation session with H.E. Peter Fahrenholtz, Ambassador of the Federal Republic of Germany to Bangladesh. He shared several issues that include relationships between Bangladesh’s economic progress, new German supply chain law, product diversification, workers’ health & safety. Here is the summary of the conversation for our readers-

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H.E. Peter Fahrenholtz, Ambassador of the Federal Republic of Germany to Bangladesh

Textile Focus: In this hard time, how do you see the economic growth of Bangladesh and how do you evaluate the contribution of the textile and apparel industry?

H.E. Peter Fahrenholtz:  Bangladesh had the highest growth rate in Asia before the Corona pandemic and has been increasing its GDP especially over the last 10-12 years continuously. Last year Bangladesh passed India looking at the GDP per capita. This is a tremendous success story.

The main driver of this high economic growth has been the Textile & Apparel Industry of Bangladesh. Which has become as a result is one of the most important sectors for the economic development of Bangladesh. As the globally second largest RMG exporter country this success did not come easily. This success results from hard work, good management of the companies and an industrious work force.

Due to the pandemic the GDP growth rate decreased to about 5 % but I am confident that growth will pick up again soon and increase again to over 8 percent in the next year. But in the future Bangladesh’s economy needs urgently to diversify. If you only depend on one sector your economy remains vulnerable. Obvious candidates would be the electronics and pharmaceuticals sectors. Also, the textile and apparel industry needs to diversify its high-end products and invest in more technology.

Textile Focus: What was your observation of Covid-19 pandemic? 

H.E. Peter Fahrenholtz: The covid-19 pandemic is having terrible consequences for all countries in the world. It also reminded us that in the history of humanity pandemics happened again and again. As affected countries we need to learn our lessons to be better prepared next time. I think the Bangladeshi government handled the corona situation quite well as it was confronted with  the very difficult challenge to maintain a  balance between epidemiological counter measures  and safeguarding the livelihood of its citizens as well as the survival of its companies. I am confident that Bangladesh will overcome the corona crisis well.

Textile Focus: Majority of German’s imports from Bangladesh are textile products, how Bangladesh can boost its export in Germany more?

H.E. Peter Fahrenholtz: I believe the main challenge coming up is the supply chain law being passed by German parliament in June. This supply chain law which actually is called Due Diligence law will force the German importers and foreign exporters to comply to minimum standards on social protection of workers, labor laws and also ecological sustainability in production. So, I think if the Bangladeshi companies approach this challenge proactively and faster than the competitors from other countries, they would be able to gain additional market share.

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Textile Focus: Still Bangladesh textile and apparel manufacturers are struggling on profitability, mainly due to lower prices from brands, do you think manufacturing could be sustainable with current prices brands offering to Bangladesh?

H.E. Peter Fahrenholtz: Successful business rests on the model of competition. The market economy is the key to economic success and prosperity. This only works if the same rules of strict competition are applied to all companies. This obviously means that some companies which cannot compete go bankrupt, other companies which are more efficient, have better management, take better care of their workers will succeed and be more profitable. Obviously, for a profitable business, you need to work on customer satisfaction, market research, good management, and sustainable technology, well trained and motivated workers.

Bangladesh is now becoming a middle-income country. Every middle-income country in the world has a social security system including medical insurance, accident insurance etc. Bangladesh also needs to conform to ILO labor laws regulations as this will contribute to a cooperative relationship between capital and labour. I think the Bangladeshi government has begun a process about what need to be changed and reformed as the county moves into middle-income-level.

Textile Focus:  We know Germany is involved with many development projects in Bangladesh. Could you please share us the projects that are related to the textile and apparel industry?

H.E. Peter Fahrenholtz: We have several initiatives. Specially after Rana Plaza the German government decided to assist the Bangladeshi government and textile producers in improving safety in the T&A sector including fire safety, production standards etc.

We have several initiatives, one is to establish injury insurance, another one is to provide the textile sector with loans and credits for safety enhancement measures.

Textile Focus: What are the challenges in bilateral trade between two countries? How it will be overcome?

H.E. Peter Fahrenholtz: I think one of the main challenges to export to Germany will be the new supply chain law. My advice is for the Bangladeshi producers to look at the new rules and adapt to them. The embassy has published a summary of the new rules and we try to be very transparent about it. It is all about following minimum standards on labor rights, social protection and ecological sustainability in producing textiles and apparel. I think similar laws will be extended to other countries soon.

My advice to BGMEA and other associations would be to establish a trade office in Europe, Germany and other export countries for market research, and development and export promotion.

Textile Focus: Any message about Industry?

H.E. Peter Fahrenholtz: To promote exports and investment from Germany to Bangladesh I would advise the government to improve the ease of doing business. At the moment Bangladesh has a very low ranking on this and the overall investment climate. Bangladesh should focus on increasing sector wise FDI while identifying sectors where FDI would be particularly welcome. German companies are interested in investing in Bangladesh and after the pandemic I am sure more German companies would like to contribute to the economy.