BGMEA_Proposal.doc

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Bangladesh Garment Manufacturers and Exporters Association (BGMEA)

PART - A

TECHNICAL PROPOSAL

Survey on the Power Sector of Bangladesh and the Impact on the PresentState on the RMG Industry

June 2008

---------------------------------------------------------------------------------------------------------------------House 10, Road 135, Gulshan-1, Dhaka-1212, [email protected]


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Chapter-1:

INTRODUCTION

1.1 BackgroundBangladesh with a per capita income of about $500 is one of the least developedcountries of the world. Its export base is weak and heavily depends on RMG, from whichit earns about 75% of its merchandize export income. RMG also employs about 3 millionpeople, with about 3,600 factories in operation and any negative impact on the operationof this sector shall obviously have a large bearing on national economy.

Bangladesh suffers from a chronic shortage of electric power, caused by a large gap itsdemand and supply. The situation is deteriorating progressively with time, being causedby the natural growth of the demand for power at one hand and retiring of depreciatingpower generation plants/equipment on the other. A large gap exists between thenameplate capacity of power generation plants, reported at 5200 MW and their actual(operational) capability to generate an average of about 3,600 MW. The peak generationhas been reported to be just over 4,100 MW, leaving still a gap of about 1000 MWbetween the nameplate capacity and the generation. The average life of the powerplants in Bangladesh stand at more than twenty years and most of them needrehabilitation / refurbishing to bring out reasonable capacities out of them.

Presently, the power situation has further deteriorated, due to a shortfall in supply ofnatural gas which is reportedly depleting fast. The country is reeling under a daily load-shedding that ranges between 600 - 1,200 MW, the average being of the order of about1000 MW. On the primary energy side, the present shortfall of natural gas is estimatedat about 200 million cubic feet per day. Energy and power, on the other hand, are verybasic inputs to industrial production in general and to the Readymade Garment (RMG)industries in particular, in which over 20% of the production costs are on account of thecosts for energy. The power consumption in a typical RMG industry is predominantlydivided into lighting and sewing operations, both of which are critical to productivity.

The cost of power failures/ load-shedding are very high and its impacts are reflectedthrough loss of production, machinery depreciation, cost of alternative (emergencygenerator) fuels, like diesel, impact on the continuity of production lines and a series ofhigh cost consequential damages, including delays in shipment schedules, loss ofcommitment and business goodwill, which can often be irreversible. General economicevaluations by power experts are indicative that the cost of not supplying power to theproduction units can range as high as Tk. 16 - 30 per kWh (not supplied). However,surveys/studies need to be conducted with reference to specific and nationally importantproduction sectors as the RMG, to quantify such economic/financial impacts, which arenecessary as valuable feedback for a course-correction for nationally initiating

appropriate strategies and action plans to improve such unacceptable power/energysituations. Against this backdrop, it is strongly felt that an integrated study on this issuebe undertaken.

1.2 ObjectiveThe overall objective of the proposed study is to analyze the current status of power andgas supply in the RMG sector of the country, its impact and the recommended strategiesand corresponding action plans which will pave the way forward.


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1.3 Scope of the StudyTo meet the objectives of the proposed study, the following will be its scope:

To identify and quantify the National Demand for and Supply of Power in the

RMG Industries.

Estimate the power consumption of RMG Industries, based on representativesampling of 25% of the operating RMG Industries. Also, work out the specificpower consumption.

Typical 24-hour load-profile in the area where the RMG factories are located

Typical Electrical load and consumption (with approximate average hours ofoperation of the following in RMG factories :

- Lighting (Type of lights, their numbers, type of ballasts used, i.e. whether

magnetic or electronic etc.)- Electric Motors (with production/sewing machines)- Fans / Blowers (e.g. Exhausts, Boiler forced draft fans)- Air-conditioners- Other Electrical loads

Capacity & Consumption profiles of other Primary and Secondary Energy (NaturalGas, Petroleum Fuels, Steam, Hot Water etc.)

- Natural gas for Captive Power Generation (e.g. Gas Engines) : kW and kWh- Diesel (Standby or Emergency) generators - Capacity(kW) and Consumption kW

Including the volume of diesel and costs (average litres/costs)

- Steam requirements / consumption, including natural gas use / cost for same- Hot water requirements, if any (e,g, for Washing Plants)

Load-shedding - its frequency and profile (over typical production routine ofRMG industries), vis-a-vis national load-shedding and also seasonal profile of load-shedding (e.g. summer/winter, irrigation seasons etc.), based on last 2 - 3 yearsoperational experience.

Collect information / data from the sampled RMG operators and

analyze/evaluate and studythe Impacts of the present Power & Energy supplysituation, including, both in physical/technical and/or financial terms : Loss of production caused by power interruption

Interruption due to holiday staggering policy in different areas Production & financial losses and machinery depreciation due to use of standby

generators

Damages of equipment

Other consequential losses, such as :

- Labor and line managers motivation and productivity- Loss of goodwill due to commitment failure


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- Impact and lead time

Potential Threats to sustainable growth of RMG sector due to lack of power

Relevant Policy Analysis in the light of interest of the RMG sector

Recommended Strategies and Action Plansfor improving thePower & Energysupplysituation (energy security) in the RMG sector:

Fast-track (short term) solutions (example : Energy Efficiency) Medium Term measures (example : Cogeneration - captive power

and steam / hot water from waste heat of captive power plants Long term solutions / best practices (Industrial Parks/Mono-economic

Zones)

1.4. Tentative Indicators:Based on the scope of the assignment, the following tentative indicators have beenidentified:

Year of establishment

Type of establishment

Number of operators and other categories of personnel employed

RMG items produced

Type of raw materials used

Countries of origin of raw materials

Value of materials procured

Countries where exported

Volume of export by countries, by items and by value

Production capacity: number of machines and equipment

Electrical load Demand for power:

o Number of bulbso Type of ballasts usedo Electric motorso Fans, air conditioners

Other electrical appliances usedo Capacity and consumption issues

Sources of primary energy used Capacity of gas engines Generation of captive power by diesel engines

Steam requirements Hot water requirements

Availability of power in the national grid for use in the factory

Gap/shortage

Loss of production

Interruption due to holiday staggering policy

Depreciation of machineries

Financial losses


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SecondaryData

PrimaryData

Check list Quantitative Qualitative

Survey KII FGD

Data Requirements

Damages of equipment

Number of times the firm was in difficulty to make the delivery and itsconsequential losses

Recommendations and suggestions

Chapter-2

Methodology

Methodology is the most important component in any study proposal since it explains the

procedures and methods through which a particular study will be carried out. This chapter

includes a discussion on study population, sample and its size, stages of sample selection,

etc.

2.1. Data Requirements:

Data are the raw materials for any study project. Relevant data for the proposed study will be

collected from both secondary and primary sources (Figure-1). Secondary data/reports will

be collected from BGMEA, BKMEA, Bangladesh Bank, Bangladesh Bureau of Statistics

(BBS), GTZ, Bangladesh Institute of Development Studies (BIDS), Center for Policy

Dialogue (CPD), South Asian Regional Initiative (SARI), Power Development Board (PDB)/

Dhaka Electricity Supply Authority (DESA), Titas Gas Transmission and Distribution

Company (TGTDC), Petrobangla, etc. These will reviewed and analyzed in the office by the

consultants. The consultants will also review all sorts of RMG/ industrial operation, impacts

due to power interruption, scope for improvement and measures to be undertaken for it.

Figure 2.1: Data Collection Requirement

Primary data will be of two types quantitative and qualitative. Quantitative data will be

gathered from survey with active RMG manufacturers using systematic sampling

procedures, while qualitative data from Key Informants Interviews (KIIs) and Focus Group

Discussions (FGDs) with owners/laborers, office bearers of associations such as Washing


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and Dying Association, Corrugated and Paper Packaging Association, other stakeholders

like BKMEA, BTMA, PDB, TGTDC, and think tanks. The following is basically the discussion

of primary data collection mechanism.

2.2. Study Population

The study population for the proposed study will be the garments manufacturers. They may

be BGMEA members or non-members. As of June 2008, there are about 4,614 members of

BGMEA. Out of them about 64% are woven manufacturers, 22% knitwear manufacturers,

and the remaining 15% sweater producers (BGMEA, June 2008). But all these members are

not active. It can be mentioned here that about 56% of them are active. An active exporter of

garments products are generally the member BGMEA because of some benefits provided by

it. Active BGMEA members will constitute one of the components of study population.

Another component will be the non-members, who can be the RMG producers, washing and

dying enterprises and packaging enterprises providing services to garments exporters. It is

very difficult to ascertain the number of active non-members in this stage. The following

figure will show the process of screening study population (Figure-2).Figure 2.2 : Composition of Study Population

2.3. Study Area

The RMG firms constituting study population are mostly located in and around Dhaka andChittagong (Table-2.1). In Dhaka region, the districts of Dhaka, Narayanganj, and Gazipurare the concentration of RMG firms, whereas, Chittagong is the only district in Chittagongregion where there is a good concentration of RMG firms. The following table has beenprepared according to the address provided in the BGMEA Members Directory prepared byBGMEA. The table shows the concentration of BGMEA members both active and inactive inDhaka and Chittagong regions. About four-fifths of the BGMEA members are located inDhaka region consisting of Dhaka, Gazipur and Narayanganj districts, while about one-sixthin Chittagong region.

Table 2.1-Number of BGMEA members in Dhaka and Chittagong RegionsDistricts Woven Knitwear Sweater Total

BGMEAMember

BGMEANon Member

Knitwear Woven Sweater R M G Washing& Dying

Packaging

InactiveMember

ActiveMember

ActiveNon Member

StudyPopulation


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Number %Dhaka 1,769 657 535 2,961 72.7Narayanganj 34 70 11 115 2.8Gazipur 73 48 67 188 4.6Subtotal: Dhaka 1,876 775 613 3,264 80.1Chittagong 521 86 73 680 16.7

Others 67 19 45 131 3.2TotalIn %

2,46460.5

88021.6

73117.9

4,075100.0

100.0-

Source: BGMEA Member List

2.4. Sample SizeFor survey there will be two types of sample: members and non-members. According to theTerms of Reference (TOR), the survey should cover at least 25% of the active RMGmanufacturing factories at Dhaka and Chittagong. Also, it is mentioned in the TOR that thereare about 3,600 factories in operation. Hence, the number of sample RMG factories wouldbe 3,600x.25 = 900. However, it is difficult to trace an active factory. A factory is to be tracedthrough an active RMG member, who owns it. It can be mentioned here that an activemember can own more than one factory. Thus a sample factory is to be traced through RMGmember owning factories.

The number of active BGMEA members is about 2,600. Hence, the sample will be 2,600 x0.25 = 650. It can be mentioned here that a sample member may own more than onemanufacturing factory. In this case the number of sample factories would be more than 650.It is estimated that a sample member owns, on an average, 1.4 RMG manufacturingfactories. In this case the number of sample factories would be 650 x 1.4 = 910 or around900. After consultation with BGMEA, BKMEA and other knowledgeable agencies/firms, thesample of active non-members will be determined. Let us assume that the number of non-member would be about 50. It is also true that in the survey there will be some non-responses due to various reasons. For adjusting non-responses, a total of 1,000 samples ofmembers and non-members is proposed.

2.5. Allocation of Samples

The samples for the survey will be selected in two stages (Figure-2.5). In the first stage a list

of active BGMEA members by woven, knit and sweater, will be prepared for Dhaka and

Chittagong regions in consultation with BGMEA and BKMEA. In the second stage 25% of the

listed active members will be selected using stratified random sampling procedures. In the

survey stratum will be woven, knit and sweater. The sample for non-members will be

selected using the same procedure. The distribution of sample by Dhaka and Chittagong

regions will be done according the number of firms functioning there.

Figure-2.5: Stages of sample selection

1st stageList of Members


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2nd stage

2.6. FGDs and KIIsA total of 12 Focus Group Discussions (FGDs) will be organized- 6 from Dhaka region and

another 6 from Chittagong region. The FGDs will be equally organized between three RMGsectors: woven, knit and sweater. Also 6 sessions will be organized with owners and another6 with the laborers currently working in different RMG sectors. However, the exact numberof FGDs will be determined after consultation with BGMEA. It is to be noted here that itwould be difficult to organize FGD sessions with RMG owners without the active supportfrom BGMEA/BKMEA. The following table will show the distribution of FGDs by sectors andlocations:

Table 2.6: FGDs by Sectors and LocationsLocation Woven Knit Sweater TotalOwnersDhaka 1 1 1 3Chittagong 1 1 1 3Total 2 2 2 6LaborersDhaka 1 1 1 3Chittagong 1 1 1 3Total 2 2 2 6Grand Total 4 4 4 12

In addition, about 25 Key Informants Interviews will be administered with association leadersof BGMEA, BKMEA, Washing and Dying, Corrugated and Paper Packaging, BTMA, andother associations related to RMG export. President /General Secretary or any responsibleperson on behalf of the associations can provide required information. Stakeholders likePower Development Board (PDB), Titas Gas Transmission and Distribution Company,

Bakhrabad Gas Transmission and Distribution Company will also be included in the study.Government policy decision making agencies like Ministry of Energy, Ministry of Jute andTextile, Ministry of Finances, Ministry of Industries, Bangladesh Bank, etc can be included inthe study to provide policy issues regarding the future development of the sector. Thinktanks such as Bangladesh Institute of Development Studies (BIDS), Center for PolicyDialogue (CPD), Dhaka University, etc. Researchers working in the area from theseinstitutions will be requested to give their opinion.

2.7. Instruments to Used

The consultants will prepare the following instruments:

Checklist provides pointers to the type of information being sought. Also can be used to

check compliance with certain procedures, where 'yes or no' answers can be given.

Survey Questionnaire is useful for straightforward situations. It is best to include open or

close ended questions to allow for a full response rather than be restricted to 'yes or no'

answers.

Observation helps watching how a process can provide a more realistic picture of the extent

of compliance with a specific procedure than could be obtained simply by asking an

RMG Firms


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individual how a process is performed. However, this should never be used in isolation as it

may not provide enough detail or may lead to incorrect assumptions if further investigations

are not made.

Focus Group Discussion:A total of12 FGDs will be organized with owners and workers of

RMG manufacturers. The following is the distribution FGDs:

Key Informants Interviews will involve collection of information by interviewing

knowledgeable persons in various fields associated with RMG export.

2.8. Dissemination Meetings/WorkshopThe consultants will present the status of the study to BGMEA and GTZ in differentphases of its implementation. In addition a national workshop will be organized to sharethe key findings of the study with the stakeholders of the sector.

Chapter-3

Implementation

For implementation, the study will consist of 4 broad activities: planning, field work, datamanagement and report writing. Planning stage will include recruitment and training of fieldstaff; design, pretest and finalization of instruments, and determination of study samples;field work will show the data collection and quality control; data management stage consistsof registration of filled in instruments in the office, editing of filled in instruments,preparation of data entry format, data entry and its verification, and data analysis.

4.1. Planning

4.1.1. Design, Pre-test, and Finalization of Survey Instruments

Study instruments (survey questionnaire, FGD guidelines and KII checklist) will be designed

after giving due attention to the objectives and scope of the study. Before design theconsultants will review the similar studies undertaken by different agencies including BGMEA

and BKMEA. After design the instruments will be sent to BGMEA/GTZ for comments. The

instruments will be pre-tested with some of the non-sample RMG factories near Dhaka. After

incorporation of feedbacks from pretest and comments from BGMEA/GTZ, the instruments

will be finalized and printed in required number.

4.1.2. Recruitment and Training of Field Staff

In order to undertake field work, a total of 18 enumerators and 3 supervisors will be

recruited in Dhaka and Chittagong regions for a period of 5 weeks including training

period. There will be 3 teams, each consisting of 6 enumerators and 1 supervisor. Eachteam will be led by a supervisor. Recruitment will be done by the consultants team. The

enumerators will be recruited from among graduates with 2/3 years experience in similar

work, while supervisors from masters with at least 5 years experience. For conducting

FGDs, two teams consisting of two FGD facilitators and two note-takers, will be formed.

Thus, each team will consist of one facilitator and one note taker. Note takers will be

recruited from among the graduates with some experience, while FGD facilitators will be


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semi-professionals working in survey research. Key Informants Interviews will be

administered by the supervisors and the consultants

The Consulting Firm will organize an orientation and training course for the field staff

(enumerators, supervisors, facilitators and note takers) describing the objectives,

importance and methodology of the study. The training shall also be conducted oncollection, identification, verification, and recording of data on questionnaire/instruments

prior to sending the field staff to the project areas. The trainees shall be guided to arrive

at solution of filling up questionnaire, compilation and to fetch real information from the

survey population using personal skills and expertise. After completion of the training,

the field enumerators and supervisors will be led to the project areas to carry out test for

identification, verification, acquisition and recording of data on the questionnaire.

4.2 Field Work

The field staff will collect data according to the set programme by personally visiting,observing, interviewing and recording data from relevant respondents/participants. They

must not deviate from the set program. In case of unavoidable reasons like naturaldisaster, serious illness, the enumerator or his partner in the team must inform of anychange that may occur in the program and get approval telephonically by adjusting withremaining program. The collected data will be sent to the office every week, where inturn each filled in instrument will be checked for consistency. Errors if detected will berectified. The survey coordinator will be responsible for quality control. Besides, theconsultant team members will also undertake some field visit for quality checks.

4.3 Data ManagementData management will consist of 4 activities, which will be performed under theleadership of Data Management Specialist. Team leader will provide some guidance.Data management activities are as follows:

Recording of filled in instruments in the office Editing of filled in instruments

Preparation of data entry format Data entry Data analysis

4.3.1. Recording of Filled in instrumentsEach filled in questionnaire/instrument will be duly recorded in the office of BETSConsulting Services Ltd in Dhaka in a record book according to enumerator, date ofinterviews, status of interviews, etc.

4.3.2. Editing of Filled-in Questionnaire

Editing is the checking of filled-in questionnaire/checklist for detecting any error orinconsistency, if any. There are two types of such editing: field edit and office edit. Fieldedit is done by the enumerator administering the questionnaire with support fromsupervisor. Verification of information is also conducted by survey coordinator. Officeedit is done in the office by a person other than the enumerator. Each and every filled inquestionnaire will be checked for error and inconsistency in the office. For serious error ifdetected, the questionnaire/checklist will be re-administered. Two editors will be


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recruited for a period of about one month each. For open-ended responses the editorswill assign code numbers.

4.3.3. Preparation of data Entry FormatThe data entry format will be prepared with the help of MS ACCESS, a versatile dataentry software. The format will take care of the check numbers, which will ensure correct

entry of data.

4.3.4. Data EntryData from the filled in questionnaires will be entered by the trained entry operatorsaccording to data entry plan. At the end of the day s/he will hand over the data to theData Management Specialist, who will prepare up to date situation for information. Usingsome consistency check, data entry will be verified.

4.3.5. Data AnalysisThe data analyses will be carried out with the help of SPSS. The team leader willprepare the format of output tables and the Data Analyst will bring out the analyticaloutput in tabular as well as graphical form where required.

4.4. ReportingOne copy of the draft final report in hard copy will be submitted to BGMEA/GTZ beforethe end of the project. The report will be finalized after the incorporation of commentsfrom BGMEA and GTZ, if any. The hard copy of the final report will be submitted in 3copies. In addition the soft copy will also be provided along with data base andquestionnaires.

Documents

BGMEA_Proposal.doc