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Source: Reuters

Jute ban to hurt Bangladesh exports: business leader

Published: 20 Dec 2009 18:02:42 PST

DHAKA, Dec 19 - An abrupt decision by Bangladesh to halt export of all grades of jute may severely hurt the country's exports, notably to Germany, a business leader said on Saturday.

Bangladesh ordered the indefinite ban last week for what officials said was poor yields of the natural fibre, which through exports earn the impoverished south Asian country about $350 million annually.

The Mercedes, Volkswagen, Ford and Opel car makers in Germany use "staple" fibre produced from jute for insulation of doors, said Mohammad Saiful Islam, president of Bangladesh-German Chamber of Commerce and Industry.

"Shipments (of German-bound) jute) have already been stopped at the Chittagong port following the decision," he told Reuters, adding that the "ban would effect adversely the German investments in our country."

Saiful said two German plants that used Bangladeshi jute to make staple fibre for exporting to several European countries would go out of operation as they cannot divert the goods to make sacks.

The plants are located in Bangladesh and enjoy a guarantee by Germany to cover any damage or losses caused for certain specified reasons.

"The (jute) export ban consequently will lead to the immediate shutdown of production facilities. This will not only endanger jobs and tax revenue for the government but will also damage Bangladesh's reputation as an outlet for foreign investment," Saiful said.

"If compensation has to be paid under such an investment guarantee, the case automatically will be reported to the export credit agencies of all other OECD countries," Saiful said.

Several large automobile companies in Germany and a number of manufacturers in neighbouring countries including France are end users of jute.

"Any delay in the supply of staple fibre may jeopardize the timely production of cars because essential parts such as car doors and seats are made with jute from Bangladesh," Saiful said.

Jute, once known as golden fibre that was Bangladesh's top export earner, had lost much of its gloss in steep competition from cheaper and more durable synthetics.

But in recent years its fortunes have revived as buyers turned to more environmentally friendly fibres, government officials have said.

Saiful said he feared the jute export ban would endanger "years of efforts and research to promote jute to regain its lost position".

Bangladesh said the ban was driven by poor yields following an erratic monsoon but may be lifted next year if the trend reserved.

Bangladesh annually earned nearly $350 million by exporting raw jute and jute goods of which more than 20 percent comes from Germany.

Germany is the second-biggest export destination of Bangladesh after the United States and the total investment of Germany in Bangladesh is about $1 billion, officials said.

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