DHAKA, April 23: Some 600 garment factories could face closure and 800,000 garment workers become jobless as immediate fallout of the phasing out of the Multi-Fibre Arrangement in 2005, apprehends the government of Bangladesh.

The ministry of commerce, which has recently prepared a document in this regard and sent it to the prime minister's office on April 22, has sought an urgent fund of Tk2,320 million to undertake an action programme aimed at creating preparedness to counter the possible shocks.

The proposed programme would be taken over the next five years beginning from June this year, the document says.

"There is an apprehension that about 20-40 per cent garment factories (particularly small producers) will be closed down after quota phase out from January 1, 2005," the document reads. "A moderate to huge (100,000-300,000 to 800,000) loss of jobs is feared in the RMG sector after MFA phase out."

Commerce ministry officials said the document was prepared after intensive consultations with the country's large RMG exporters, the Export Promotion Board, the international organisation Gherji, the World Bank, the United States International Trade Commission and the report of the American Textile Manufacturers Institute.

The commerce ministry paper proposes that the sought amount of Tk2,320 million would be spent in training programmes for both entrepreneurs and workers, providing micro credit at zero interest rate for export-oriented production, providing subsistence of jobless allowance and enterprise capacity building, in technological capacity development of small and medium enterprises, providing support to primary textile sector, in exploring of new markets and providing support to forward linkage industries.

According to sources at the BGMEA (Bangladesh Garment Manufacturers and Exporters Association), over 1,600,000 workers are employed in more than 3,000 garment units that are currently involved in exporting both woven and knit items.

However, the document says that the RMG sector is contributing more than three-fourths or about $5.5 billion to the total national export earnings. Although RMG is exported to about 80 countries, only two markets - European Union (56 per cent) and the United States (35 per cent) - contribute about 91 per cent of its total exports.

The government of Prime Minister Khaleda Zia is yet to make any decision on the commerce ministry proposals. But a source at the prime minister office said that the multilateral lending agencies would be approached once the policy decision was taken by the government.

Meanwhile, the United States International Trade Commission in a recent study said the fate of Bangladesh RMG exports to the US would be uncertain after 2004.

The American Textile Manufacturers Institute in December 2003 cautioned that Bangladesh would lose its US market worth $1.05 billion by 2006 due to the elimination of the MFA from 2005.