Textile in BD

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Welcome

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Trade in Textile: Bangladesh

Perspective

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IntroductionIntroductionTextiles have been an extremely important part of Bangladesh's

economy for a very long time.

Trade in textile of Bangladesh is playing a vital role in global market.

It is the main source of GDP national income. It includes varioussector such as- RMG, weaving & spinning

Bangladesh is importing raw materials & exporting products throughwhich large scope in international business.

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Textileis the single greatest source of economic growth inBangladesh.

Bangladeshs largest employment sector.Exports of textiles, clothing, and ready-made garments

accounted for 77% of Bangladeshs total merchandiseexports.Only 5% of textile factories are owned by foreign investors& most of the production being controlled by Bangladeshicompanies.

45% of all industrial employment

5% of the total national income.

78% of the countrys export earningsExports its apparel products worth nearly $5 billion peryear

The sixth largest apparel supplier

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A Picture Of Bangladesh'sA Picture Of Bangladesh's Textile IndustryTextile Industry

Bangladeshs textile industry canbe divided into three main

categories -

Public sector

Handloom sector and

The organized private sector.

The private sector is the fastest

growing sector in the country.

Textile and apparel firms in Bangladesh are mostly concentrated

around the capital city of Dhaka.

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History of Textile Production in BangladeshHistory of Textile Production in Bangladesh After 1947 and the partition of East and West Pakistan from India,

most of the capital and resources of Pakistan came under the controlof West Pakistanis.

When Bangladesh gained its independence from Pakistan in 1971, thenew government nationalized the textile industry.

In 1978 the RMG industry was established in Bangladesh.

The garment industry in Bangladesh became the main export sectorand a major source of foreign exchange starting in 1980, and exportedabout $7 billion USD in 2008.

The industry employs about 3 million workersof whom 90% are women.

Two non-market factors have played a crucialrole in ensuring the garment sectors continual success-

(a) Quotas under Multi- Fiber Arrangement (MFA) in the NorthAmerican market,

(b) Preferential market access to European markets.

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Bangladesh Textile Mills CorporationBangladesh Textile Mills Corporation

When Bangladesh gained its independence fromPakistan in 1971, the new government nationalized thetextile industry. All of the countrys textile factorieswere then organized under the Bangladesh Textile MillsCorp. (BTMC).

BTMC enjoyed a near-monopoly within the yarn andfabric market in Bangladesh.

At present, there are 21 textile companies underBTMC

Among the 21 mills, Valika WoolenMills Ltd., Nasirabad, Chittagong, is the only specializedBTMC company, producing knitting wool, woolen suiting,mens and womens woolen shawls, and woolenblankets.

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Exporting Textile ProductsExporting Textile ProductsMajor products exported from Bangladeshinclude

polyester filament fabrics,

man-made filament mixed fabrics,

PV fabrics, viscose filament fabrics and man-made spun yarns.

Shirts and blouses,

Trousers,

Skirts,

shorts,

Jackets,

Sweaters and sportswear,

Other fashion apparel.

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Major MarketsBangladesh was the sixth-largest exporter of apparel in theworld after China, the EU, Hong Kong, Turkey, and Indiain 2006. That year, Bangladesh's share in world apparelexports was 2.8%.

The US was the largest single market with US$3.23 billionin exports, a 30% share in 2007. Today, the US remains thelargest market for Bangladesh's woven garments takingUS$2.42 billion, a 47% share of Bangladesh's total wovenexports.

The European Union remains the largest regionaldestination-Bangladesh exported US$5.36 billion inapparel; 50% of their total apparel exports. The EU took a61% share of Bangladeshi knitwear with US$3.36 billionexports.

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Competitive AdvantageCompetitive AdvantageThe Government declared the textile as a thrust sector that led to introduce asupport system for the textile industry. The support system included FiscalBenefits, Financial Benefits and Institutional Support.

1) Bonded warehouse facilities

2) Duty Exemption Drawback Organization, or DEDO3) 25% export cash incentive4) Tax holiday - Five to nine years of tax exemption for new factories.

5) Duty free importation of raw materials of export in the RMG.6) Avoidance of double taxation for joint venture projects.7) Income tax exemption for up to three years for foreign technicians.8) Duty free import of capital machinery.

Gas burned energy cost in Bangladesh is less than two cents/KWH in compared to9.33, 6.72 and 7.84 cents/KWH in India, Pakistan and China, respectively.

Per hour labor costs are Thailand $1.00 /h

Vietnam $0.40 /h

China $0.89 /h

India $0.43 /h

Pakistan $0.41 /h

BangladeshBangladesh $0.22 /h$0.22 /h

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Government initiativesThree institutional arrangements were introduced:

A task force was formed, chaired by the Commerce Minister, to coordinate theefforts of the various government ministries and agencies and private sector

organizations;

A Core Group was also set up and chaired by the Commerce Secretary to

implement the decisions of the task force; and

A Post-MFA Implementation Committee was formed to identify and design the

programs to be implemented to cope with the post-MFA scenario.

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Post-MFA Action Plan (PMAP)This Plan contains six major components:

Skill and Quality Development Program (SQDP); Displaced Workers Rehabilitation Program (DWRP);

Support to Capacity Enhancement Program (SCEP);

Support to Primary Textile Sector (SPTS);

Support to Handloom Sector (SHS); and

Support to Forward Linkage Industries (SFLI).

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BGMEA and BKMEA initiatives To diversify buyers and improve product quality and productivity through

participation in international trade fairs,

In-house skills training for workers and supervisors,

Acquisition of modern technology such as computer-assisted design (CAD)

and productivity improvement schemes.

Also run awareness-raising activities on compliance among its members

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ProblemsInfrastructure bottlenecks,

Weak governance,Insufficient financing,

Inadequate labor quality,

Low FDI,Trade regime that has an anti-export

bias,

Energy crisis,

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ProblemsCostly accessories and

Lower labor productivity etc.

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Resources: Include abundant labor forces, low cost energy and natural gas.Dedicated and sincere work force, who are eager to work extended work hour when

need to meet the production target is the key element to the success of Bangladesh

textile industry.

Opportunities: Bangladesh had a tremendous opportunity to access to European and

the U.S. market through MFA agreements for its RMG. Bangladeshi entrepreneurs

did not make any mistake. They grabbed the opportunity.

Policy Decision: Govt. policy basically sustained the textile growth. The Govt.

policy of liberalization of the economy encouraged private sector investments. The

Government declared the textile as a thrust sector that led to introduce a support

system for the textile industry. The support system included Fiscal Benefits,

Financial Benefits and Institutional Support.

Three major factors that helped booming the textile in Bangladesh

State of Cotton & Textile Industry of Bangladesh (Contd)

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Labor Cost & Power cost in Bangladesh

Two of the most important resources, labor and power are abundant and cheap in

Bangladesh. In comparison to its competitors, India, Pakistan and China. Bangladesh

has an advantage of cheaper labor and lower energy cost.


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Tariff structure

The textile policy introduced a new tariff structure designed to stimulate the growth in

Backward Linkage Industry (BLI). Tariff in spinning sector is strikingly absent.

Whereas imported yarns and fabrics are heavily taxed to discourage imports and

encourage local yarn productions.


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Export condition

Export in textile sectors has also

seen a phenomenal growth, from

$1.5b in 1994 to $9.56b in 2006.

Knit Garments export volume in1993-94 was almost a fifth

($264m) of the Woven Garments

export ($1,292m). Whereas in

2006, these exports are almost

equal ($4,725m in Knit and

$4,736m in Woven), indicating

Bangladesh is catching up more

with the Knit Garments than the

Woven Garments export demands.


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Origin of Cotton

Bangladesh spinning mills

use more and more high

quality and comparativelycheaper Uzbek cotton.

Uzbekistan cotton had

market share of 63% (in

2006), in Bangladesh

whereas Indian cotton

ranked second with only9%, in that yr.

Uzbekistan


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Export of textile and import of Raw Cotton

Bangladeshi spinners do not use U.S. and Brazilian cotton because of higher price.

Bangladesh should reduce its dependency on Uzbec cotton and should search for some

others sources. India, Pakistan and East or West Africa fulfill a portion of our demand.

But the quality of these

material has always

been a concern.


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** RMG exports nearly doubled in last five years-from $6.4 billion in FY05 to $12.5 billion in FY10.


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Gap between Demand and Supply of fabrics

Gap is increasing quickly, along with export orders

Fabric demand is increasing at the rate of 20 percent per year.

Country does not produce enough raw materials

To meet up the demand in 2014 -2015 we need to establish

233 (62%) new standard size spinning units

224 weaving mills (for the creation of weaving facilities)

303 knitting/knit processing units (with a capacity for the production and

processing of 523 million kg of knit fabrics)

146 woven fabric processing units (with a processing capacity for 2.924 billion

meters of woven fabrics).

**The estimated investment required would be around $7 billion over the next five years.

State of Cotton & Textile Industry of Bangladesh

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Major buyer includes

Wal-Mart

Tesco

H&M

Metro

Levi Strauss

Marks & Spencer

GAP

Nike

JC Penney

Hennes & Mauritz,

Zara and

Carrefour

Major Buyers around the world

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Ways to solve the problems(Contd)

Need to educate and train up the workers Productivity should be linked with compliance

Industrial police and intelligence forces Set up of new plant to produce Energy Use of Solar Energy and Windmill can be introduced Wage Board on garments in Bangladesh Positive Govt. Policy: such as duty-free import of fabrics under back-to-

back L/C, bonded warehouse facilities, cash export incentive, EPZ

facilities, etc.

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Bangladesh has taken some steps (e.g. removing infrastructural bottlenecks, buildingadditional supply capacity, use of cost reduction strategy) to face the new challenges.

Organize annual Exhibition Workers, owners and the government have responsibilities to maintain Social

Environment.

Ways to solve the problems

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Textile in BD

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