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Welcome
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Trade in Textile: Bangladesh


Perspective
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Introduction
Textiles 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 various


sector such as- RMG, weaving & spinning

Bangladesh is importing raw materials & exporting products through


which large scope in international business.
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Textile is the single greatest source of economic growth in


Bangladesh.
Bangladesh’s largest employment sector.
Exports of textiles, clothing, and ready-made garments
accounted for 77% of Bangladesh’s total merchandise
exports.
Only 5% of textile factories are owned by foreign investors
& most of the production being controlled by Bangladeshi
companies.
45% of all industrial employment
5% of the total national income.
78% of the country’s export earnings
Exports its apparel products worth nearly $5 billion per
year
The sixth largest apparel supplier
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A Picture Of Bangladesh's Textile Industry


Bangladesh’s textile industry can
be 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 Bangladesh


 After 1947 and the partition of East and West Pakistan from India,
most of the capital and resources of Pakistan came under the control
of West Pakistanis.
 When Bangladesh gained its independence from Pakistan in 1971, the
new government nationalized the textile industry.
 In 1978 the RMG industry was established in Bangladesh.
 The garment industry in Bangladesh became the main export sector
and a major source of foreign exchange starting in 1980, and exported
about $7 billion USD in 2008.

 The industry employs about 3 million workers


of whom 90% are women.

 Two non-market factors have played a crucial


role in ensuring the garment sector’s continual success-
(a) Quotas under Multi- Fiber Arrangement (MFA) in the North
American market,
(b) Preferential market access to European markets.
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Bangladesh Textile Mills Corporation


When Bangladesh gained its independence from
Pakistan in 1971, the new government nationalized the
textile industry. All of the country’s textile factories
were then organized under the Bangladesh Textile Mills
Corp. (BTMC).

BTMC enjoyed a near-monopoly within the yarn and


fabric market in Bangladesh.

At present, there are 21 textile companies under


BTMC

Among the 21 mills, Valika Woolen


Mills Ltd., Nasirabad, Chittagong, is the only specialized
BTMC company, producing knitting wool, woolen suiting,
men’s and women’s woolen shawls, and woolen
blankets.
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Exporting Textile Products


Major products exported from Bangladesh
include–
• 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 Markets
Bangladesh was the sixth-largest exporter of apparel in the
world after China, the EU, Hong Kong, Turkey, and India
in 2006. That year, Bangladesh's share in world apparel
exports was 2.8%.
The US was the largest single market with US$3.23 billion
in exports, a 30% share in 2007. Today, the US remains the
largest market for Bangladesh's woven garments taking
US$2.42 billion, a 47% share of Bangladesh's total woven
exports.
The European Union remains the largest regional
destination-Bangladesh exported US$5.36 billion in
apparel; 50% of their total apparel exports. The EU took a
61% share of Bangladeshi knitwear with US$3.36 billion
exports.
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Competitive Advantage
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.

1) Bonded warehouse facilities


2) Duty Exemption Drawback Organization, or DEDO
3) 25% export cash incentive
4) 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 to
9.33, 6.72 and 7.84 cents/KWH in India, Pakistan and China, respectively.
Thailand $1.00 /h
Per hour labor costs are –
Vietnam $0.40 /h
China $0.89 /h
India $0.43 /h
Pakistan $0.41 /h
Bangladesh $0.22 /h
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Government initiatives
Three institutional arrangements were introduced:

 A task force was formed, chaired by the Commerce Minister, to coordinate the
efforts 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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Problems
Infrastructure bottlenecks,
Weak governance,
Insufficient financing,
Inadequate labor quality,
Low FDI,
Trade regime that has an anti-export
bias,
Energy crisis,
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Problems
Costly accessories and
Lower labor productivity etc.
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State of Cotton & Textile Industry of Bangladesh (Cont’d)

Three major factors that helped booming the textile in Bangladesh


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.
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State of Cotton & Textile Industry of Bangladesh (Cont’d)


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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State of Cotton & Textile Industry of Bangladesh (Cont’d)


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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State of Cotton & Textile Industry of Bangladesh (Cont’d)


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 in
1993-94 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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State of Cotton & Textile Industry of Bangladesh (Cont’d)


Origin of Cotton Uzbekistan

Bangladesh spinning mills


use more and more high
quality and comparatively
cheaper Uzbek cotton.
Uzbekistan cotton had
market share of 63% (in
2006), in Bangladesh
whereas Indian cotton
ranked second with only
9%, in that yr.
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State of Cotton & Textile Industry of Bangladesh (Cont’d)


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.

** RMG exports nearly doubled in last five years-from $6.4 billion in FY05 to $12.5 billion in FY10.
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State of Cotton & Textile Industry of Bangladesh


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.
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Major Buyers around the world


Major buyer includes
Wal-Mart
Tesco
H&M
Metro
Levi Strauss
Marks & Spencer
GAP
Nike
JC Penney
Hennes & Mauritz,
Zara and
Carrefour
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Ways to solve the problems (Cont’d)

 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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Ways to solve the problems

 Bangladesh has taken some steps (e.g. removing infrastructural bottlenecks, building
additional 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.
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