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Thetextile industry in Bangladesh, now the sixth largest exporter of apparel inthe world after a decade of spectacular economic growth, has positioned itselfto benefit from the current global economic crisis. Production of ready-madegarments (RMG) and knitwear is at an all-time high. Many challenges remain, butthe overall outlook for this nation's industry remains bright.
Fewnations have gone through as much dramatic change over the past several decadesas the Indian Ocean nation of Bangladesh. A rich and fertile agricultural land,Bangladesh (once a part of the state of Bengal in India) made its initial impactin the modern textile industry as the world's largest producer of jute ("theGolden Fiber of Bangladesh") with an 80% share of the market in 1947,before production in other nations and use of synthetic fibers eroded thishegemony. An impoverished and densely-populated nation, Bangladesh has made great strides in economic development since the late 1970s, and was included inGoldman Sach's 2005 list of the "next 11" growing economic nationsbehind Brazil, Russia, India, and China.
Statusof Textile Industry in Bangladesh
Thetextile industry is an important segment of Bangladesh's manufacturing industry,playing a critical role in its economic development. Textile exports (includingapparel) accounted for 76% of the national export in FY 2007, an increase from41% in FY 1989 and 66% in FY 1995.
Untilthe liberation of Bangladesh, the textile sector was primarily an import-substitutionindustry. It began exporting ready-made garments (RMG) including woven, knitted,and sweater garments in 1978, which grew spectacurlarly during the next two anda half decades-from US$3.5 million in 1981 to US$10.7 billion in FY 2007. Apparelexports grew, but initially, the RMG industry was not adequately supported bythe growth up and down the domestic supply chain (e.g., spinning, weaving,knitting, fabric processing, and the accessories industries). Until FY 1994, Bangladesh's RMG industry was mostly dependent on imported fabrics-the Primary TextileSector (PTS) was not producing the necessary fabrics and yarn. Since then, productionhas increased in all Bangladesh PTS sub-sectors.
MajorMarkets
The US was the largest single market with US$3.23 billion in exports, a 30% sharein 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 EUtook a 61% share of Bangladeshi knitwear with US$3.36 billion exports.
Ready-Made Garments in Bangladesh
The journey of the RMG industry started in early 1980s. Unique ideas like the bonded warehouse license and back-to-back letter of credit concepts propelled the industry forward. The hurdles of the Multi Fibre Arrangment (MFA) quotas in 1985 and the Harkin Bill in 1994 were great challenges for the industry, as were the phasing out of MFA quotas in 2004 and the European Union Generalized System of Preferences (GSP) scheme. Although there was concern that the MFA phase-out would shut down the industry, the Bangladesh textile sector actually grew tremendously after 2004 and reached an export turnover of US$10.7 billion in FY 2007.
Bangladesh's export trade is dominated by the RMG industry. The sector currently employs 2.5 million people-about 40% of total manufacturing (85% of these employees are women)-and accounts for 76% of the country's export earnings and 10% of its GDP.
Manufacturers have successfully maintained product quality, commitment to buyers, and social compliance, making Bangladesh a reliable apparel sourcing destination. Bangladesh's RMG industry does business with top buyers around the world including Wal-Mart, Tesco, Hennes & Mauritz, Marks & Spencer, GAP, Nike, JCPenney, Sears, Zara, and Carrefour.
Knitwear: Export Growth Leader in FY 2007
By achieving a 21% growth in exports, Bangladesh's knitwear sector pulled export growth up to 16% in FY 2007. With a value of US$5.5 billion, the knitwear sector emerged as Bangladesh's largest export-earning sector, followed by the woven sector with an export value of US$5.2 billion and an 11% growth rate. Knitwear (39%) and woven (37%) sector contributions jointly composed 76% of Bangladesh's national exports.
Currently, the knitwear sector is recognized as a global industry in Bangladesh with improved social compliance and a growing understanding of environmental safety and hazardous chemicals. In the future, Bangladeshi knitwear production growth should continue to accelerate and is expected to export more than US$10 billion in product annually within the next two to three years.
Decoupled from the Global Recession?
Efficiency and productivity improvements are key for the garment and textile sectors to survive in this time of global financial recession, according to economists and exporters attending a seminar in November 2008 organized by Bangladesh Garments Manufacturers' & Exporters' Association (BGMEA). They said no adverse impact was noticed in the export of Bangladeshi garment items following the global financial meltdown. The downward trend of cotton price is also a plus point for Bangladesh as the country's garment manufacturing is mainly dependent on imported cotton. The price of cotton declined to less than 50 cents per pound from its previous 70 cents per pound. The worldwide price decline of other commodities such as petroleum products will also be beneficial.
There are some factors helping to insulate Bangladesh from the effects of the current recession. These include limited Foreign Direct Investment (FDI) inflow, an insulated capital market, the lack of foreign portfolio investment, a limited exposure to foreign securities markets, and a controlled financial environment. The experts at the November 2008 BGMEA seminar concluded that Bangladesh is more or less decoupled from the rest of the world with regards to the effects of the economic recession.
Improve Skill and Productivity to Survive
According to Vivek Gogia of Alster International Bangladesh, factories should start taking the necessary steps to improve their competitiveness for maintaining and growing their share of the RMG market. Factories must diversify product lines (i.e., by producing high-value designed garments instead of only basic t-shirts) where there are very few factories and huge potential, as well as producing more value-added garments. To improve the design element, design teams should be created that travel to fashion centers around the world, keeping pace with the latest trends, designs, and fabrics. Accordingly, factories should invest in plant and machinery upgrades to keep a competitive edge in world markets. Factories should also maximize their productivity by investing in time and motion studies and creating separate planning departments to ensure smooth production flow and to optimize productivity. The marketing element is by and large missing at these factories, and remain dependent on their customers to bring orders into the country. Going forward, they should adopt a proactive approach and recruit customers that have not traditionally purchased Bangladeshi goods.
Concluding Remarks
As the Bangladeshi textile sector keeps expanding, the country's weak infrastructure may potentially threaten continued growth. The industry has set a target of US$25 billion in garment exports by 2013, which would create an additional 1.4 million job opportunities within the sector and subsequently open up opportunities across different occupations. To make it happen, entrepreneurs are gradually moving to a higher value-added niche market, changing from factory-driven to market-driven processes, developing designs and collections, enhancing productivity, and strengthening the industry down the supply chain for the sector. The textile industry in Bangladesh may provide market alternatives to those looking for growth opportunities in the midst of the current global recession.
Originally published in AATCC News; March 2009
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About the Authors
The authors are associated with Dysin-Chem Ltd and Dyehouse Solutions International, respectively.
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