The pandemic had made Bangladesh’s RMG sector capable to face new challenges
Bangladesh-based Maksons Group owns and operates multiple corporations and has major investments in the textile industry, readymade garment (RMG) sector, property and development, and logistic business. Managing Director Mohd. Showkot Ali discusses with Fibre2Fashion about the textile and garment sector in Bangladesh.
What are the 5 main pillars on which the Maksons Group is formed? What are its core competencies?
The main pillars are commitment, quality, skill and knowledgeable workforce, latest technology-based capital machineries, and a strong team management. The core competencies are our knowledge, skill and ability.
Where is the sourcing of your raw materials done from for both your textiles and garment business? How does the supply chain work?
We mainly import our raw cotton from the US, Africa, India, China and Australia. On the other hand, we source fabric and accessories for apparels division as nominated by our buyers. It may be locally like Zaber & Zubair Fabrics Ltd, Envoy Textiles Limited, Nice Denim Mills Limited, Mahmud Denim and Square Textiles Limited. We have a knowledgeable supply chain team which sources the raw material as guided by our sourcing policy.
What percentage of your revenues come from your apparels side of the business/yarns?
Last year our revenues were approximately $90 million, out of which $15 million or nearly 18 per cent came from our Apparels division.
Fifteen years in the textile, garmenting industry. How have you seen the textile industry of Bangladesh evolve through the years?
Bangladesh’s textile sector has grown over the past decade, making it the world’s second-largest exporter of garments. The RMG sector, attached with other clothing exports, accounts for up to 81 per cent of the country’s export earnings, and the quickly growing RMG industry contributes up to 20 per cent to Bangladesh’s GDP, more than any other secondary industry sector in Bangladesh.
With agriculture as the country’s crucial employment, Bangladesh started to grow as an important garment exporter country when the focus shifted to the export industry. In the year 2012, Bangladesh’s textile industry made up to 79 per cent of the country’s export income, and the country plans to achieve a target of RMG exports value of $50 billion in a few years.
The growth in Bangladesh’s textile industry started taking place when wages began to increase in other countries. Currently, Bangladesh has more than 5,000 factories operating in the textile sector that employ almost 4 million people, mostly female. Bangladesh had set foot in the export industry during the 1980s, and the industry kept growing ever since. The country’s textile export had improved significantly since the year 2012.
Which are the most important policies of the government that makes Bangladesh one of the biggest textile powerhouses? Which regions are its close competitors?
The Government of Bangladesh has played a dynamic role in providing policy support to the RMG sector that includes back-to-back L/C, bonded warehouse, cash incentives, export credit guarantee scheme, tax holiday and related facilities. At present, the government operates a cash compensation scheme through which domestic suppliers to export-oriented RMG units receive a cash payment equivalent to 5 per cent of the net FOB value of exported garments. The reduced tax rates and other facilities are likely to have a positive impact on the RMG sector. The government has initiated Economic Zones across the country to attract more FDI in this sector.
Main competitors are Vietnam, China, Turkey, Philippines, Cambodia and India.
Which are the major markets that you export to, and which brands and retailers does this include?
Our major markets are the UK, South Africa, Italy, Germany, France and India. Our major brands are No Excess, Pep & Co, Eclips, Lecopper, CP, South Pull, Rossini, Primark, NKD, GEMO, Auchan, Next, KiK and MAX.
How does it work at Maksons? Do you only manufacture or is your team involved from scratch till the final product is made? Do elaborate.
We started our journey in the textile sector, i.e., manufacturing export quality yarn, in 1993. Soon after we increased our production capacity and set out another concern Maksons Spinning Mills Limited in the year 2003. Presently our per day production capacity is nearly 70,000 kg of cotton yarn. Based on these experiences, we took the initiative to expand our business operation into RMG sector. Now there are three business units in RMG sector, out of which one is a buying house and the other two are production units. Initially, our team was involved only in manufacturing, but recently we have started our studio/design house in our corporate office.
We also have a good design team here in Bangladesh, which works closely with the designers of customers to co-create designs. This is where we focus on niche customers – not just the larger customers who sell on volume.
What have been the greatest effects of the COVID-19 pandemic on the Bangladesh textile industry, apart from closure of factories and retrenchment of workers? What challenges were seen in sourcing of raw materials, order fulfillment, inventories, etc?
Bangladesh reported its first confirmed coronavirus case on Sunday, March 8, 2020, marking the beginning of the first wave. Government ordered to cease all manufacturing activities in the garment industry in late March. As a result, workers had to move back to their homes. The major buyers of Bangladesh including American and European fashion firms, namely GAP, Zara, H&M, Primark, Marks & Spencer slashed their imports and orders due to financial crunch and fall in consumer spending because of the COVID-19. It is assumed that orders worth nearly $6 billion were cancelled.
On the other hand, Bangladesh depends heavily on raw materials supplied from China. According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), 40 per cent of the machinery and spare parts for the RMG sector are imported from China that accounts for half of the regular imported RMG material. The raw materials supply chain was severely disrupted and the RMG sector witnessed a record low in revenues.
How has the recovery been of the garment industry since last year? Has it bounced back to its pre-COVID levels yet?
The RMG sector recovery was pleasing in the last three-four months of 2021 and the performance of the sector in the period was even better than pre-pandemic situation. After the reporting of the first COVID positive case in Bangladesh in March 2020, the government announced shutdowns in the country. At that time Bangladesh’s industrial units were closed for at least one month in March and April.
Later, the government allowed production in RMG factories, but the sector faced cancellation of a huge number of orders from western buyers as the surge in pandemic stopped business activities in the United States and in European countries.
According to the government data, Bangladesh’s RMG exports in 2020 decreased by $5.6 billion to $27.47 billion from $33.07 billion in 2019 due to the impact of the pandemic. The year 2021 was better than the year 2020 as the sector started recovering from the blow of the pandemic. During the year, Bangladesh’s RMG sector faced various challenges, including an increase in the prices of raw materials, but the sector also gained some opportunities.
The prices of products increased on the global market in 2021 but it was lower than the hike of raw materials prices. According to the Export Promotion Bureau data, RMG exports in 11 months (January-November) of 2021 grew by nearly $7 billion to $31.76 billion from $24.82 billion in the same period of 2020. We have seen that 2021 was better than 2020 for the RMG sector and we expect the trend to continue in 2022. The pandemic had made Bangladesh’s RMG sector capable to face new challenges.
How sustainable are your manufacturing units? What steps have you taken across the value chain to ensure a smaller carbon footprint?
The three pillars of sustainability for a manufacturing unit are Environmental, Social and Economical. We are closely working for the sustainable environmental development for our next generation. To minimise the global carbon emission, we have taken steps like Ecosystem Service, Green Engineering and Chemistry, Air Quality, Water Quality, Stressors and Resource Integrity, etc.
What kind of capacity expansion are you planning in the future?
Presently, we have undertaken to expand our business operation in both sectors. We have already opened the capital machineries LC for expansion our existing production capacity of RMG sector and another business unit i.e., Maksons Textiles Limited, where we want to produce high quality denim yarn.
What is the turnover of the company as on date? What are the revenue expectations for the current fiscal?
Last year, our turnover was $90 million. We plan to reach $110 million turnover for the current fiscal year.
