Local denim makers in dire straits

Local denim makers are struggling to survive, as they have lost at least 70 per cent of buy orders over the past few months, due to high prices of raw cotton and new GSP rules. Industry insiders warned that some of the country's over 20 denim factories might even face closure soon due to sharp fall in orders. They also said most of the denim plants are now using just 50 per cent of their capacity, to produce jeans products of their earlier orders, got during the third quarter of 2010. Even, many of the units have not received any supply order yet for the coming months. But during this time in 2010 all of the local denim units were fully booked with orders for the next several months. M Rahmat Ullah, a director of the leading denim producer Chittagong Denims, told the FE: "Buyers have switched over their orders to Pakistan and China, as the denims of those countries are comparatively cheaper than that of Bangladesh." "Cotton prices have increased by 120 per cent within this year, due to growing demand in the emerging markets. The high cotton prices and the new GSP rules have created an uneven competition for us," Mr Rahmat Ullah added. The industry insiders said many local garment manufacturers are now procuring denim from India, China and Pakistan. They are getting GSP facility under the new EU Rules of Origin, effective from January 1. The relaxed EU Rules of Origin allows the made-in-Bangladesh garments, even made with imported fabrics, to enjoy zero-duty entry facility to the EU markets, escaping the previous 12.50 per cent duty. The local denim industry has been a strong backward linkage source for the exporters for the last few years. Bangladeshi exporters accounted for more than one-third of the country's total $15 billion plus apparel exports. A senior official of Partex Denim said the denim industry is now facing the crisis of cotton and yarn scarcity that began in last December. He, however, said the situation might improve from August onwards, when cotton harvest will begin. Former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Anwar-Ul-Alam Chowdhury Parvez said the problems faced by the Bangladeshi denim makers have intensified. Unpredictably, the Chinese suppliers were significantly slashing the prices of their fabrics in the recent weeks, making the Bangladeshi fabrics further uncompetitive, he added. Jahangir Alamin, president of Bangladesh Textile Mills Association (BTMA), said the government should immediately provide enhanced cash subsidy to the local fabric manufacturers to help them survive in this transitional period. "The GSP is a new system for us. Our industry needs some more time to accommodate with it. For this, we need at least 15 per cent cash incentives for the next three years," he added. The country's over 20 denim plants, installed during the last five to six years, have the capacity to produce 20 million gauge fabrics per month.