Potential for local woven industry remains largely untapped

Shamsul Huda The growth potential of the country's woven textile industry remains yet largely untapped. This, according to some relevant analysis, is a disconcerting situation, considering particularly the growing demand for fabrics from the local readymade garment (RMG) sector. Fresh investments in the woven textile sector saw a drastic fall in the last calendar year, the data from different sources indicated. In 2009 a total amount of Tk 10.7 billion was invested in the woven textile sector. In 2011 the investments totalled only Tk 0.99 billion. Such a level of investments that continued almost in a similar pattern in 2012, is totally unsatisfactory, the sources said. Despite the expanding scope for meeting the RMG manufacturers' total demand for woven fabrics, no significant investment has been taking place in the woven textile sector that can become one of key backward linkages for the RMG units, they noted. The sources ascribed the reasons for this falling trend of investment in domestic woven textile sector to the supply-related problems about power, gas and other constraints. Currently the local fabric manufacturers are meeting only 35 per cent of the country's total demand for fabrics by the RMG sector and imports meet the rest of their demand. The RMG manufacturers import mostly cheaper Chinese fabrics to meet their increased demand. The setting up of a high-tech woven fabric or spinning mill requires an investment to the tune of Tk 2.0-3.0 billion. In the face of short supply of energy and relatively high lending rates on bank loans, no new investors are venturing into this particular area, the sources said. Giving his views on the situation to the FE, Bangladesh Textile Mills Association (BTMA) President Jahangir Alamin said: "We can meet only 35-40 per cent of the demand of the local RMG sector. This demand-supply gap is further widening as the export of woven wears has been increasing." He said: "We cannot utilise our full production capacity due to the shortage of gas. Everyday around 40 to 45 per cent of our total production capacity remains idle." The BTMA president said: "It is difficult for us to make profit amid the power crisis, the high lending rate of banks, the strict terms and conditions of the central bank's directives about inland bill purchases by the commercial banks in the wake of massive loan scam by Hall-Mark Group and the latest relaxation of rules of origin in the GSP (generalised system of preference)." The relaxed rules of origin have also been impacting the local textile sector as the RMG exporters now can import their fabrics under the new provisions of the GSP facility for exports by Bangladesh to the European Union (EU) market. Of about $20 billion worth of RMG exports, locally-manufactured fabrics account for $7.0-8.0 billion. "We are missing the opportunity of seizing the opportunities for supplies of the vital raw-material input of Bangladesh's RMG exports to the expanding markets across the countries of the world, largely for lack of new investments and below capacity utilisation of existing textile industries," Mr. Alamin said. Former BTMA vice president MA Zaher said despite a high demand for fabrics, no new investment has been taking place in the sector, leaving the RMG manufacturers dependent on imported fabrics. "The growth in investments in the sector has been negative for the last couple of years. Less than 100 new looms could be added during this period," he said. The former BTMA vice president said the knitting sector was doing better as their current domestic input supplies for the exports accounted for more than 80 per cent. If the negative trend about investment in the domestic textile industry and its current level of operational performance continue, the main backward linkage industry for RMG units in Bangladesh is most likely to be developed properly, much to the advantage of the overseas foreign suppliers who might grab the entire market in the country sooner rather than later, he said. Despite enjoying some positive advantages for manufacturing fabrics, China, however, is increasingly becoming less interested in this sector so because of higher wages and other costs there. Against this backdrop, the government needs to take a proper note of the situation and recognise the importance of facilitating the growth and expansion of the local textile industry cost-effectively as a key backward linkage industry of the RMG sector, the sources said. Pro-active policy supports are critical for sustained development of this sector, they added. A greater amount of domestic value addition to the overall export earnings by the RMG sector can be ensured through an increasingly greater volume of supplies of local fabrics to the RMG units, they further observed. A RMG exporter said though there are some problems about sourcing local fabrics, it is still helpful as it involves to lower the lead time and there is also the option for changing any defective lot of fabrics. However, some other relevant circles expressed the view that a good number of RMG units "do not show a pro-active attitude towards sourcing fabrics from within the country and favour to import fabrics under 'branded warehouse' facilities for making business gains." They preferred not explaining what these "business gains" are to stating only that "all concerned businesses and others know what such 'gains, mostly informal ones' are."