The Bangladesh Textile Mills Association (BTMA) has urged a temporary halt to imports of cotton yarn used in the country's readymade garment industry, seeking to retain foreign currency amidst a shortage of dollars and boost garment value addition.
In a letter to the Bangladesh Bank governor on April 3, BTMA President Mohammad Ali Khokon outlined the proposal, which has drawn opposition from exporters who argue that the move would undermine their competitiveness in global markets.
The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), which sources most of its yarn and fabric domestically, has expressed reservations about any restrictions on imports.
According to the BKMEA, there should not be any restriction for an export-oriented industry to sustain its competitiveness in the global market.
The BTMA claims that some 510 local spinning mills, with a 3600 million kg production capacity of cotton yarn, can meet 70% of the demand for the export-oriented garment industry.
Mr Khokon said that the mills have a significant stock of raw materials due to a fall in demand. On the other hand, the export-oriented RMG industry imports a large quantity of cotton carded and combed yarn through bonded warehouse facilities, which requires a considerable amount of US dollars.
He also mentioned that "If the locally produced cotton yarn is sourced or used, the value addition would be up to 60% against the 30% value addition of imported ones."
Mr Khokon urged the central bank governor to take measures to stop back-to-back letters of credit (LCs) opening for cotton yarn imports, saying that Bangladesh is 100% capable of producing cotton yarn.
According to BTMA, Bangladesh imported 0.543 million tonnes of cotton yarn in 2022, which was 0.297 million tonnes in 2019.
BKMEA Executive President Mohammad Hatem opposed BTMA's plea, saying that there should not be any restriction as local spinners cannot meet the export sector's full demand for yarn and fabric.
As a result, he said garment exporters have to import yarn and fabric, especially the special kind of such products, while sometimes buyers nominate the required raw materials from abroad, especially China.
"We usually source cotton yarn carded or combed from local spinning mills even though the price difference is 30 to 50 cents per kg," said Mohammad Hatem.
If the difference is over that, exporters source locally to meet the deadline for immediate shipment, he said, adding that it takes a week to get the raw materials from the local sources while imports take 30-45 days.
"We import the rest which is usual and can't be restricted in a free market economy and to sustain competitiveness," Mr Hatem added.
The government allowed the country's apparel exporters to import yarns from India in partial shipment through Benapole, Bhomra, Sonamasjid, and Banglabandha land ports in January this year amid protests from the BTMA.
RMG exporters previously could import yarn through the Benapole land port under the bonded warehouse facility but were not allowed partial shipment.
In the last fiscal year, Bangladesh fetched US$42.61 billion from RMG exports, out of which US$23.21 billion and US$19.39 billion came from knitwear and woven items, respectively. According to BTMA, textile mills meet 80% and 35%-40% of the knitwear and woven sectors' demand for yarn and fabric.
Central bank data showed that value addition in the sector declined to 54.38% in the last fiscal, which was 64.32% in fiscal 2019, mainly due to the high import of raw materials.
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