Textile manufacturing sector and readymade garment industry (also the knitwear segment) are in fact inseparable and rolled into one. The burgeoning readymade garment and knitwear sector has set a goal to reach $50 billion export by 2021. While this appears quite a daunting task, but industry sources claim it is doable provided the government and its concerned ministries make determined efforts to help achieve it.
If the private investment in the textile manufacturing sector is any guide, the increase of 54 per cent import of capital machinery during Fy2014-15 has shown that it is ready. The capital machinery imports accounted for over $445 million during the year, according to Bangladesh Textile Mills Association (BTMA). This is encouraging when all sources are suggesting that private investment is not forthcoming because of fund constraints and other reasons.
While talking about investment in textile, RMG and knitwear industries, one has to remember a few relevant factors, sources say. The value addition in the RMG (woven) sector is relatively low - only over 20 per cent and in knitwear sector, it is high, nearly 90 per cent. The $50 billion target for garment exports by 2021 has some visible problems which needs government's undivided attention.
For example, the rules of origin are important factor for sustaining the flow of exports. RMG's low value addition is being accepted by the European Union - largest importer of our garments. Other major and rising markets are still okay. But the 2021 export target was fixed considering the industrial restructuring in China as rising wages there making them uncompetitive. China is concentrating on high value garment providing an opportunity to cheaper countries like Bangladesh and Vietnam. This is both an opportunity and challenge for Bangladesh.
China has provided duty-free access to its market of all types of goods from Bangladesh which has resulted in picking up exports to China. But rules of origin (RoO) have posed a problem for the woven garments because it has envisaged 40 per cent value addition for such goods. Knitwear sector, however, with its high value addition has no problem. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the concerned government agencies are trying to negotiate with the Chinese authorities for a favourable decision.
Analysts feel that while a receptive Chinese government may temporarily overlook the rigid RoO factor, it is unlikely to work for long. Besides, as the worldwide economic recession is showing no signs of improvement anytime soon, other sophisticated and developed markets may impose stringent RoO to safeguard their interest.
This leaves Bangladesh with the only option: to try and increase value addition, which the industry owners are aware of. In fact, this realisation has prompted many of them to expand their production capacities of spinning, weaving and finishing segments. According to BTMA Secretary, during FY2015, the import of textile machinery has accelerated and as many as 26 new textile mills in spinning, weaving, dyeing and finishing were established.
The increase in value addition input has tremendous advantages. For example, if a garment exporter imports fabrics from, say China, it requires 30-40 days for their arrival which adds to the lead time for shipment of finished goods. Industry sources say, if they get fabrics locally, their shipment time could be reduced to 32 to 45 days. Successful garment exporters are trying to increase their production capacity by installing new machines in their factories.
For example, Mahmud Mahin, a garment manufacturer from Narsigdi was quoted by a newspaper as saying that he has expanded his yarn, dyeing and weaving capacity by investing Tk 1.35 billion (Tk 135 crore). He said: "I have a lot of work order from buyers and that's why, I have expanded my capacity." Like him, many other successful garment owners are doing the same for higher productivity and shortening lead time.
But then where is the problem? BTMA's Vice President Abdullah Al Mahmud says there is no alternative to investing in textile sector to allow garment sector to meet the RoO and reduce lead time for shipment. But this is not being done because of lack of adequate power supply. Country's need is 30,000 mw but government and private sector together produce about 10,000 mw - leaving a huge gap.
Besides, industry sources say, factories located in the rural areas can't depend on REB (Rural Electrification Board of Bangladesh) because of its low-quality supply and hence factory owners are dependent on expensive power generators to run their heavy machines. BTMA and BGMEA leaders claim they can find the required funds for needed industrial expansion but without dependable power supply, they are lost and meeting their garment export target could be in jeopardy.
sayed.kamaluddin@gmail.com
The only option for RMG - increase value addition
Sayed Kamaluddin | Published: September 08, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
Share if you like