Share of woven garments in Bangladesh’s exports is declining due to lax upstream linkages
MONIRA MUNNI |
March 05, 2022 08:33:32
Mar 05, 2022 2:46:15 p.m.
The share of woven garments in Bangladesh’s export earnings is declining mainly because the lax upstream industry fails to support the garment sub-sector, insiders say.
The backlink industry is also “important for dealing with post-graduation challenges,” they add.
The weaving sub-sector of the country’s main export industry is likely to face stringent rules of origin (RoO) requirements in its major destinations, including the European Union, after Bangladesh exits the PMA, as garment producers will have to comply with the double processing requirement regardless of their access to GSP or GSP-plus schemes.
Bangladesh relies heavily on imported fabrics for making woven garments, as local spinners can meet 35-40% of the demand from fabric exporters, they say.
People in the industry say that the share of knitted garments has increased due to its strong backward linkage that helps the subsector ship its exports in the shortest possible time.
Lack of infrastructure, mainly gas shortage, required political supports and financial issues discourage entrepreneurs from making new investments in woven fabric manufacturing, they note.
Analysis of data from official sources also indicates the declining share of woven apparel exports for several years now.
Woven garments contributed more than 43 percent to the country’s total exports worth $34.24 billion in fiscal year 2015-2016, according to central bank data.
The share fell to 37.40% in the last financial year, while it fell further to 35.38% in the first half of the current financial year, 2021-22, according to the Bank’s Quarterly Review. from Bangladesh.
Bangladesh received $8.73 billion in woven apparel exports and $11.16 billion in knitted goods exports respectively during the July-December period of the current fiscal year.
Asked about the slide, Vice President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Md Shahidullah Azim said that during the pandemic, the demand for woven garments has declined as people stay at home to security reasons.
Echoing his view, Mahmud Hassan Khan, former BGMEA leader, said the pandemic was a temporary reason – the main reason for the decline in weaving’s share is the lack of a strong upstream industry here. .
“Delivery time is a major concern of buyers, and local fabric manufacturers need a long time to ship products because they mainly meet fabric requirements by import,” he explains.
Knitwear exporters need relatively short lead times because they can source raw materials like yarn and fabrics locally, he adds.
According to the BTMA, local textile mills satisfy 75-80% of knitters’ demand for fabrics, while the percentage is only 35-40% for woven fabrics.
Bangladesh imported 552,859 tonnes of woven fabrics in 2021, up from 490,430 tonnes in 2017, according to BTMA calculations.
According to a study by the National Institute of Textile Engineering and Research (NITER), Bangladesh is at a disadvantage among RMG supplier countries due to higher time constraint.
The competitive advantages obtained by lower production costs are canceled out by longer delivery times.
According to a study by NITER, depending on foreign sources for raw materials drags industries behind and, for fabrics alone, 30 to 40 days are added to the production time.
In 90s, Bangladesh delivery time was 120-150 days, which is now reduced to 90-100 days. On the other hand, China can deliver products within 30-35 days, while the delivery time for Vietnam is 60 days.
Echoing Mr. Hassan’s observations, Mohammad Ali Khokon, President of the Bangladesh Textile Mills Association (BTMA), says that the growth of woven segments has remained negligible over the past five years due to lack of policy support required by the government.
Factories set up in the upstream linkage industry of the weaving subsector are capital-intensive while there is no guarantee of timely connection to utilities, he said, adding that factories after installing all the machines have to wait a few years to get the connection, it’s noted.
“Gas is essential for a weaving mill,” says Mr. Khan, also managing director of Rising Group.
Factories are suffering from a lack of sufficient gas supply while new industries outside economic zones are not getting new connections, the BTMA leader said.
Special facilities should be granted to the establishment of factories outside economic zones, he adds.
He urged the government to provide the necessary policy supports, including incentives, to encourage investment in the backhaul industry of this sub-sector.