Textile Sector of Bangladesh Offers
Best Invest Opportunity in South Asia

by Redwan Ahmed
Ex-President, Bangladesh Garment Manufacturers & Exporters Association

After Liberation when country's traditional items of export could not yield expected result, in late 70s the government and a section of entrepreneurs - young, educated and dynamic, began to emphasize on development of non-traditional items of export. By the year 1983, Ready-Made-Garment (RMG) emerged to be a non-traditional export oriented sector most promising in the socioeconomic context of the country. By that time, those entrepreneurs felt a necessity of sectoral trade body, non-government in nature, free from traditional bureaucracy, to help the RMG sector and to boost up the foreign exchange earnings of the country urgently needed at that time. Responding to that necessity, 19 (Nineteen) RMG manufacturers and exporters joined together and by their untiring efforts got Bangladesh Garment Manufacturers and Exporters Association (BGMEA) incorporated on February 20, 1983, Today 2400 small and medium scale privately owned garment factories, registered with BGMEA, spread in cluster over the EPZ and urban areas of Dhaka, Chittagong and Khulna, are manufacturing ready-made garments of varied specifications as per size and designs stipulated by the overseas buyers. Starting with a few items, the entrepreneurs in the RMG sector have widely diversified the product base ranging from ordinary shirt, T-shirt, trousers, shorts, pajama, ladie's wear and children's wear to sophisticated high value items like quality suits, branded jeans items, jackets-both cotton and leather, sweaters, embroidered wear etc.

Fetching only US $ 6.4 million in 1981, garment sector of the country has now become an over 2.5-billion-dollar-foreign-exchange-earner, enjoying the status of 5th largest garment exporter and largest shirt and T-shirt exporter to the EU and 6th largest apparel exporter to USA. Bangladesh now exports ready-made garments to as many as 30 countries of the world with EU as the major importer, followed by USA, the largest importing country.

Besides accounting for 66% of Bangladesh's total export earning in 1995, this sector is employing about 1.2 million 1.2 million people of whom 90% are women. Ancillary industries producing cartons, polybags, woven labels, buttons, sewing thread, strapping band, gum tape etc. have emerged in large number with the growth of the sector. The RMG industry has helped the growth of the sectors like banking, insurance, shipping, hotel, tourism, road, transportation and railway container services etc. The sector in which the RMG has helped created the maximum prospect in the country in the textile sector - supply source of mother raw-material of RMG sector.

During the industry's early days in late 70s, RMG producers and exporters had to import all fabrics and accessories. Through the passage of about one and a half decade, today the situation has changed a lot. In 1995, RMG industry of the country used local accessories around 70% of the total accessory requirement of the industry. Presently, around 80% of required accessories like elastic, collarband, price ticket, metal clip, zipper, plastic clip, cellophane tape, carton, hangers etc. are being supplied from local sources. Local supply of other accessories is also increasing regularly. It can also be noted that we never can look forward to having supplies of all trimming materials from within the country because sometimes the producers have to import some accessories, according to buyers' preference, from some specific foreign suppliers. Dishonouring such conditions may cause losing valuable buyers. Considering this point, a size of local accessory industry capable to meet around 90% of the total demand is good enough to support smooth development of the RMG industry. That means, in accessory industry, we are not long way off. Both foreign and local capital are invested in the accessory industry.

But, though the CMT (Cutting, Making and Trimming) basis apparel sector has created an export oriented captive market for over 2.5 billion yards of fabrics per year which is increasing by not less than 20% each year, textile sector, rather capital intensive one, requires foreign capital to flourish to successfully match the fabric requirement of the export oriented RMG sector of the country.

If classified into knit and woven categories only, the story of knit fabric is far better than of the other. In 1995, the industry imported 86% of its total required fabrics from countries like China, India, Hong Kong, Singapore, Thailand, Korea, Indonesia, Taiwan, etc. Out of the total fabric requirement of the industry, usually around 16% is constituted by the knit fabrics. Presently around 96% of the total requirement of woven fabrics and around 35% of the total requirement of knit fabrics are imported by the export oriented RMG industry.

It is not that fabrics are not produced in the country enough for the industry rather the quantity of locally produced fabrics, conforming to the choice of the buyers in the global market, is very negligible. In 1995, out of the local fabrics used in the industry, 4 million meters of Garmeen Check (GC), a recently developed locally produced handloom fabric, were used. Statistics show that presently the textile industry of the country is developing in a way that earth two-year around 230 million yards of fabrics are being produced as additional.

With WTO already installed and MFA in transition to be completely phased out by 2005, the manufacturers and exporters of RMG in Bangladesh are awaiting to compete in a greater context in the global apparel market. Country's talented entrepreneurs in the RMG industry have achieved the highest growth rate during last several years, compared to other industrial sectors, though almost 96% of woven and 35% of knit fabrics are presently being imported from abroad. Countries, where production cost, if properly engineered, is far below its competitors' for their natural endowment in supply of easily trainable huge work force, will offer maximum benefits to the customers. Moreover, if those countries enjoy sound local textile supply sources, they will do far better.

The country holds strategic location as the bridge between South and East Asian high growth regions and links with other markets of India, Pakistan, Malaysia, Singapore, etc. The country has given high priority to development of roads & highways, bridges, rail roads, ports, telecommunication and other modern communication system, power supply, eradication of poverty, restoration of law & order situation and political stability. Besides the two export processing zones (EPZ) - one at Dhaka and the other at Chittagong, the government has decided to set up a new EPZ in Gazipur near Dhaka to meet the increased demand for setting up export oriented industries by investors form both home and abroad idea of setting up EPZ in private sector is also being mooted.

An extensive programme of incentives, to expedite investment in the country, are row in place covering " No Ceiling for investment" Tax holiday up to 10 years "Tax-exemption and duty-free importation of capital machinery and spare parts for 100% export oriented industries" Residency permits for foreign nationals including citizenship "Easy capital profit and dividend repatriation facilities" Double taxation avoidance "Tax-exemption on the interest payable on foreign loans" Taka convertible on current account etc.

The country enjoys Most Favoured Nation status and has signed bilateral trade and investment treaties with 16 countries in North America, Asia and Europe. Investors can also take advantage of the generalized-system of preference (GSP) which allows duty-free access to the European Markets. Since 1990, the Government has embarked on a highly successful macroeconomic, stabilization programme with balance of payments much improved, foreign exchange reserves and export earnings increased. Transparent investment protection law perhaps in the country's best attraction for investors in its open-door investment policy. The country has a very liberal investment climate. For instance, it takes just three days for a foreign investment registration and there is no discrimination between foreign and local private investors. Hundred percent foreign investment as well as joint ventures with local partners are allowed. Specially for the textile sector, as additional to the said facilities, policy for 25% export incentives has been introduced to encourage the use of local fabrics in the export oriented garment industry. With the possibility of further reduction in future, duty on cotton yarn has been reduced from 15% to 7.5%, on textiles spares from 30% to 15% and on dyes from 60% to 30%. Raw cotton import is now duty-free. Foreign investment is particularly welcome in our export-oriented textile industry.

The 51 million work force of the country is easily trainable. The price of labour is competitive compared to our neighbouring countries, countries in South-East Asia and Eastern Europe. The work force in one of the main advantages that Bangladesh is enjoying and will continue to enjoy over a considerable span of time in the context of international trade. Werner International has the comparative hourly wage rate in textile for 1993 that shows that average rate for Bangladesh is most cost-effective among India, Pakistan, Sri Lanka, Indonesia. The Philippines, Singapore, Thailand, China, Hongkong, Japan, Korea and Taiwan. So, Bangaldesh enjoys and advantage in this respect.

A new generator of entrepreneurs has emerged in the country, specially with the development of RMG, who are competent enough to shoulder the burden for mid and upper-mid level management and are experienced in textile industry. Now, in Bangladesh, organizations are recruiting more people with technical and professional education than ever before. Therefore, scope of professional education has expanded. Over 0.2 million Bangladesh students are studying abroad with majority in US. Local universities and other private institutions are also offering different professional and technical courses. These students, studying at home and abroad make up the pool of prospective technical and professional talent who will drive the economic growth of the country.

I profoundly believe that the present rate of development in the overall textile sector in the country will continue and the country will cross US dollar 4 billion before 2001 in exporting RMG. If greater foreign investment takes place in the export oriented textile industry, situation will be far better no doubt. As the formation of local capital is very negligible as compared to the requirement in the Export oriented textile sector, foreign investors are most welcome to come up and weigh the prospects awaiting for them in our textile sector.

Fabourable investment policy framework, low rate of inflation, easily trainable workforce and emergence of a new generation dynamic entrepreneur class, with the recent development of infrastructure perhaps have made Bangladesh offer the best opportunity for investment in textiles in south Asia. Investors from Singapore, South Korea, Hong Kong, Japan and many of the European countries including United Kingdom, Germany etc. now have been showing trend to move to cost effective labour supplying countries. Had those investors been reached effectively, we believe, tremendous mutual benefit could have been accrued.

Last Updated : 16th September 1997
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