Textile backward linkage industry must be protected
Value addition on local products in export market is a major component in a country's economic growth and in this regard Bangladesh is advancing ahead due to its cheaper labour, own energy resources and good geographical location for ports.
Currently the growth of local textile industry with using state of the art technology in manufacturing woven and many types knit fabrics are feeding the demands exporters fabrics at a major per cent that Bangladesh is adding higher value addition in its export value and also contributing to the economy in generating employment opportunities as a strong backward linkage industry.
As per latest official statistics Bangladesh earned $11.5 billion exporting knitwear products and from woven it is also a big amount. For knit item value added was 75 per cent the same amount of money remained in the country which happened duo to strong backward linkage industry in manufacturing spinning and fabrics. The existing backward linkage industry is capable of meeting local demands about 90 per cent, which is increasing gradually because of the strong backward linkage industry. Bangladesh is currently manufacturing high end woven fabrics and meeting more than 65 per cent of the demands for export of readymade garments including denim fabrics.
It offers low lead time, provides employment opportunity and contributing to the national gross domestic product with introducing the latest technology and upgrading machinery to improve the quality as per international standards of the fabric for valued added products. The country's primary textile sector, a strong backward linkage industry for the RMG, is contributing a lot the apparel sector by proving of yarn and fabrics.
However, value addition to the woven sector is now around 55 to 60 per cent meaning that Bangladesh is unable to fulfil 40 per cent of woven fabrics and if supported by the government the rest of the demanded fabrics could be manufactured within 1.5 years. In meeting the demands of rest of the high valued fabrics, Bangladeshi manufacturers of yarn and woven fabrics mill owners have to invest with latest machinery and technology aiming to target fresh investment in reaching 100 per cent value addition which will raise Bangladesh's competitiveness in the global market.
Backward linkage in garment accessories and packaging manufacturers are also contributing to the economy and it is a need for overall policy support to protect local investments. Bangladesh, the largest cotton importer of the world, up till 2018, could meet 1 per cent of its cotton demand despite being an agriculture based country. Currently, Bangladesh imports USD 3 billion worth of cotton a year. Stable and controlled cotton supply is an essential need for the burgeoning RMG sector, which contributes 82 per cent of the country's export.
In order to achieve Bangladesh's goal of USD 50 billion apparel export within 2021, sustainable and strong backward linkage of Primary Textile (spinning) Sector (PTS) is a must which is helping garments industries value addition. In this trend fresh new investment is stuck in the sector as gas crunch jeopardizing the system and low demand of yarn from the mills.
Recently bond pilferage is badly damaging the local industry that the importers show false order declaration and imports duty free fabrics which is later sold at local market in cheaper prices than locally produced fabrics. In this regard the government is losing huge amount of revenue. Currently a good number of textile power-loom and small factories are facing shutdown and some are in trouble to continue business as they incurring losses. Out of 20,000 sets of handlooms only 1100 are currently active in Narshingdhi area now.
Otherwise new investment would not be created and it will be tough to attract investments in the newly established economics zones in textile sectors as local investors will find that the business is not viable. Bangladesh is importing LNG but there is yet to do a energy policy for its pricing and supplying that how the textile sector as backward linkage industry would be preferred in getting more gas to run their factories.
There must also be a need for strict border monitoring on coming fabrics are sold at local market and affecting the investors who pay tax and duty to the government there the government is losing huge amount of duty. More focus on high value added fabrics in particular 'Viscos' and few other high end products are needed to be focused. Spinning is already saturated and steps must be taken for other sector like weaving dyeing, and finishing.
As strong backward linkage industry, the textile sector is generating employment opportunity with creating many other sub sectors like packaging, printing and few other service sectors. To feed the growing readymade garment export market as an backward linkage sector it is saving a huge foreign currency and it is possible to save more by enhancing its capability of providing more types of high end fabrics which are currently imported by the exporters as per demand made by the buyers.
To protect this sector, it is inevitable to strictly monitor borders to stop smuggling of woven fabrics and cotton yarns, stop misuse of bonded facilities, and must ensure for uninterrupted power supply for expansion and set up of new industrial units aiming to grab the market for high end products and to go for export market.
Though currently few companies are arranging foreign currency loans from different offshore source, it is a need for financing by local banks and financial institutions which reduces pressure of extra loan burden for repaying of foreign currency debts.
The writer is chairman of the Little Group and former director Bangladesh Textile Mills Association (BTMA)