Tradeoff between yarn and RMG made of jhuts

The European Union (EU) has already moved towards formulating a new due diligence law incorporating the sourcing of garments made from recycled yarn. According to an upcoming law of the EU due to be enacted in 2025, cotton fibre must be produced by combining recycled fibre with a maximum of 50% virgin cotton at a proportional rate. Following the phase out of GSP benefits in 2026 after the LDC graduation of Bangladesh, garment products in EU countries will be taxable and face tougher competition. EU importers will be exempted from the 30 percent tax if they procure clothes or garment products from recycled fibres. As a result, garment products will get access to the European market at relatively low prices and export income will be guaranteed. But Bangladesh is appropriately using jhuts to make RMG for some low cost market in India and some other countries and this seem adding more value than making yarns for certain applications.The trade bloc has already announced that by 2030, all its garment items would have to be sourced from recycled yarn. Before such new rules, Swedish retail giant H&M has a target to have 24 percent of its apparel sourced from recycled or sustainable materials by 2025.

Bangladesh is still lagging behind competitors in the production of recycled yarn although the market for such yarn is swelling, especially in tune with new environmental laws being formulated by the EU.The Sourcing clothing made from recycled textiles is not easy and requires substantial financial and human resources due to factors such as a very different supply chain and vendor base, the additional complexity of traceability, and meeting unique legal requirements.

Bangladesh exports clothing items worth about US$70 billion annually from the country's biggest export sector, with the turning amount by 0.4-0.5 million tonnes of such waste or jhut, primarily consisting of cutting waste, scraps and fluffs.These wastes are directly exported and only 5.0 percent is recycled by some readymade garment-manufacturing groups that use recycled fibre to produce yarn, fabrics and exportable RMG.Some 30-35 percent of the waste is reused domestically to produce goods like baby wear, pillow, car-seat coating, quilt, mattress and so.

The supply chain of Jhut consist of about 20,000 to 22,000 traders, are creating employment for about 0.6 million workers, especially women workers, and 1.0 million people are indirectly dependent on the apparel sub-sector. In this business, traders usually collect waste in sacks weighing 60-70 kilograms with the range from Tk 2.0 to Tk 70 per sack, based on their colours and size of pieces.Among them, the white-colour jhut has high demand in the export market as the wastes are recycled into cotton by using chemicals and then turned into yarn and fabrics.

Local apparel and terry-towel exporters and textile millers are, however, against exporting jhut while the Jhut exporters demand cash incentives to earn more from exports.According to Bangladesh Textile and Garment Waste Processors and Exporters Association (BTGWPEA), garment wastes worth US$ 500-600 million are exported from the country per annum.Jhut exports stood at US$116.54 million in the last fiscal year (FY23), up from $64.68 million in FY 2018-19, as per Export Promotion Bureau (EPB) data. The government has fixed the value of sorted white 'jhut' at $600 per tonne and colour un-sorted 'jhut' at $235 per tonne, which was previously $350 and $140 respectively.

BTGWPEA President said, "Bangladesh's garment waste has a high demand in many countries as it is used to manufacture a variety of products. Most of the garment jhut from Bangladesh is exported to India and the EU." A Vice-President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said, "Bangladesh could earn US$4.0 billion to US$5.0 billion annually by recycling textile wastes if provided with required policy support for value addition locally."

There are some markets of certain categories of jhuts in local and export markets and some businesses are working almost silently. Part of these available jhuts is used in some low cost RMG in some part of the counties for small local market but for export market as well. A certain category of Jhuts is shifted to Mirpur Kata Kapor market (scraped fabrics). According to Kata Kapoor Traders cooperative association, there are only 30-40 traders at Mirpur jhut palli who are engaged in jhut or kata-kapor trade out of 285 shops here.

The rest or 60 per cent of the textile wastes are exported to India, Hong Kong, Sweden and other countries where they are recycled and sold back to the local readymade garment industry as recycled yarn, at a higher cost.

The processing of jhut is taking momentum in Bangladesh. According to Bangladesh Textile Mills Association there are more than 20 recycling mills that use cotton wastes and garment jhut as raw materials. The use of recycled fibre would help retain US$1.0 billion locally while such recycling would help keep the environment green and reduce water consumption significantly, resulting in decrease in use of chemicals and carbon emission.

Bangladesh is successful in another use of certain bigger sizses jhuts for stitching RMG for local and overseas market due to demand for low cost RMG in those countries, Manufacturing clothes from jhut, presented a tremendous opportunity for small businesses in Rangpur and Pabna Districts over the past three decades. As export facilities grew, businesses expanded into large-scale operations. There are over 1,000 small manufacturing factories as well as over 200 big factories established in recent years targeting the export business in these areas.

These towns, located near the eastern borders of India has become a hub for garment exports to India. Garment traders based in Kolkattaand Silguriin West Bengal import trousers and shirts meant for mass consumption in the region, while some import women's dresses for re-export to other overseas countries.Garment workers who work in Dhaka, but hail from these regions are shifting back to local factories, even though they get lower wages as they are able to live with their families.

Despite prospects, garment factory owners said they must face difficulties and spend a hefty amount of money to get BGMEA and EPB certification.According to the Pabna Hosiery Manufacturing Group, garment products from jhut used to bring in annual exports of around Tk 300-400 crore. After export to India for last three decades, now being exported to Malaysia and other neighboring and Asian countries. Most of the importers in these countries opened letters of credit (LCs) for a small amount by showing the low price of clothes. Most clothes are supplied against payments through illegal channels to avoid customs duties. In this way, they reduced the price of our clothes in the international market. The export figure is more thanthe declared value.

Unfortunately, the Indian importers are not paying the balance amount on time and some of the exporters in Bangladesh facing trouble and some of the exporter stop export to India. Moreover, after the Covid-19 pandemic, the price of our local garment products reduced in the Indian market. Exporters are experiencing huge losses. Now the demand has reduced in their markets as Indian buyers are buying jhut from Bangladesh andlosing interest in RMG.

But there is a point of discussion whether Bangladesh can continue operation of these RMG industries while EU's buyer will gradually be looking for RMG made of Jhuts to be complaint. The western buyers and the Bangladesh Textile and Garment Waste Processors and Exporters Association (BTGWPEA) should work together to exchanges ideas and cooperation for appropriate use of jhuts to be compliant before the EU deadline of trade of garment made from jhuts.The Tradeoff between RMG made of jhut and yarn are two different of use of jhuts. Bangladesh needs a policy support to the regional RMG manufacturers who already developed a regional niche market.

The writer is a Non-Government Adviser, Bangladesh Competition Commission