The textiles industry in Bangladesh has grown in an unplanned manner and a critical demand-supply gap has arisen for both yarn and fabric. The crisis will naturally deepen unless appropriate backward linkages are built to meet the rapidly approaching challenges in the global textiles market. As the population is growing and the standard of living is improving in the country, the demand for textiles is increasing rapidly. This presents an urgent need to dramatically increase capacities in the spinning, weaving, knitting, dyeing, printing and finishing sub-sectors. Fibre2fashion Market Intelligence explores.
Bangladesh holds a comparative advantage over all competitors in terms of the expense of yarn production. However, in regards to the total yarn cost, Bangladesh's advantage over India and Pakistan disappears, even though it remains competitive with other producers. This is a result of the higher cost of raw materials in Bangladesh, as most of the needed items are imported.
Bangladesh also has some major operative advantages over its competitors. It has a lower waste percentage than others. Power is the cheapest in Bangladesh among all yarn producers. The country also has a very low depreciation rate and a fairly low interest rate, aided by a low conversion cost as well. However, the price of auxiliary materials here is the highest among all yarn producers, as is the price of raw materials. Due to these two factors, Bangladesh loses its comparative advantage over India and Pakistan.
With increased investment in the sub-sectors and modernised machinery, Bangladesh could profit greatly from larger and more competitive weaving and knitting sectors. As current dyeing facilities are mostly dependent on imported fabrics, they are expanding at a rate which is not dependent on any of the other sectors. However, as local grey becomes more competitive, and its production is increased, the dyeing, printing and finishing sub-sectors will also need to expand to accommodate for the increased supply The leakage from bonded warehouse facilities and smuggling of materials across borders also needs to be monitored closely in order to assure the competitiveness of the local industry. The reduction of such problems will automatically improve the market position, resulting in improved opportunities for the expansion of the Bangladeshi textiles industry.
* Lack of safety in working place and working conditions for millions of garments workers
* Political instability
* Cost effective strategy
* New product development strategy
* Product diversification strategy
* Market diversification strategy
* Labour laws
* Fashion trends
* Sustainibility issues
* Overall development of the sector
The garment industry is the largest foreign currency earner for Bangladesh. Earnings from export of garment items touched $26.602 billion in 2015, which is the highest-ever export earnings recorded by the garment sector of the country in the last decade, according to the data from the Export Promotion Bureau (EPB) of Bangladesh. The country has set an ambitious target of achieving $50 billion in woven and knitted garment exports by 2021, in view of the ongoing industrial restructuring in China due to rising wages.
With the improved safety compliance scenario in the garment sector and the promising show in 2015, coupled with the emergence of new export destinations, the Bangladesh garment industry has high hopes for year 2016. For Bangladesh, value addition is the need of the hour (currently more in knits than in woven) considering the imposition of stringent rules by the developed nations via Rules of Origin (RoO).
In a recent McKinsey survey, chief purchasing officers of major companies said that they view Bangladesh as the next hotspot for sourcing. The World Bank, meanwhile, predicts that Bangladesh's GDP will grow up to 6.7 per cent in 2016, making it one of the world's fastest-growing economies. The one challenge to the growth of Bangladesh's garment industry, however, could be Vietnam-which has become another top location for apparel manufacturing as brands look for alternative sourcing destinations in view of the significant wage rise in China. The recent signing of the Trans-Pacific Partnership agreement makes Vietnam even more attractive for garment sourcing, particularly for US brands.