PRESENTATION ONTHE IMPORTANCE OF THE BANGLADESH PRIMARY

TEXTILE SECTOR

A. Matin Chowdhury

Managing Director, Malek Spinning

Mills Ltd.

Southeast University

Seminar Hall, Dhaka

7th September , 2009

ToToFresher’s Reception ProgramFresher’s Reception Program

School of Science & Engineering School of Science & Engineering Southeast UniversitySoutheast University

Thank you for inviting me to make a Presentation on the

Textile & Clothing (T&C) Sector of Bangladesh.

T&C has grown and we appreciate the interest of the

University in this Sector.

T&C is the largest employer in the country and is currently

up-scaling its requirement.

Therefore, it is important that the University and the students

consider this, in their H.R. development and career planning.

GROWTH AND CONTRIBUTIONOF THE

T&C IN BANGLADESH

Growth and contribution of the T&C in Bangladesh

After liberation of Bangladesh in 1971: Jute was the only exportable item. Most products including yarn and fabric were imported. Huge shortage of foreign currency.Present Day (2009)

Jute export unfortunately diminished to 2.68% of national export. T&C has rescued the country by:

- Meeting the total domestic needs.- Exporting US$ 12.87 billion – 82.68% of national export.

- Currently running good foreign exchange reserve.

- Huge employment with downstream and supporting industries.

Bangladesh Export Position2007 – 2008 and 2008 - 2009

Sl No.

Item July 07 - June 08

% July 08 - June 09 %

01 Total Export 14,110.80 100.00

15565.19 100.00

02 Textile & Clothing

11,170.76 79.16

12,870.17 82.68

03 Others 29,404.04 20.84

2,695.02 17.32

Sl No.

Item July 07 -June 08

July 08 - June 09 Growth%

01 Knit Garments 5,532.52 6,429.26 16.21

02 Woven Garments 5,167.28 5,918.51 14.54

03 Home textile 357.96 389.83 8.00

04 Terry towel 112.88 132.57 17.44

Total T & C 11,170.76 12,870.17

05 Footwear & Leather 346.92 471.34 (26.39)

06 Frozen Food 534.07 454.53 (14.89)

07 Raw Jute & Jute Goods

483.40 417.42 (13.65)

08 Bicycle 64.28 84.54 31.32

09 Processed Food 40.65 46.68 14.83

10 Ceramic 38.33 31.70 (17.30)Source: EPB

Textile & Clothing Contribution IDevelopment of Textile and Clothing since 1971

A great achievement for the people, government, Labour and entrepreneurs of Bangladesh.

A great achievement for the people, government, Labour and entrepreneurs of Bangladesh.

Local yarn stimulated knit export growthKnit export overtook woven RMG with huge FE retention & employment

Textile & Clothing Contribution IIGrowth

PTS reduced Back to Back L/C from 67% to 32 % Local input increased from $ 739 million to $ 7,511 million

Textile & Clothing Contribution IIIOverseas Dependency of RMG Export Reduced (1994-

2008)

FE Retention increased 10 folds

Item Total Export

Export using local inputs

Export using foreign inputs

Value Retention Value Retention

Knit Garments

6,429 5,786 4,339 643 160

Woven Garments

5,919 1,775 1,331 4,143 1,036

Home Textile + Towel

522 522 392 00 00

Total 12,870

8,083 6,062 4,786 1,196(all figures in mil US

$)

Textile & Clothing Contribution IV2008-09 Foreign Exchange Retention

FE Retention with local fabric 5 times that of Imported Fabric

PTS Helped Increase Exports Increase Retention Create Bangladesh as a Major Hub for Textiles

and RMG

Textile and Clothing Contribution VEffect of Cash Assistance Payments

Impact of this scheme resulted in a massive multiplier effect

Proven success for Bangladesh Must be pursued with a higher % to survive in

current global crisis

Total Cash Assistance Paid

1991-2008

1991 to 2006 2007 to 2008

$ 802.52 Million $ 77.35 Million

A SUCCESS STORY

GLOBAL COMPETITIVERACE & POSSIBILITIES

FOR BANGLADESH

Global Competitive Race and Possibilities for Bangladesh I

Facilities Given

* Between 1.10.08 to 31.03.09 – IRS 14,701 crore ($ 3.12 billion) was paid.

SL. No.

Country 1990 1995 2000 2005 2007 2008Share

1995

Share

2008

01 China 2,739 3,518 4,49915,14

322,745.5

922,922.0

0 10.20%33.02

%02 Vietnam 0 17 47 2,725 4,358.52 5,223.44 0.00% 7.57%03 Indonesia 629 1,183 2,055 2,875 3,981.07 4,028.43 3.40% 5.79%04 Mexico 508 2,566 8,413 6,078 4,523.38 4,014.50 7.40% 5.52%05 Bangladesh 429 1,067 2,116 2,372 3,103.35 3,441.65 3.10% 5.08%06 India 557 1,098 1,786 2,976 3,169.93 3,073.36 3.20% 4.28%07 Honduras 113 918 2,323 2,622 2,511.01 2,604.03 2.70% 3.59%08 Thailand 437 1,037 1,820 1,808 1,766.31 1,667.81 3.00% 2.26%09 El Salvador 54 582 1,583 1,619 1,486.10 1,533.58 1.70% 2.13%10 Pakistan 206 550 920 1,259 1,498.58 1,489.56 1.60% 2.09%11 Sri Lanka 425 928 1,472 1,650 1,573.36 1,466.97 2.70% 2.04%12 Guatemala 191 682 1,487 1,816 1,450.58 1,388.16 2.00% 1.82%

13

Dominican Rep 694 1,731 2,425 1,849 1,056.52 840.55 5.00% 1.13%

US$ in Million

Global Competitive Race and Possibilities for Bangladesh II

US Apparel Imports 1990-2008

World 21,937

34,649

57,232

68,713

73,922.59

71,568.54

100.00%

100.00%

Global Competitive Race and Possibilities for Bangladesh III

US Apparel Imports Q1 & Q2, 2008 vs 2009

SL. No.

Country January –

JuneJanuary –

June%

Change

% Share

2008 2009

1 World 32,995.69 28,907.09 -12.39 100.00

2 China 9,069.47 9,421.44 3.88 34.493 Vietnam 2,349.51 2,347.60 -0.08 7.744 Indonesia 2,020.72 1,947.20 -3.64 5.865 Bangladesh 1,623.46 1,741.16 7.25 5.276 Mexico 1,991.32 1,612.67 -19.02 5.397 India 1,744.13 1,593.69 -8.63 4.338 Honduras 1,222.49 958.744 -21.57 3.479 Cambodia 1,155.46 889.819 -22.99 3.13

10 Thailand 835.607 614.707 -26.44 2.1411 Salvadr 744.493 606.596 -18.52 2.0712 Sri Lanka 727.443 634.239 -12.81 2.0413 Pakistan 688.391 597.867 -13.15 2.07

1. Initially focused on stitching only with imported fabric. Developed spinning and local fabrics capabilities after mid 90’s.

2. Has a large textile base with a double digit growth.

3. Big base allows further growth possibilities as many companies have reached economies of scale.

4. Adequate manpower has been developed.

5. Aggressive investors.

6. 3rd largest exporter to the European Union. 5th largest to the U.S. in 2008

- Overtook Mexico for 4th position in 2009.

Will also have a presence in the Asian market as Japan decided to divert 20.00% import from China.

Possibilities for Bangladesh - I

7. Till now produced basic products – Plans now:

- Upgrade 25% product to value added category

which will yield additional $ 2.00 billion.

- Build on existing base by growth of 15% yielding

additional $ 2.00 billion.

- Take on capacities vacated by Mexico, Turkey,

ASEAN & Latin America.

- Chase India & China on Price.

Possibilities for Bangladesh - II

AREAS FOR GROWTH All circular knit products

- move aggressively to synthetics. Sweaters

- with emphasis on upstream activity including yarn. Trousers – Denim

- all ready leader. Need to develop fabric, finishing & washing.

Home Textile- bed sheets, curtains, towels.

Shirts- develop fabric.

Synthetic Garments- import high quality fabric.

Develop value addition with printing, embroidery, embellishment etc.

Develop all types of accessories and packaging.

Possibilities for Bangladesh - III

CHALLENGES

Bangladesh T&C Industry has tremendous prospects. Can very easily take Global second position after China. A difficult task, but achievable and requires concerted and determined effort from all – Government, Entrepreneurs, workers, financiers, etc.

National Aim1. Government of Bangladesh had given initial support to the T&C.

For the last 8 – 10 years withdrawn support. Needs to believe the possibility of T&C and therefore should:

• Draw out a policy• Make a long term plan with targeted products, production and value.• Support the education and training of all levels of personnel involved with the industry.• Activate an export campaign improving the country’s image.

Challenges - I

2. Labour relations and labour productivity: a. T&C is a labour intensive industry and therefore strict regulation on workers

rights and privileges – A Must. b. Strict law enforcement for industrial disputes . c. Disciplined workers and owners. d. Having reached a global level, cannot progress on cheap labour-need training. Therefore, labour productivity and use of equipment, automation has to be encouraged and achieved.

3. Energy: T&C requires a lot of energy and has to go for high capacity utilization. Have time bound commitments- regular and good quality energy is essential. This needs to be solved otherwise all orders and investments will go in vain.

Challenges - II

4. Infrastructures: Ports, roads, industrial estates, etc. need development to cut costs of doing business in this cutthroat competitive environment.

5. Law and order: T&C requires a lot of processing, movement of goods and sub-contracting and also produces a huge amount of salvageable waste. Strict law and order is essential for the security and successes of the industry.

6. Financial costs: The T&C business has a lot of transactions which are made through investments, L/Cs, acceptance, etc. These costs has to be maintained at a sustainable level, otherwise, it will hamper growth.

Challenges - III

1. Government support and private investments into T&C paid

handsomely with exports, employment and FE retention.

2. Best possible product to meet future development and exports, thus

should be planned for growth.3. Competitive Government giving policy advantages to

their industry. We need policy support to balance this.

4. Law and order and labour management must be improved.

5. Energy and infrastructure to be improved.

6. Huge funding for growth to be arranged.

7. Industrial estates need.

Conclusion

THANK YOU FOR YOUR KIND ATTENTION