Overview of Textile Industry

1.1 Country ProfileOfficial name : Peoples Republic of

Bangladesh

Area : 144 000 sq km

Population : 150 million Language : Bengali, EnglishGeographical Location: South AsiaTime : GMT + 6 hoursMain Industries : Textiles, jute, Leather,

Frozen Foods, Agriculture, etc.GNI per Capita : US $ 470 (2006)

: US $ 620 (2008)

History of Apparel Industry in Bangladesh

There were only 9 export oriented garment manufacturing industry in 1978, earned only 1 million dollar.

Some of them were very small, produced RMG for local market as well.

Four such small and pioneer garments were Reaz garments, Paris garments, Jewel garments and Boishakhi garments.

Reaz garments established in 1960, as a small tailoring outfit, named Reaz store in Dhaka. Served only domestic market of its initial 15 years.

In 1973, it changed its name to Reaz Garments Ltd and started to export by selling 10 000 pieces of shirt to France, valued 13 million franc in 1978.That was the first direct export of apparel.

History of Apparel Industry in Bangladesh Desh Garments Ltd., first joint venture in

Bangladesh, Technical and marketing collaboration with S. Korean Daewoo Corporation, established in 1979.

First 100% export oriented company. In 1980, Youngone (49%) and Trexim (51%

equity) formed a company named younone Bangladesh exported first consignment of padded and non padded jackets to sweden in dec 1980.

It had trained 120 operators including 3 women in S. Korea Went to the production in 1980.

History of Apparel Industry in Bangladesh

Till to the end of 1982, there were only 47 garment manufacturing units.

Break through occurred in 1984-85 when numbers of garment factories increased to 587.

In 1999, there were 2900 garment factory in the country.

Average growth rate of garment export is 22%.

Now, the numbers of garment manufacturing units in Bangladesh is 5500.

Reasons of Growth

External Reasons:GATT Approved multi fiber agreement (MFA)Quota, As a LDC, get preferential access in EU.GSP

Internal Reasons:5% cash incentivesNo import dutyBonded warehouse facilitiesBack to back L/CConcessionary rates of interests FDI of Joint venture facilitiesConcessionary duty on imported machinaryEPZ facilities

Textile Production

Mainly Two Sub-sector:a. Woven:

Horizontally Integrated 85% woven fabric imported off 3 billion yards Demand increases @ 20%Requires comparatively higher investment.223 modern weaving plants, each with an annual capacity of 10 million meters, will be set

up

b. Knit: Vertically IntegratedAlmost self-reliant - 95% Collected Locally.

Annual Increment of Consumption of fabric : 20%

Value Chain: Michael Porter in 1985 introduced in his book ‘

The Competitive Advantage: Creating and sustaining Superior performance’ the concept of the Value Chain.

Michael Porter suggested that the organization is split into ‘primary activities’ and ‘support activities’.

Primary activities: Operation, Logistics, marketing, Service,

Support Activities: Procurement, Technology development, Human resource mgt, Infrastructure.

Value Chain: Knit Almost complete value chain Some of the factories fully vertically integrated : Spinning to

finished garment. Competitive wage, Easily trainable workforce, Expanding

supply side capacity, government supporting policy helped to gain competitive advantage.

Core strength is backward linkage. 90%-95% knit fabric produced locally Net export is higher than woven. In FY 2006-07, Export share of knit and woven were 37.39%

and 38.25% respectively. Cumulative average growth of knitwear is 27%. Advantages of Bangladeshi Knitwear:

Self sufficient – 95% fabric and accessories collected Locally. Integrated Good capacity existsUnbeatable in priceCheap labor with high stitching capabilityGood reputation of Bangladeshi Knit apparels all over

the world.

Value Chain : Woven Only a few weaving factories that offer

quality product. So, majority of fabrics has to be imported

– higher purchasing cost, dependency on external supplier, pricing disadvantages.

Can meet only 15% of fabric demand. More than 220 modern weaving mill need

to be set up, each with an annual capacity of 10 million yards.

Annual Consumption of fabric: 3 billion yards.

Backward Linkage Supporting Industry Spinning, weaving/knitting, dyeing,

finishing Industries. In addition to these, Interlining, labels,

buttons, sewing threads, packing and packaging materials, zippers, draw strings all are backward linked industries.

70% of accessories collected locally. Share of BB L/C in total export dropped

from 68.33% in FY 1995 to 45.1% in the first eight months of FY 2001.

Total investment in backward linkage is US$ 2B.

SWOT Analysis Strength:

Competitive price advantage due to cheap labor and Governmental Assistance

Skilled Human Resource Duty and Quota free access and GSP in

EU Integrated Supply Chain, Specially in

Knitwear International Image of a reliable

supplier of basic Products.

SWOT Analysis

Weakness Weak Structure, in particular

production efficiency, product development, marketing skill, customer service, controlling, planning, management skill, technical know how

Producing mainly basic products, Heavily depend on importing woven

fabrics, low value addition Poor image of adapting international

and Corporate social standards Political, Social and worker unrest.

SWOT Analysis Opportunities:

Potential for higher value addition by developing backward linkage.

Reduce lead time by developing infrastructure of transportation, faster custom clearance, strong backward linkage

Improved image by adapting environmental and social standards

Diversifying apparel product; switching from basic product to fashionable product.

May get preferential access in USA and Canadian market in near future.

SWOT Analysis Threats:

Risk of loosing competitive advantages-development steps required.

Poor political and investment climate leading declined interest of importers

Poor capital formation Risk of loosing know-how transfer, staff

qualification, Totally depend on others for raw materials

as Bangladesh produce neither natural fiber nor MMF.

Increased international competition Woven sector requires huge investment Single market concentration.

Distribution Structure Contact Directly to the apparel producers

regarding price, samples, delivery schedule etc – more dependency on manufactures regarding quality.

Production Agencies/Buying house: Take care of product development, purchase of fabrics and accessories, follow up production, conducting inspection, scheduling shipment date etc.

Satellite office: Has own QC dept. and other staffs to conduct the operations.