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Course Code: TEX4029

Course title: Machine Technology & Maintenance of Textile MachineryAssignment on Present status of textile industry & its future in Bangladesh Submitted to:

Md. Tipu Sultan

Senior Lecturer

Department of textile Engineering

Submitted by:Md. Mofizur Rahman Sazal ID: 2013000400036Taskin Zahan ID: 2013000400004Md. Mazadul Islam Ripon ID: 2013000400016Md.Saiful Islam Jony ID: 2013000400031Rifad Hossain ID: 2013000400011Rafiqual Islam Pathan ID: 2013000400021Tanveer Ahmed Khan Sunny ID: 2011100400090(17th)Section: Major WPT Batch: 22

Submission date: 28 August 2016

Introduction: The textile sector is the most important one in Bangladesh. It is the largest manufacturing sector

in the country. The textile sector’s contributions to industrial GDP and employment are the highest in Bangladesh. All the textile companies have excellent production, sales and financial performance due to favorable local and foreign sales and satisfactory earning profit. The bright future of the garment sector has created a good demand for our yarn and fabrics and taps this opportunity; we need congenial business environment and backward linkage industries for the survival of our textile sector.

Bangladesh, being a labour abundant country, started the process of industrialization by concentrating on labour-intensive products such as textiles and clothing. The industrial sector plays a pivotal role for accelerated economic growth as well as rapid employment generation.

The main focus of Textile sector during the Fourth Plan period was oriented towards generation of employment, priority to private sector investment, promotion of export-oriented industries, rationalization of tariffs, providing monetary and fiscal incentives, product diversification and horizontal market expansion. In 1997-2002, no provision was kept for creation of any new capacity in textiles under the public sector and private sector was given the exclusive performance to invest in the field of spinning, weaving, knitting, dyeing and finishing and garments making. Private investment at various stages of the textile industries will be encouraged with particular emphasis on development of quality through technological improvement. This will be done not with a view to maximizing the backward linkage of ready-made garments manufacturing but also with the view to enabling the exports of fabric and yarn.

Overview of Textile Companies in Bangladesh

Bangladesh’s textile industry is comprised of a mix of small to large scale privately and publicly owned companies. Major products exported from Bangladesh include polyester filament fabrics, man-made filament mixed fabrics, PV fabrics, viscose filament fabrics and man-made spun yarns. Major garments exported include knitted and woven shirts and blouses, trousers, skirts, shorts, jackets, sweaters and sportswear, among other fashion apparel. Bangladesh’s textile industry can be divided into three main categories: public sector; handloom sector; and the organized private sector. The private sector is the fastest growing sector in the country. The handloom industry provides employment for a large segment of the population of Bangladesh and supplies a large portion of the fabric required by the local market. Combined, the textile and apparel sectors consist of 3,600 firms. There is a concentration of manufacturing activity in and around the capital city of Dhaka and a growing garment manufacturing presence in the country’s export processing zones. (Wikipedia, 2013)

About 20 percent of existing mills in Bangladesh are large-scale mills, roughly 30 percent are medium-scale mills, and the remaining 50 percent are small-scale mills and the number of spinning mills in the country is increasing day-by-day. While industry analysts say Bangladesh’s garment and textile manufacturers will have to face steep competition from countries such as India, Pakistan, China and Thailand as a result of new policies, the textile companies see no impact on their business. But still the future of the textile industry here is very bright. The size of the textile sector under BTMA:

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Table 1: Size of the Textile Sector of Bangladesh

Until the liberation of Bangladesh, the textile sector was primarily an import-substitution industry. It began exporting ready-made garments (RMG) including woven, knitted, and sweater garments in 1978, which grew spectacularly during the next two and a half decades-from US$3.5 million in 1981 to US$10.7 billion in FY 2007. The industry employs about 3 million workers of whom 90% are women. Two non-market factors have played a crucial role in ensuring the garment sector’s continual success namely(a) Quotas under Multi- Fiber Arrangement1 (MFA) in the North American market and(b) Preferential market access to European markets. (Bangladesh Textile Industry, Wikipedia)

When Bangladesh gained its independence from Pakistan in 1971, the new government nationalized the textile industry. All of the country’s textile factories were then organized under the Bangladesh Textile Mills Corp. (BTMC). The role of BTMC within Bangladesh’s textile industry has substantially been altered since the denationalization of a large number of public sector textile mills over the last decade and a half. Prior to denationalization, BTMC enjoyed a near-monopoly within the yarn and fabric market in Bangladesh. At present, there are 21 textile companies under BTMC. They operate 24 spinning facilities with an installed capacity of 490,892 spindles and 1,036 looms. Out of that total, 13 of the companies — which operate 16 plants — utilize 320,228 spindles under the service charge system producing different counts of yarn in the range of 32/1 to 80/1. Another five companies have 128,088 spindles in operation. Among the 21 mills, Valika Woolen Mills Ltd., Nasirabad, Chittagong, is the only specialized BTMC Company, producing knitting wool, woolen suiting, men’s and women’s woolen shawls, and woolen blankets. (Akter 2012)

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The textile and clothing sector is the largest manufacturing activity in Bangladesh. It provides direct employment to about than 5 million people, which accounts for 45 per cent of all industrial employment in the country. The sector contributes 10 per cent of the country’s GDP, 40 per cent of industrial value addition, and 78 per cent of export earnings. Major readymade garments exported by Bangladesh are knitted and woven shirts and blouses, trousers, skirts, shorts, jackets, sweaters and sportswear, and other fashion apparel.

Table 2: provides a profile of Bangladesh’s textile and clothing sector. The sector can broadly be divided into primary textile sector (PTS) and export-oriented readymade garment (RMG) making sector. The PTS comprises spinning, weaving, specialized textile units, traditional handloom sector and knitting and dyeing subsectors. Currently, there are now 350 spinning mills, 400 weaving firms, 310 dyeing and finishing units, and 4,500 garment factories.

Table 2: The Textile and Clothing Sector at a Glance

Sub-sector Numberof units

Installed machine capacity

Production capacity

Employment

Textile spinning

350 7.5 million spindles(0.2 million

rotors)

1,800 millionkg

400,000

Textile weaving

400 25,000shuttleless/shuttle

loom

1,600 millionmeter

80,000

Specialised textile

and power loom

1,065 23,000shuttleless/shuttle

loom

400 millionmetre

43,000

Handloom 148,342 498,000 looms 837 millionmetre

1,020,000

Knitting, knit dyeing

2,800 17,000 knit/Dy/M

4,100 millionmetre

324,000

Dyeing and finishing

310 -- 1,720 million metre

33,000

Export orientedreadymade

garment(clothing)

4,500 --- 475 milliondozen

2,000,000

Other related sectors

--- ---- ---- 600,000

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History of the Textile Industry in Bangladesh

When Bangladesh gained its independence from Pakistan in 1971, the new government nationalized the textile industry. All of the country's textile factories were then nationalized and organized under the Bangladesh Textile Mills Corporation, or BTMC. The government gradually denationalized the production of textiles after 1882 for various problems such as low productivity in the labor force, lack of planning, indiscipline, lack of accountability, and poor machine maintenance and operation resulted in a lack of profits. Factories were privatized, beginning with the dyeing and weaving units. Since that time, much of the industry has been privatized through auctions and other means. After privatization, the quality of the fabrics produced improved significantly, leading to a great increase in the demand for Bangladeshi textiles in both the international market, as well as the export oriented garment industry of Bangladesh.

Readymade Garments Industry and its Growth In 1978 the RMG industry was established in Bangladesh with nine enterprises. In addition, Bangladesh's garment exporters enjoy the privilege of quota-free entry into the European Union, or EU, whereas their major competitors, such as China, India, Indonesia, Pakistan, Sri Lanka, and Thailand, are subjected to the restrictions of an assigned quota. As a result Bangladesh is able to export everything that it produces, while its more developed competitors are limited to specific amounts assigned through quotas.

The Current Position of the Textile Industry in Bangladesh Today, the textile industry of Bangladesh can be divided into the three main categories: the public sector, handloom sector, and the organized private sector.

Public Sector:The factories in the public sector enjoy certain privileges such as government funding. In addition, the equipment in this sector is not well maintained, as much of the money allocated for this purpose is not spent as planned, but is wasted through corruption and poor accounting.

Handloom Sector:However, the inferiority of their machinery, mostly due to their narrow width, means that the fabric production is slow, and usually falls short of the quality needed for export.

Private Sector: The most productive of the three categories is the private sector. Since the owners of such factories are directly affected by their performance, they take an active part in planning, decision making, and management. Most of these factories also have machinery that is superior to those in the two other sectors because the owners are well aware of the connection between their equipment and their profits.

Demand Supply Gap Only 21% of the total demand for yarn is met locally in Bangladesh. The figures for grey are not much better as only 28% of the total demand is met locally.

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Some of the problems:All sectors of the textile industry face many of the same challenges. These main problems include lack of power, obsolete technology, low capacity utilization, lack of machinery maintenance, a workforce that is not adequately trained, problems with labor unrest and militancy, political unrest causing disruption such as hartals, and a lack of working capital. The problems with electricity were evident to me on my visit to the Rahim Textile Mills; I think that it is more efficient to power the factory continuously by a generator, instead of letting production be hampered by power failures. In addition, each of the sub-sectors faces various other problems.

History of RMG Sector in Bangladesh:

While agriculture for domestic consumption is Bangladesh’s largest employment sector, the money gained from exporting textiles is the single greatest source of economic growth in Bangladesh. Exports of textiles, clothing, and ready-made garments accounted for 77% of Bangladesh’s total merchandise exports in 2002. Only 5% of textile factories are owned by foreign investors, with most of the production being controlled by families or Bangladeshi companies. (Bangladesh Textile Industry, Wikipedia) Immediately after the founding of Bangladesh, tea and jute were the most export-oriented sectors. But with the constant threat of flooding, declining jute fiber prices and a significant decrease in world demand, the contribution of the jute sector to the country’s economy has deteriorated. (Bangladesh Textile Industry, Wikipedia)

In the 1980s, the RMG market started its journey. The hurdles of the Multi-Fiber Arrangement (MFA) quotas in 1985 and the Harkin Bill in 1994 were great challenges for the industry, as were the phasing out of MFA quotas in 2004. Although there was concern that the MFA phase-out would shut down the industry, the Bangladesh textile sector actually grew tremendously after 2004 and reached an export turnover of US$10.7 billion in FY 2007. Bangladesh's export trade is dominated by the RMG industry. The sector currently employs 2.5 million people—about 40% of total manufacturing (85% of these employees are women)—and accounts for 76% of the country's export earnings and 10% of its GDP. (Wikipedia, 2013) Currently Bangladesh is now second largest readymade garments manufacturer after China, by the next five years Bangladesh will become largest readymade garments manufacturer. Bangladesh was the sixth largest exporter of apparel in the world after China, the EU, Hong Kong, Turkey and India in 2006. In 2006 Bangladesh's share in the world apparel exports was 2.8%. (Wikipedia, 2013) The exports of Ready Made garments for the year 2011-2012 according to EPB were:

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Through the history of textile and RMG of Bangladesh, it has been seen that several times the back ward industry was not given due importance. The contribution of RMG can be publicized very easily which allure always to concentrate there. But the backward industry in this textile supply chain is very important for a sustainable future of the overall industry. Only a strong backward industry can assure the retention of foreign currency, stable supply chain system, more control on the raw materials supplier, less lead time. At this cross road of textile and apparel business, strong backward linkage industry is a must. Investment in the backward industry was very slow in the last few years that should be increased without any delay. Existing industry is in problem due to GSP plus policy. Government should come forward to save these industries by imposing bindings on the garment makers to buy a significant part (possibly 50%) of their fabric from the local factories to enjoy duty waiver for other imports.

Present Situation of RMG Sector in Bangladesh:

Quota system was a great blessing for establishing our garments industry. We were strongly benefited by using that. As a result we can see a matured garments industry today. But while quota system was approaching to an end in 2004, there’s so many got upset about the RMG sector of Bangladesh. Though in the latter it can’t be affected here as the experts were seemed. We conquered the post quota challenges and made that a successful story.

In RMG sector of Bangladesh, there are more than 5000 garment factories (private statistics) at the current time, employing more than 12 lack labours, where 85% of the labour force is women. But, according to BGMEA the number of garment factories in Bangladesh around 4000. Now, RMG industry is the countries largest export earner with the value of over $24.49bn of exports in the last financial year. Its a great news for us that, Bangladesh is clearly ahead from other South Asian suppliers in terms of capacity of the ready made garments industry.

Though, there are various types of garments are manufactured in Bangladesh, but all the ready made garments are classified into two broad categories, where one is woven products and another one is knitted products. Woven products includes Shirts, Pants and Trousers. On the other hand, knitted product includes T-Shirts, Polo Shirts, Undergarments, Socks, Stockings and Sweaters. Woven garments still dominates the export earnings of the country.From BGMEA website its seen that, Day by day knitted items production is increasing in considerable rate and now about 40% export earnings has achieved from knitted products.

Contribution of RMG Sector to the National Economy:

The role RMG sector in Bangladesh economy is remarkable. It’s seen that, from the last decade, RMG sector contributes to the national economy in considerable rate. About 76% of total export earnings come from RMG sector. From a statistics it’s known that, in FY 2003-04 RMG sector of Bangladesh earned US$ 5,686.06 million, in FY 2004-05 the value was US$ 6,417.67.67 million, in FY 2005-06 the value was US$ 7900.80 million, in FY 2006-07 the value was US$ 9,211.23 million, in FY 2007-08 the value was US$ 10,699.80 million, in FY 2008-09 the value was US$ 12.35 billion and finally in FY 2013-14 the value stands at $24.49billion.

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Opportunity of RMG Sector in Bangladesh:

RMG sector of Bangladesh has some key factors which inspired for steady growth of this sector. Though it’s a matter of great surprising for so many that how RMG sector of Bangladesh continues to show its robust performance in the world.

The main key factors which have great influence on RMG sector of Bangladesh are in the following:

1. Vast labor force,2. Skilled human resources,3. Technological upgrades,4. Government supports for textile and clothing,5. Special economic/export processing zones,6. Creation of textile and clothing villages,7. Incentive for use of local inputs,8. Duty reduction for the import of inputs/machines,9. Income tax reduction,10. And international supports like GSP, GSP+, duty free access etc.

By using the above key points we can easily take place the world’s readymade garments market very strongly. But there’s some another key factors. If we apply those key factors in our readymade garments sector, then we will achieve the first priority to the worlds famous buyers note book.

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Those key factors are-

a. Cost Effective Strategy,b. New Product Development strategy,c. Product Diversification Strategy andd. Market Diversification Strategy

Oust Effective Strategy includes the following two key points:

1. Cost Reduction Strategy and2. Labour Productivity Improvement.

Those key points are discussed in the below:

1. Cost Reduction Strategy:Cost reduction strategy should begin with assigning the highest priority for establishing backward linkages. The establishment of backward linkages will reduce our dependence on foreign sources which will reduce the total and average production cost of garments. This Strategy will make our products more competitive in the world’s readymade garments market.2. Labour Productivity Improvement: Bangladeshi workers are not efficient as of Hong Kong, South Korea and Sri Lankan workers. Wages are low in Bangladesh, but it does not necessarily mean that relatively low wages workers automatically lead to higher productivity. So, to keep place in the world’s largest competitive market, labor productivity must be improved.

New Product Development strategy:

It’s a matter of great sorrow for us that, we are regularly produced the same products. Our product categories are very less in quantities. Our product items that are exported into foreign market are Shirts-60%, Jackets-11%, Knit items-10%, Trousers-7% and Others-11.50%. To survive in the world’s most competitive RMG market, we have to develop new product items with a lot of variations.

Product Diversification Strategy:

Product Diversification Strategy is an important factor to keep place in the worlds readymade garments market. Different types of products should be produced by applying fashion. Thailand, China, India, Pakistan, Hong Kong, Singapore, Malaysia, Indonesia and others are the main competitors of Bangladesh. They are already ahead of Bangladesh in product diversification strategy areas.

Market Diversification Strategy:

Bangladesh has exported their products in the world’s limited market. Mostly are in USA, Canada and Europe. About 46% of its total garment exports go to USA, 14% to the Canada and

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rest of those into the European market. The competitors of Bangladesh are regularly expands their markets and keep changing their products by using fashion.

The following key factors must be undertaken during market diversification strategy:

1. Market research on product design2. Market research on product development,3. Market promotion through trade fairs, exhibition, etc.4. Human resources development by providing training.

Challenges for RMG Sector of Bangladesh:

Though RMG sector of Bangladesh has achieved the second spot for the highest number of garments exporter, but it has a lot of problems. The major problems faced by RMG sector currently is the lack of safety in working place and working conditions for the millions of garments workers. It’s become a great challenge for the upcoming financial year of Bangladesh. Another important one is political stability.

Two major incidents in RMG sector of Bangladesh are the Tazreen fire and the Rana Plaza collapse, which have brought the issue of workplace safety to the fore and led all stakeholders to act accordingly. But it’s good news for RMG sector that, following the unfortunate incidents, various platforms such as the Bangladesh Accord on Fire and Building Safety, the Alliance for Bangladesh Worker Safety and National Plan of Action have been formed to improve building and fire safety of Bangladesh’s garment industry. Also BGMEA and BKMEA are working together here to solve such kinds of problems. They have also taken necessary actions and invested huge amount of money.

It’s a huge responsibility for the government of Bangladesh to ensure working place safety in all the garments manufacturing factories. If we can’t do it, foreign buyers will refuse to place order here, which will be a massive blow for RMG sector of Bangladesh. We hope, the government of Bangladesh, BGMEA and BKMEA, with the support of global brands and international development partners, will be able to ensure the safety of the RMG industry and maintain the momentum of socio-economic development in the country.

Political stability creates a negative impact on RMG sector of Bangladesh. If it continues, it will be a massive blow to destroy our most valuable sector. So, political leaders should come out immediately to solve such kinds of problems.

Hoping for RMG Sector of Bangladesh:

According to the McKinsey survey, it’s seen that 86 percent of the chief purchasing officers in leading apparel companies in Europe and the United States planned to decrease levels of sourcing in China over the next five years because of declining profit margins and capacity constraints.

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Also they said in that survey, “Western buyers are evaluating a considerable number of sourcing options in the Far East and Southeast Asia, many chief purchasing officers said in the survey that they view Bangladesh as the next hot spot”. Many chief purchasing officers mentioned Bangladesh as the hot spot in the readymade garments market.

McKinsey survey also reported that, with about $15 billion in exports in 2010, ready-made garments are the country’s most important industrial sector; which represents 13% and more than 75% of GDP and total exports, respectively. McKinsey forecasts, export-value growth of 7 to 9% annually within the next ten years, so the market will double by 2015 and nearly triple by 2020

The Future of the Textile Industry in Bangladesh

As the population is growing and the standard of living is increasing in Bangladesh, the demand for textiles is increasing rapidly. The weaving and knitting sub-sectors will also need to expand at a rapid rate, as there is a large demand-supply gap in the country. With increased investment in the sub-sectors and modernized machinery, Bangladesh could profit greatly from larger and more competitive weaving and knitting sectors.As the 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-sector will also need to expand to accommodate for the increased supply.The reduction of such problems will automatically improve the market position resulting in improved opportunities for the expansion of the Bangladeshi textile industry. The textile 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, the incorporation of the fundamental steps in the textile industry all through to the RMG industry, can be built to meet the rapidly approaching challenges in the global textile market. As the population is growing and the standard of living is increasing in Bangladesh, the

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demand for textiles is increasing rapidly. This presents an urgent need to dramatically increase capacities in spinning, weaving, knitting, and dyeing, printing, and finishing sub-sectors. This will require the adoption of the most modern and appropriate technology to ensure quality products at competitive prices.

The possibility of increased yarn production in Bangladesh is an issue that has been looked into extensively by many researchers. These investigations have revealed the country actually has 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 essentially a result of the higher cost of raw materials in Bangladesh, as most need to be imported. As can be seen in chart 2, Bangladesh has a lower waste percentage than all its competitors. Power along with Korea is the cheapest in Bangladesh amongst all the yarn producers. The country also has a very low depreciation rate and a fairly low interest rate as well, aided by a low conversion cost as well. However, the price of auxiliary materials in Bangladesh is the highest among all the yarn producers, as is the price of raw materials. Due to these two factors Bangladesh loses its comparative advantage over India and Pakistan. Most of the raw cotton imported by Bangladesh comes from overseas. The country is not only handicapped by the import tariffs and shipping expenses, but India and Pakistan subsidize the raw cotton, which is sold locally, resulting in countries like Bangladesh paying more for the same cotton.

The outcome for the Bangladeshi spinning mills of such price differentials is that they obtain raw cotton of the same quality at prices, which are approximately 30% higher than the Indian mills, and Pakistani mills. In addition, Bangladesh's spinning mills have to pay another 6 to 7% for handling, freight, and commission charges which put them in a disadvantageous situation. The new infrastructure development surcharge, or IDS, on all imports, which was stipulated in the 1997/98 fiscal year, added another 2.5% to the price of imported raw cotton. The weaving and knitting sub-sectors will also need to expand at a rapid rate, as there is a large demand-supply gap in the country. With increased investment in the sub-sectors and modernized machinery, Bangladesh could profit greatly from larger and more competitive weaving and knitting sectors. As the 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-sector will also need to expand to accommodate for the increased supply. The leakage from bonded warehouse facilities and smuggling of materials across borders also need 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 textile industry.

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Conclusions:The importance of the textile industry in the economy of Bangladesh is very high. Furthermore, the industry is expected to be the catalyst in the industrialization of Bangladesh, and has been declared as a thrust sector by the government. However, over the course of my Senior Project investigations, I have realized that Bangladesh's low labor cost, skill development potential, a presently expanding market, and favorable conversion cost can be used to turn the challenges of the quota-free market into a window of opportunity. In addition, most developed countries are turning away from industries like the textile industry and investing in other sectors, thus creating a vacuum in the market.

We have also developed some idea of the types of solutions necessary to overcome the problems faced by Bangladesh's textile industry. The bank charges and interests interest rates for loans are extremely high; as a result it is very difficult to gather the capital to set up and maintain any type of factory especially textile units which require much expensive equipment. A reduction of the interest rate would not only encourage entrepreneurs to expand their current facilities but should also attract new investors. The handling charges for shipping are also extremely high, which adds to the cost of the materials that are imported and exported.

There is currently a serious lack of coordination among the various government agencies that are connected in some way with the textile industry.The Bangladesh Tariff Commission or BTC should place greater emphasis on textiles and should develop more of its policies around the industry.

References: 1. http://www.slideshare.net/rakib41/rmg-sector-past-present-future 2. http://www.assignmentpoint.com/business/human-resource-management/report-on-

garments-industry-in-bangladesh.html3. http://textilelearner.blogspot.com/2012/11/present-conditionsituation-of-ready.html 4. http://archive.dhakatribune.com/long-form/2014/sep/19/rmg-industry-bangladesh-past-

present-and-future5. https://www.plunkettresearch.com/industries/apparel-textiles-clothing-market-research/ 6. http://bdtextilesector.blogspot.com/ 7. https://www.academia.edu/5466262/

Financial_Condition_of_Textile_Industry_in_Bangladesh?auto=download

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