City University

Department Of Textile Engineering Bangladesh Studies SSC 108 Name of Assignment: The major challenges and Opportunities of textile sector in relation to the global economic recession. Date of submission: 22/08/2009 Submitted To: Dr.Sk. Tawfique M. Haque Associate Professor Submitted By: Muhammad Rizvy Redwan Id: 08319177 Batch: 10Th Programme: BSTE

CONTENTS 1. Introduction 2. Industry Background and Status

3.

Effect of the Agreement on Textiles and Clothing

4. Industry Outlook 5. Investment Outlook 6. Challenges of and Supports to the Spinners 7. Challenges are facing 8. Causes of facing challenge 9. Solution 10. Some Reason for Flourishing Textile Sector 11. Conclusion 12. Reference

Introduction: Man has some fundamental things. Cloth is one of them. No one can run without it. On the other hand, cloth is made by textile industry. Textile derived from Latin term textilies, which is based on the verb texere, to wave. A broad classification of materials that can be utilized in constructing fabrics, including textile fibers and yarn. Designates the constructive fabric including woven, knitted and nonwoven structures as well as lace and crocheted goods.

Industry Background and Status: The phenomenal growth in RMG was experienced in the last decade. In 1984-85, no of Garment factories was 800 RMG jointly with knitwear accounted for more than 70% of total investments in the manufacturing sector during the first half of the 1990s. At present with about 4,000 factories and a workforce of two million, 80% of which are women, employing over 50% of the Industrial workforce and having 75% of the total exportsearning of the country. Exhibit 6.1 shows the growth of RMGexports from Bangladesh since 1981-82.

Effect of the Agreement on Textiles and Clothing: From 1995-2005 the WTO Agreement on Textiles and Clothing (ATC) was in effect, wherein more industrialized countries consented to export fewer textiles while less industrialized countries enjoyed increased quotas for exporting their textiles. Throughout the 10 year agreement, export market USA (textile) USA (clothing) 4% EU (textile) EU (clothing) 3%

market share <3% in 1995 market share 3% in 2004

<3%

2%

3%

4%

Bangladeshs economy benefited from quota-free access to European markets and desirable quotas for the American markets. As the above table shows, the market shares for Bangladeshi textiles in the USA and both textiles and clothing in the European Union have changed during the time period of the ATC. It is uncertain whether these favorable export markets will remain since the expiration of the ATC in 2005.Textile exports from Bangladesh to the United States did increase

by 10% in 2009. Industry Outlook: Multi-Fibre Agreement (MFA) and Generalized system of Preferences (GSP) of the EU are the main actors behind acquainting Bangladesh RMG products to global market ensuring assured market access. Bangladesh is now a significant RMG supplier to North America and Europe. Due to phasing out of MFA, many are doubtful about Bangladeshs ability to maintain the fast growth of the recent years in this sector but Bangladesh has taken a better position in the U.S.A market through competition. However, on a more positive note, Bangladesh is expected to maintain its tariff-free access to EU under the European GSP, since the GSP is not covered by the Uruguay Round Agreement. Recently, Canada has also provided tariff-free access of all the items from Bangladesh. Meantime, Bangladesh RMG industry has earned strong competitiveness as a global standard RMG source. Marketing network has been spread over the economies of the continents. End users could well recognize and differentiate the products confidently. Till today, Bangladesh RMG industry largely depends on the imported yarns and fabrics. Bangladesh produces only 10% of export-quality cloth used by the garments industry. The need for establishment of backward-linkage industry has become an immediate

concern to the government and the exporters. There are enormous opportunities in setting up composite textiles industry combining textile, yarn and garments.

Investment Outlook: Textile & Clothing is the largest manufacturing sector of Bangladesh providing over 4 million jobs, accounting for 5% of GDP, 40% of manufacturing value addition and 75% of total foreign exchange earnings. The growing demands for yarn in the local market, comparatively low cost of doing business, lucrative incentive package, favorable investment policy regime etc are the main reasons for investment in this sustainable sector. Spinning could be chosen.

Challenges of and Supports to the Spinners: The success of a robust textile sector largely depends upon an improved and reliable spinning sub-sector. If spinning sub-sector produces substandard / inferior yarn, its adverse effect persists right across the entire value chain. Availability of raw materials, transportation, port facilities and tariff rationalization are the key challenges to the spinners. The Government has been supporting the spinners providing lower tariff for machinery spares and raw materials, cash incentives, reduced tax rate, and low-cost funding

etc.

Challenges are facing: RISING incidents of violence continues to hit the apparel sector in the country. Over the last few weeks, agitation among the readymade garments (RMG) workers flared up in Ashulia, Savar, Gazipur and surrounding areas. Many garment units were burnt and damaged by the unruly mob resulting in colossal damage to properties. Some people were killed and hundreds injured in these incidences of vandalism. Two RMG units of famous Hameem Group were set ablaze.

Causes of facing challenge: Rising prices of essentials, unpaid salaries, governments inaction and absence of responsible trade unions are some of the reason responsible for the rising violence in the sector. There are many other reasons cited by them. Absence of good relations between workers and owners, misbehaviour of mid-level officials and deferred payments to workers are some other problems that dog the embattled sector.

Solution: There are a few things the industry must do to position itself

to confront the present crisis or any crisis in the future. Three apex organizations, namely BTMA, BGMEA and BKMEA, must be united and see this crisis as the crisis of the entire industry. They should jointly form a Textile Council headed by a professional with international repute and expertise on global economics and politics. The Textile Council should be governed by a Board comprising the presidents of these three organizations. The Council will work as a think-tank and advise the presidents of BTMA, BGMEA and BMKEA to develop their policies and strategies. It should play an important role in minimising the policy gaps between the three organizations. A team of experts and professionals will support the head of the Council. They will study the strength and weakness of our competitors, explore new potential markets and give directions to our industry leaders in difficult times. The Council will interact with international organizations, policy makers and governments to sway policy decisions in our favour. They will exchange information, technical data and disseminate valuable information on markets to members of BTMA, BGMEA and BKMEA. The Textile Council should develop an institute that would provide continuing education services to textile professionals to catch up with advanced technologies, new developments and market dynamics. The

entire industry must be ready not only for the present challenges but for any challenge of the twenty first century.

Some Reason for Flourishing Textile Sector:

Bangladesh is a developing country. For this reason, the labour costs is low. Bangladesh is well positioned and compares favourably with other Asian countries. The per hour cost of labour in Bangladesh is $0.25, compared to $0.27 in Indonesia, $0.34 in Pakistan, $0.46 in Sri Lanka, $0.48 in China, and $0.57 in India. Another reason is, Bangladesh has a good environmet for investment in textile sector. So, many people invest in this sector, even foreigners invest in this sector. Government is made many EPZ for attraction foreigners.

Conclusion: Textile plays a vital role in the Economic development of Bangladesh. Textile and RMG contribute about 40% of Industrial Value addition. Provides 4.6 million jobs of which approx, 60% are women.78% of the total earning come from textile RMG products. Provides 0.2 million jobs in waste recycle industry related to RMG. Contribute 10.5% to GDP. Provides indirect employments to 0.80 million workforce in accessories industries to RMG. Bangladesh textile

sector can be developed if our government can provide well communication, basic raw materials, agriculture products and higher technologies

Reference: Fairchilds Dictionary of Textile 7th Edition http://en.wikipedia.org/wiki/Bangladesh_garment_industry

http://www.boi.gov.bd/sector_brief.php

http://www.apparel.com.bd/2009/01/what-it-means-to-bangladeshtextile-industry/