Current State of Textile Industries in Bangladesh

Introduction:

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.

In the Table below 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, and 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.

|Sub-sector |Number of units |Installed machine capacity |Production capacity |Employment |
| | | | | |
|Textile spinning |350 7.5 million |spindles |1,800 million |400,000 |
| | |(0.2 million rotors) |kg | |
|Textile weaving |400 |25,000 |1,600 million |80,000 |
| | |shuttle less/shuttle |meter | |
| | |loom | | |
|Specialized textile |1,065 |23,000 |400 million |43,000 |
|and power loom | |shuttle less/shuttle |meter | |
| | |loom | | |
|Handloom |148,342 |498,000 looms |837 million |1,020,000 |
| | | |meter | |
|Knitting, knit dyeing |2,800 |17,000 knit/Dye/M |4,100 million |324,000 |
| | | |meter | |
|Dyeing and finishing |310 |-- |1,720 million meter |33,000 |
|Export oriented |4,500 |--- |475 million |2,000,000 |
|readymade garment | | |dozen | |
|(clothing) | | | | |
|Other related sectors |--- |---- |---- |600,000 |

Bangladesh's textile industry, which includes knitwear and ready-made garments along with specialized textile products, is the nation's number one export earner, accounting for 80% of Bangladesh's exports of $15.56 billion in 2009. Bangladesh is 3rd in world textile exports behind Turkey, another low volume exporter, and China which exported $120.1 billion worth of textiles in 2009. The industry employs nearly 3.5 million workers. Current exports have doubled since 2004. Wages in Bangladesh's textile industry were the lowest in the world as of 2010. The country was considered the most formidable rival to China where wages were rapidly rising and currency was appreciating.

After massive labor unrest in 2006 the government formed a Minimum Wage Board including business and worker representatives which in 2006 set a minimum wage equivalent to 1,662.50 taka, $24 a month, up from Tk950. In 2010, following widespread labor protests involving 100,000 workers in June, 2010, a controversial proposal was being considered by the Board which would raise the monthly minimum to the equivalent of $50 a month, still far below worker demands of 5,000 taka, $72, for entry level wages, but unacceptably high according to textile manufacturers who are asking for a wage below $30.On July 28, 2010 it was announced that the minimum entry level wage would be increased to 3,000 taka, about $43.

The government also seems to believe some change is necessary. On September 21, 2006 then ex-Prime Minister Khaleda Zia called on textile firms to ensure the safety of workers by complying with international labor law at a speech inaugurating the Bangladesh Apparel & Textile Exposition (BATEXPO).

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.

History of Textile Industry in Bangladesh:

Textiles the history of power driven modern textiles in Bangladesh back to the beginning of the twentieth century. Before 1947, modern textiles were only the composite textile mills having spinning and weaving facilities. Added later were activities like specialized textile weaving, knitting and hosiery, and dyeing-printing-finishing. At Partition of 1947, there were about 11 composite textile mills in East Pakistan with 1.1million spindles and 2.7 thousand looms. Spindles grew to 3.2 million in 1956 but declined to 0.8 million in 1972 as worn-out obsolete spindles went out of operation. In 1972 large-scale manufacturing units including textile mills were nationalized. After 1982, state owned spinning mills were gradually denationalized. By 1999, spindles installed were 2.4 million in the private sector as compared to 0.4 million in the public sector.

Most spinning mills of Bangladesh produce low-grade yarn. The existing capacity is not enough to produce good quality combed yarn and polyester/cotton blended yarn for meeting there requirement of garment industry. The products of the spinning sub-sector are cotton yarn of different counts, polyester, synthetic yarn, woolen yarn and blended yarn mixed of cotton and polyester. Yarns are being used by the weaving sub-sectors like specialized textiles, hand looms, and knitting and hosiery. In 1999, yarn production of 112 million kg satisfied only 22% of total yarn requirement of the country. The growth of mill weaving loom age capacity was slow (2% annually) during 1947-56 but was faster (4.6% annually) during 1957-72. Like the spinning mills, the weaving mills with6.8 thousand looms, which were in composite mills, were also nationalized in1972. Loom age capacity was more or less the same until 1983 when privatization of nationalized mills was undertaken. Loom age capacity reduced to 3.9 thousands in 1999 from 6.3 thousands in 1983 as the old obsolete looms went out of operation.

The products of modern weaving are cotton fabrics used as sari, dhoti, lungi, blouse, shirting, drill, long cloth, poplin, saloon, Grey marlin, etc. These fabrics are woven in narrow strips and in addition, they cannot be used in the garments industry because of their low quality. In 1999, fabric production of 25 million meters cannot even meet 1% of the domestic fabric requirement. The specialized textiles sub-sector, loom age capacity of which varies from 10 to 50, started in mid-seventies. In 1976, it had 800 looms with annual production capacity of 15.6 million meters of fabrics. Its loom age capacity rose to 3,500 in 1983 indicating a 23% annual growth rate. Its yearly growth rate was slower (about 16.5% annually) during 1983-99. Fabrics produced in this sub-sector are mostly cotton, polyester and cotton-polyester blended types. Main products are nylon saris, household linens, curtains, shirting, suiting, nets, pocketing fabrics, velvet cloth and fabrics for draperies.

Knitting and hosiery units catered to the domestic need with 3,000 machines in 1952 and 1,562 machines in 1976. Only after the 1980's, the products of this sub-sector gained access to export market. The annual growth of machine capacity satisfying domestic market was about 5.3% for the period 1976-83 and only 2.1% for the period 1983-99. In this period, 1,390 circular knitting machines were added to the capacity to satisfy the export demand. However, the situation on the knitting side looks better than in weaving. The main products of this sub-sector are vests, underwear, T-shirts, polo shirts, ladies undergarments, socks, mufflers and sweaters. During 1956-76, modern dyeing facilities were limited to composite mills and traditional hand-dyeing facilities to hand loom industry. Automatic and semi-automatic dyeing-printing-finishing facilities were set up in the private sector after 1976. The annual growth in the semi-automatic dyeing and finishing units was 17.4% during 1976-83 and only1.9% during 1983-99. It was 6.3 and 7.7% for automatic dyeing and finishing units for the two periods respectively. Manual dyeing still exists in the hand loom sub-sector.

The overall growth performance of modern textiles excepting the export-oriented garments industry has been very poor with only very limited investment taking place in weaving sub-sectors and relatively more new investment in the spinning sub-sector. Modern textiles have developed in haphazard and footloose manner with little balancing among spinning, weaving, and dyeing-printing-finishing sub-sectors. Most mills are unbalanced with their own structures, and suffer from technological and production shortcomings. Over the years the links between the downstream textiles and garments sub-sector remained weak. Bangladesh entered into export market of readymade garments (RMG) in 1977. Exports of RMG grew at a very fast rate during the last two decades. But this growth has not been supported by a growth of the backward linkage facilities. The RMG industry has to depend upon imports for 85% of fabrics and 40% of yarn required for this expanding export market.

As of 1999, the textile sector of Bangladesh may be characterized by the following facts: there were 2.8 million spindles with an annual production capacity of 200 million kg of thread; the total number of looms were 3,900;1,200 in private sector and 2,700 in public sector and the annual production capacity was 66.9 million meters of cloth. All the specialized textile mills were in the private sector and they had 40,500 looms producing annually 69million meters of cloth. The number of body machines/circular machines in knitting and hosiery sector was 8,884, of which 5,753 operated for export market. There were 250 dyeing and finishing units - 175 semi-automatic and 75automatic and the number of export oriented RMG manufacturing units was 2,650having an annual production capacity of 1.8 billion pieces.

The total demand-supply gaps of fabric and yarn for 1996-97 were 2,433 million meters and 429 million kg respectively. These gaps would increase to 3,717 million meters and 639 million kg respectively by 2002. This speaks of this textile sector as an important area for potential investments. The investment in this sector is also attractive because of low wage ($40-70dollar) per month, and relatively low cost of infrastructure required for setting up textile mills. In an international environment cost of capital and labor in HongKong, Korea, Singapore and Taiwan etc. are rapidly increasing. The government policy also encourages private investment, especially foreign investment in the textile sector by allowing special facilities such as (a) tax holiday for five, seven, nine and twelve years for industries set up in the developed, less developed, least developed, and special economic zones respectively, (b) tax exemption on royalties, technical know-how and technical fees, (c) tax exemption on interest on foreign loans, (d) tax exemption on capital gains, (e) avoidance of double taxation, (f) exemption of income tax for foreign technicians for a period of up to 3 years; (g) remittance up to 50% of the salary of the foreign underemployed in Bangladesh, (h) facilities for repatriation of invested capital, profits, and dividends abroad, and (i) provision for treating reinvestment of repatriate dividend as new foreign investment.

Bangladeshis a member of the World Trade Organization and its exports of RMG products are benefiting from the Most Favored Nation status including the post-Uruguay Round tariff rates and reductions in them made by all major developed nations. Bangladesh is favored partner in the Generalized System of Preferences of the EU. It is also a signatory to the Uruguay Round Agreement on Textiles and Clothing. It concluded bilateral Multi fiber Agreement (MFA) on trade of textiles and clothing with Canada, EU and USA.MFA restrictions on textiles and apparel trade will be withdrawn in phases by2005 creating a more competitive environment when access to export market will not be as assured as under the current quota system.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA):

BGMEA (Bangladesh Garment Manufacturers and Exporters Association) a recognized trade body that represents export oriented garment manufacturers and garment exporters of the country. Starting in the late 1970s as a negligible non-traditional sector with a narrow export-base, the Readymade GARMENT INDUSTRY emerged as a promising foreign exchange earning sector of the country by the year 1983. Since then, this sector has been acclaimed as the thrust sector of Bangladesh economy. BGMEA had only 12 members at the time of its inception in 1977. At present day this organization is run by a 27-member board of directors elected for tenure of one year. The board is headed by a president who is assisted by four vice presidents and a qualified team of officials. The BGMEA set up its regional office in Chittagong in 1985. Chittagong is a strategically important commercial port and the gateway for all RMG exports.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is the apex trade body that represents the export oriented woven, knit and sweater garment manufacturers and exporters of the country. Readymade Garment (RMG) is the leading sector of Bangladesh in terms of employment, production and foreign exchange earnings. Readymade garment (RMG) alone earned about 78% of the yearly foreign exchange earning of the country. About 3.6 million people are employed in the garment sector. The growth rate of RMG export was over 20% per over the last two decades.

The importance of RMG sector can hardly be over emphasized. There has been a steady growth in the field of RMG during last two decades. The RMG industry enjoyed a meteoric rise from 30 enterprises in 1980 increased to about 5150 in 2010-11 fiscal years. The growth of the industry in terms of number of units and employment generation is shown in Table below:

Table: Growth of the industry and Employment

|Year |Number of Garment Factories |Employment in Million Workers |
|1983-84 |134 |0.040 |
|1984-85 |384 |0.115 |
|1985-86 |594 |0.198 |
|1986-87 |629 |0.283 |
|1987-88 |685 |0.306 |
|1988-89 |725 |0.317 |
|1989-90 |759 |0.335 |
|1990-91 |834 |0.402 |
|1991-92 |1163 |0.582 |
|1992-93 |1537 |0.804 |
|Year |Number of Garment Factories |Employment in Million Workers |
|1993-94 |1839 |0.827 |
|1994-95 |2182 |1.200 |
|1995-96 |2353 |1.290 |
|1996-97 |2503 |1.300 |
|1997-98 |2726 |1.500 |
|1998-99 |2963 |1.500 |
|1999-2000 |3200 |1.600 |
|2000-2001 |3480 |1.800 |
|2001-2002 |3618 |1.800 |
|2002-2003 |3760 |2.000 |
|2003-2004 |3957 |2.000 |
|2004-2005 |4107 |2.000 |
|2005-2006 |4220 |2.200 |
|2006-2007 |4490 |2.400 |
|2007-2008 |4743 |2.800 |
|2008-2009 |4925 |3.500 |
|2009-2010 |5063 |3.600 |
|2010-2011 |5150 |3.600 |

Out of 3.6 million manpower employed in BGMEA member factories, 2.88 million are women (80%), majorities of them are disadvantaged and economically poverty stricken women folk. The country's RMG sector, to a creditable level has relieved Bangladesh from over populous unemployment burden through providing the largest employment next to agriculture, transport, trade and industry sector. This sector has uplifted the neglected section of the population, thus radically transforming the socio-economic condition of the country. Such empowerment and employment raised awareness regarding children education, health safety, population control disaster management only so for. It is an epoch making event in the history of Bangladesh.

Main Functions of BGMEA:

BGMEA is being run by a 27-member elected Board of Directors. Four Vice Presidents having important portfolios, along with a secretariat of experienced officials, assists the Board in formulating and executing vital policies and programs of the organization. The President is the highest executive authority of the BGMEA.

The fundamental objective of BGMEA is to establish a healthy business environment for a close and mutually beneficial relationship between the manufacturers, exporters and importers in the process ensuring a steady growth in the foreign exchange earnings of the country. BGMEA issues UD to its exporters thereby monitors export as well. BGMEA plays a very strong role to lead the industry in concurrence with the government. The following are the regular activities of BGMEA for its members, apparel buyers and other partners.

➢ To Protect and uphold the interest of the industry by aiding the formulation of government policies consistent with a congenial growth of the sector.

➢ Committed to protect the interests of its members and their employees by implementing legitimate rights and privileges for garments workers.

➢ To negotiate and consult with foreign and local agencies to promote the garments sector in every possible fields.

➢ To maintain liaisons with foreign buyers, business associations and chambers.

➢ To provide foreign buyers with all necessary information regarding all issues concerned with the RMG sector.

➢ BGMEA brings the opportunities for local manufacturers to interact with foreign buyers and form new rapport by arranging different apparel fairs at home and abroad.

➢ To keep the BGMEA factories child labor free through continued monitoring.

➢ Continue and expand collaboration with relevant Ministries of the Governments.

➢ Continue educational support to workers’ children and make a provision for skill training for children removed from the BGMEA’s member factories.

➢ Provides information services to its members by publishing monthly newsletters, issuance of circulars and through Dhaka's first B2B web portal, which directly links exporters and buyers around the world.

➢ BGMEA also established its own Institute called "BGMEA Institute of Fashion & Technology (BIFT)" in 2000. Till the day BIFT is continuously developing professionals for this sector through the courses of Fashion Designing and Garment Merchandising; and other certificate, diploma and short courses. Transforming it into University is under process.

➢ Promotes computer-oriented solutions for better management to its member units.

➢ Participate actively in all trade negotiations for the sector in order to get easier market access and GSP benefits.

➢ BGMEA's appointed lobbyist firm has been working to get duty free access in the US market.

➢ BGMEA has introduced Service Books for each and every workers employed in the factories.

➢ BGMEA is going to launch a workers welfare committee in the factories.

➢ BGMEA has ensured the minimum wage implementation to the tune of 99.99% of all factories.

➢ BMGEA has set up a Crisis Management Committee for emergencies.

➢ BGMEA regularly helps out the victims of natural calamity by providing relief, rehabilitation and other support. BGMEA stood beside the SIDR affected people with huge relief and support. BGMEA also rehabilitated 100 families by establishing a weaver's village (Taath Palli) in Manikgonj.

➢ BGMEA provides scholarship to meritorious children of the garments workers. Each year 2000 students are getting the scholarships at Dhaka and Chittagong.

➢ BGMEA runs training programs through 27 TechnicalTrainingCenters and 3 other centers with the objective of producing skilled workers for the RMG sector. More than 15000 trainees will be shaped up through this program and BGMEA will appoint them in the factories. BGMEA has trained and employed 15,000 people till the date.

➢ BGMEA is in the process of taking over 34 vocational training centers to provide various skill sets to the unemployed.

➢ BGMEA regularly conducts fire drills and fire safety program at the member factories. Although 9 fire incidents took place in 2010, there were no casualties.

➢ BGMEA runs 12 medical centers for its workers and provides HIV/AIDS awareness. Around 6 million workers have already received medical treatment and 80,000 workers have been made aware of HIV/AIDS and reproductive health.

➢ BGMEA is going to develop a central database system for the garment workers, which will cover all workers' information of the readymade garment sector.

➢ BGMEA is going to start a UD automation system to speed up custom procedures. Such online system will bring dynamism in a way that reduces lengthiness in custom procedures.

➢ BGMEA has distributed essential food items among workers at subsidized price during the last Ramadan through 12 centers at Dhaka and Chittagong.

A Memorandum of Understanding (MoU) has been signed between BGMEA and IFC-SEDF on 17th June 2008 to monitor occupational safety and health status of the workers employed in the member factories of BGMEA operating at Dhaka. Under this program all the running factories at Dhaka have already been audited by the social compliance monitors of BGMEA and a database in being prepared.

Below I provide a Table where we can see the Bangladesh's RMG Export to World

|Bangladesh's RMG Export to World (FY08-09, FY 09-10, FY10-11 & FY 11-12 ) |
|Million US$ |Woven |Knit |Total |
|Major EU Countries |
|RMG Industry in Bangladesh |
| |

Public Sector:

The public sector is that portion of the industry controlled by organizations that are part of the government. The factories in the public sector enjoy certain privileges such as government funding.

However, in Bangladesh, factories in the public sector are not well supervised. There are frequent changes in officers, and many of these officials do not have a personal interest in the factory for which they are responsible. 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:

The rural group of textile producers includes operators of handlooms and a number of organizations which employ rural women, such as BRAC, or the Bangladesh Rural Advancement Committee. The Handloom industry provides employment for a large segment of the population of Bangladesh. The industry also supplies a large portion of the fabric required by the local market. Factories in this sector are usually well looked after by the owners and are quite productive, considering the equipment available. 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. This, as the term suggests, is made up of those factories owned by companies or entrepreneurs. 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:

The phenomenal expansion of the RMG industry in Bangladesh and the dramatic increase in the population in addition to an increased standard of living in the country has led to a large demand-supply gap as shown by the following table. 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. The finishing sub-sector currently is able to process all of the locally produced grey, but will need to expand at as with the weaving and knitting sub-sectors.

All sectors of the textile industry face many of the same challenges. These 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 was told 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 face various other problems.

The Spinning Sub-Sector:

Problems related to spinning have an extremely negative impact on the textile industry. The production capacity of the spinning sub-sector is estimated at approximately 183 million kg per year. However, only 125.16 kg, or 67.3% was produced in 1997-98.

One of the main causes of this under production in the spinning sub-sector is the fact that approximately 38% of the spinning mills in the country are more than twenty-five years old and therefore are not able to produce as much yarn as their initial capacity. The principal reason behind the machinery being so outdated and poorly maintained is the high import duty on textile machinery and their spare parts. Many have not been maintained or repaired as they should have been because in addition to the high cost of the spare parts, there is a shortage of technicians in this field, resulting in both very expensive and sub-standard repairs. Other reasons for the low production figures include frequent power failures, a shortage of raw materials, a high import duty on raw materials used for local consumption, and a high percentage of wastage. The labor productivity in the spinning sub-sector is also lower than that in competing countries. The output of labor in the industry is about 0.65 kg per man-hour. A recent World Bank survey indicated that the number of spindles installed in Bangladeshi spinning mills could produce twice as much yarn while using only 10% of the labor force. Obviously, obsolete machinery is having an extremely negative impact on Bangladesh's textile industry.

The Weaving Sub-Sector:

The shortage in supply from the spinning sub-sector also has a negative impact on the amount of grey produced. The unmet demand for yarn is filled by importing 3.15 billion meters of grey annually. In order to import grey, the subsequent sectors have to invest more in transportation, import taxes, etc., resulting in a more expensive end product.

The weaving sub-sector is plagued by a lack of organization and coordination. There are many small-scale manufacturers dispersed all over the country, which results in replication and a lack of specialization. Instead of working in organized groups, many of the small producers try to do everything on their own, leading to an end product of inferior quality.

The Handloom Sub-Sector:

The handloom industry, traditionally an important part of the textile industry in Bangladesh, is still responsible for a very high percentage of the nation's economy. It is the second largest source of rural employment after agriculture. Even without being dependent on electricity, there are numerous problems faced by the handloom industry.

Many of the weavers cannot work steadily due to the irregular supply of the yarn, dyes, and chemicals they require. The primary reason for this is that many of these producers are located in places with poor access to transportation. Most of these weavers obtain their raw materials from brokers at their local levels. These brokers gather money from many small scale manufacturers and travel to the urban centers to purchase the required materials, which they then take back to the weavers. Unfortunately, not all of these brokers are very experienced and some are dishonest. Those in the handloom industry are very vulnerable; even a minor problem such as a heavy rainfall might prevent them from obtaining their raw materials or selling their finished product.

Most export oriented garment factories reject a large quantity of the grey produced by the rural handlooms in Bangladesh. When I examined fabrics of similar type and patterns, one of which was produced using handlooms, and the other on power looms, the superiority in uniformity and quality of the cloth produced using the power looms was obvious. In addition, handlooms also have a narrower width than power looms, and usually cannot produce fast enough to meet the deadlines set by export oriented customers.

Knitting/Hosiery:

The hosiery industry produces different types of products such as undergarments, socks, stockings, and other soft apparel. These factories were originally designed for the local market, but recent improvements in quality have propelled them to enter the export market and knitting has become another rapidly growing textile sub-sector. The Knitting and Hosiery sub-sector is faced with the lack of modern facilities needed for producing quality fabric. There is also a shortage of raw materials in the sub-sector. However, the factor that has the most negative impact on the industry is the lack of working capital. Even though the sub-sector has to overcome some obstacles, it has been extremely successful recently. Currently the demand for knit grey can be met locally. The quality of the local knit grey is also competitive as most of the knitting units have been installed recently and the machinery is not obsolete.

Dyeing, Printing, and Finishing:

Dyeing, printing, and finishing, the final steps in the textile industry, are also the most complicated processes. It is the quality of this work that determines the appearance of the fabric and thus its marketability. In order to be competitive in the future, this sub-sector of the textile industry will need to expand at the same rate as the weaving sub-sector, in order to make the country self-sufficient in grey production.

The dyeing, printing, and finishing sub-sector has improved dramatically over the last five years. However, due to a lack of modern equipment and facilities, the majority of dyeing, printing, and finishing units are still unable to meet the standard of quality demanded by the export-oriented RMG industries, or the export market. Those that are producing fabric suitable for export are heavily dependent on imported grey. As is the case with most imported goods, they face a number of restrictions, such as import taxes, transportation, and various others. However, the successful expansion of the knitting sub-sector has made the country self-sufficient in all knit grey.

The 2005 Challenge:

In the year 2005, some of the international policies regarding the export of textiles and garments will change, which may present the Bangladeshi textile industry the greatest challenges it has had to face so far. There is much speculation at present about the situation of the RMG exporters in the post-MFA period, when the World Trade Organization, or WTO, instead of GATT will control the sector. Under the WTO all quotas will be removed, resulting in a free market worldwide.

Bangladesh's garment and textile manufacturers will have to face steep competition from countries such as India, Pakistan, China, and Thailand, from whom the country now imports fabric to meet the demands of its RMG sector. When the WTO free market is established, all these countries will be able to expand their RMG exports, now limited by quotas. As a result, these countries will be able to utilize more of their locally produced yarn and fabrics internally, resulting in the rise of prices for these in the export market, putting pressure on the industries of countries such as Bangladesh.

The Government:

To aid the expansion of the textile industry in Bangladesh, the government is currently providing numerous incentives.

1) Bonded warehouse facilities:

These facilities allow export-oriented factories to import their raw materials duty free. However, the bonded warehouses privileges have not been monitored closely enough, which has resulted in them being abused. The materials imported duty free to be used for producing garments intended for export are sometimes released into the local market. The leakage of these inexpensive items into the local market cause unfair competition for local producers.

2) Duty Exemption Drawback Organization, or DEDO:

Factories which do not take advantage of the bonded warehouse facilities and import their raw materials independently can claim the duty they paid under the Duty Exemption Drawback Organization, or DEDO. Provided that the finished goods are being exported. This system is mostly applicable for the dyeing sub-sector of the textile industry.

3) 25% export cash incentive:

For producers who do not use their DEDO or the bonded warehouse privilege, and utilize local materials. These producers obtain a 25% cash compensation from the government for the items they export.

4) Tax holiday - Five to nine years of tax exemption for new factories.

5) Duty free importation of raw materials of export in the RMG.

6) Avoidance of double taxation for joint venture projects.

7) Income tax exemption for up to three years for foreign technicians.

8) Duty free import of capital machinery.

Other steps are also being taken. The Government of Bangladesh has devised a Textile Policy designed to make the country competitive in the WTO free market by 2005. Its main objective is for the country to achieve self-sufficiency in yarn and fabrics to meet the needs of the RMG industry through backward linkages and by encouraging investments by private investors.

The Textile Policy makes some of the following suggestions in order to develop the sub-sectors of the industry in a harmonious manner.

• Closer monitoring of leakage in the market • Appoint an advisory committee to represent the industry to the government • Improvement of research and computer technology • All sectors of the industry will be Modernized • Rehabilitated as much as possible • Tariffs will be rationalized • Spinning • 116 new spinning mills each having the capacity of 25,000 spindles will be established immediately • Weaving • 223 modern weaving units each with an annual capacity of producing ten million meters will be set up • Handloom • Supervised credit system for long term loans will be established • Necessary training will be provided • Various means of encouragement and exposure will be established such as exhibitions and competitions • Dyeing, Printing, and Finishing - new units will be set up with appropriate technology • Bonded warehouse will be provided until local grey production can meet the quality and quantity required by the sub-sector • Duty on dyes and chemicals will be withdrawn
However, from my analysis of the Textile Policy, it appeared to be very theoretical and failed to address a number of issues.

1. The policy calls for the establishment of many new factories and projects, but does not provide a scheme for financing them.

2. The lack of training and technology is mentioned, but no steps are suggested for enhancing the skills of the workforce and engineers.

3. No suggestions are made for setting up institutions to conduct the technical and marketing research needed to upgrade the quality of Bangladeshi products to make them more appealing in the international market.

4. The need for the expansion of the Bangladesh's infrastructure such as road, port, and railway capacities to accommodate increased imports and exports is not mentioned.

5. The great problems arising from the shortage of land on which to build the necessary factories is also not considered.

6. The policy states that environmental pollution is negligible, but does not go further into the matter. However, it was very obvious to me on one of my factory visits that affluent treatment and disposal in the industry is a very serious problem.

7. The need for more power is mentioned, but no plans have been devised on how the expansion will be undertaken.

Annual Review of Export Receipts (2011-2012)

Total export receipts of Bangladesh (including exports of EPZ) during the financial years, 2011-2012 and 2010-2011 amounted to Tk. 180310.0 crore and Tk. 145007.6 crore or US $ 22843.5 million and US $ 20313.8 million respectively.

The overall position of export receipts in Taka and US dollar for the years
2011-2012, 2010-2011 and 2009-2010 are shown in tables (A) and (B) respectively.

Table A

| | | | |Changes |Changes |
|Type of Transaction |2011-2012 |2010-2011 |2009-2010 |(1-2) |(1-3) |
| |1 |2 |3 |4 |5 |
|Cash |153224.5 |125005.7 |87269.1 |28218.8 |65955.4 |
|EPZ |27085.5 |20001.9 |14879.1 |7083.6 |12206.4 |
|Total |180310.0 |145007.6 |102148.2 |35302.4 |78161.8 |
|(Changes in %) | | | |(+24.3) |(+76.5) |

Table B

| | | | |Changes |Changes |
|Type of Transaction |2011-2012 |2010-2011 |2009-2010 |(1-2) |(1-3) |
| |1 |2 |3 |4 |5 |
|Cash |19418.0 |17512.9 |12613.3 |1905.1 |6804.7 |
|EPZ |3425.5 |2800.9 |2150.5 |624.6 |1275.0 |
|Total |22843.5 |20313.8 |14763.8 |2529.7 |8079.7 |
|(Changes in%) | | | |(+12.5) |(+54.7) |

Recent Most Memorable Tragedy of Textile Industry

Savar Rana plaza collapsed:

Hardly has the South Asian nation of Bangladesh come out of two deadly fire incidents that killed at least 350+ people, yet another tragedy has struck the country’s readymade garment sector.

A nine-storied building, which housed four garment manufacturing units, situated in Savar, on the outskirts of the capital Dhaka, collapsed on April 24, killing at least 350+ people and injuring more than 2500+ others, according to Government officials. Bangladesh Home Minister Muhiuddin Khan Alamgir said the building might have collapsed due to faulty construction.The last apparel factory collapse was of Spectrum Garments in Baipalli in Savar, about eight years ago, which resulted in death of 64 workers. However, the last major building collapse in Bangladesh was in 2010, when at least 25 people were killed in a four-storey building collapse in Dhaka. Incidentally, Bangladesh is home to one of the largest clothing industries in the world, which supplies apparel at competitive price to several major Western retail brands. However, following the November Tazreen fire incident, Western buyers have urged Bangladesh factory owners to improve safety standards. Earlier this week, a report released by The World Bank said the garment industry of Bangladesh is suffering from a severe image crisis in the international markets because of concerns about labor safety arising from recent fire incidents in two garment factories. The latest disaster might further dent the image of Bangladesh and make buyers re-think about sourcing apparels from the least developed country.

Fire on Tazrin Fashion:

140+ people were believed to be dead after fire swept through a clothing factory outside Dhaka, recovered 124 bodies from the Tazrin Fashion factory in Ashulia Savar, about 18 miles outside the capital city. The fire started Saturday night and quickly moved through the lower floors of the building.Abu Naim Mohammad Shahidullah, director general of fire service and civil defense, told reporters an electrical short circuit may have been to blame for the fire, though an investigation would be conducted to determine the cause.The fire left scores of workers trapped on the upper floors while rescue crews contended with difficult access to the area, officials said."The main difficulty was to put out the fire; the sufficient approach road was not there," Salim Nawaj Bhuiyan, a retired fire official who now runs a fire safety company in Dhaka, told The New York Times. "The fire service had to take great trouble to approach the factory."The army was also on the scene. Troops were seen in television footage carrying out bodies of the victims while a crowd of hundreds of onlookers watched, the Press Trust of India said.The Times said Bangladesh's thriving garment industry has been experiencing growing tensions between factory owners and workers who are among the lowest paid in the world. A union organizer was tortured and killed earlier this year by unknown culprits who dumped his body outside Dhaka.

Conclusion:

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.

I 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:

www.gogle.com, www.wikipedia.org, www.textilerecords.com, www.textiletodaybd.com , www.textilelearner.blogspot.com etc.