Backward linkage, more value addition must for growth of textile sector BTMA President Abdul Hai Sarker tells Holiday in an exclusive interview.

Shamsul Huda

"Although the country does not grow cotton or manufacture textile machinery, Bangladesh has attained the status of the world's third largest readymade garment (RMG) exporter thanks to its world-class yarn, high-class denim, other fabrics and quality apparels," said Bangladesh Textile Mills Association (BTMA) President Abdul Hai Sarker.
   "At present, Bangladesh accounts for only 2 per cent of the $500 billion world textile business. As we have acquired much advanced technology, forward linkage, and skilled manpower, we can boost the export of both fabrics and RMG a lot in the coming days," said Sarker who was an ex officio CIP for the year 2007.
   "We must understand the pulse of the world textile business to sustain our local industry. Besides, excessive dependence on imported fabrics also poses a threat to our business. Unless we can go for a significant value addition, the whole industry may face a collapse in the long run," he pointed out.
   Bangladesh RMG units now add only 20 per cent value, while foreign companies get the credit of the remaining 80 per cent value addition for the fabric, machinery and accessories the RMG manufacturers import from them.
   
   Strong backward linkage
   "So, if a strong backward linkage industry develops here, it will be easier to add more value to our RMG products. For example, China, the world's largest RMG exporter, owns a strong backward linkage industry. She produces its own cotton, machinery and accessories. If Bangladesh continues to depend heavily on imported fabrics, it will lose out in competitiveness in the international market to China and other rival countries, and within a few years they may even cannibalise our share of the export market," warned the BTMA chief.
   Bangladesh's textile sector with billions of dollars of investment and millions of workers will be in a dire crisis, if the Government and the RMG entrepreneurs fail to feel the world textile business pulse accurately, he said, adding that for the overall development of the nation, there must be better co-ordination between the RMG exporters and the textile product manufacturers.
   Speaking on the need for a strong backward linkage industry, Sarker said, "We cannot afford to ignore the sub-sectors." Woven fabric-based RMG export minus a strong backward linkage will disturb the rhythm of the whole chain of production to export. The Bangladesh Garment Manufacturers and Exporters' Association (BGMEA) should take initiatives to help grow the backward linkage industry, he added.
   
   Policy support essential
   Sarker said, a sustainable development of backward linkage would ultimately help Bangladesh get duty-free access of its products to the US market. For this, a coordinated policy support is essential for both the apparel manufacturers and the RMG exporters, "as our goal is the same - to earn money for the country's economic development".
   Under such a policy, all the sub-sectors should be linked to one another. A strong unity is the way to flourish the entire sector, as has happened in the neighbouring India and Pakistan, each of whom has developed a strong backward linkage for the apparel sector. Their governments also actively help the sub-sectors get united.
   They also have an additional advantage over us - they have inherited domestic cotton production and a machinery and accessory manufacturing system.
   "If we can make united and coordinated efforts, we also can pressure our government, like they have done, to formulate an appropriate policy and offer various incentives and support," he said. "Our unity will enable us not only to survive but also to be creative in the textile and RMG business."
   Bangladesh as a least developed country (LDC) enjoys the Generalised System of Preference facilities offered by the European Union. Following the abolition of the quota system in the US market, Bangladesh is now trying to get duty- and string-free market access.
   "If we had a strong enough backward linkage industry, we could get duty-free access even a couple of years ago," Sarker maintained.
   Bangladesh should continue the current two-stage manufacturing process, which will ensure it getting the GSP facilities in RMG export to the EU, he said, adding it would also help the country develop the required backward linkage.
   "We do have a wide scope for increasing our present international market share as among the LDCs, Bangladesh has flourished its textile industry to a significant extent,' Sarker observed.
   
   Avert misunderstanding
   He said, "We cannot stop the expansion of the free market economy. But, measures should be taken to safeguard local industries for their survival, diversification, and creative growth. Any misunderstanding and rivalry and tendency to turn a millionaire overnight may hamper the growth."
   The BTMA president also termed rising inflation as a growing problem for the entire economy, including, of course, the businesses. He said, "The state machinery should take effective measures to rein in inflation. The government's borrowing from the banking system also needs to be reduced and a fund should be instituted to provide money for massive and rapid industrialisation."
   
   Double taxation
   As the textile industry is contributing to poverty alleviation by generating employment opportunities, the existing bottlenecks like double taxation should be removed for its growth and sustenance, Sarker said. "Now we have to pay 37.5 per cent tax on our earnings. After paying the 37.5 per cent of the profit as tax, we invest the rest for expansion of our businesses, on which the government again charges a 25 per cent tax. Such a double taxation is hampering the sector's growth."
   The BTMA chief also emphasised the need for more proactive role of Bangladesh missions abroad in promoting Bangladeshi goods and enhancing their export. The local entrepreneurs are dissatisfied at the lack and even absence of assistance they receive from Bangladeshi missions. Without proper support from them, it is really difficult for the entrepreneurs to strike profitable deals and manage product marketing efficiently.
   The overall port services are okay now. If they can be smoothened further, foreign trade will see a boost while the lead time and business costs will also be reduced, pointed out the textile business leader.
   Textile, the most capital-intensive sector, requires much power to operate. Due to the ongoing power supply shortfall, some of the large textile units are generating the electricity they require on their own. But it is not possible for all the factories as the power generation cost is huge. Moreover, the prices of fuel oils needed to run the generators are also increasing every day, said Sarker.
   Finally, he underscored that textiles, being an export-oriented and import-substitute sector, deserves to get special attention from the Government, because it contributes much to the GDP growth, creates jobs, and helps the wheels of the economy keep rotating.

^ TOP OF THIS PAGE ^ MAIN PAGE

Global banking giant HSBC has recently showcased different business opportunities in Bangladesh to representatives from around 50 major US companies at the bank's New York City office, a press release says.
   Chief Executive Officer of HSBC Bangladesh Steve Banner delivered a 2-hour presentation in this regard styled 'Understanding and Navigating Opportunities in Bangladesh' to highlight different aspects of the country's business climate.
   The presentation provided potential US buyers/investors with insights into the opportunities available in Bangladesh. The presentation, which covered import/export regulations, investment guidelines and opportunities within export processing zones, was followed by a question and answer session.
   Banner said: "Given the rising production costs in other countries, Bangladesh is attracting an increasing amount of interest from international buyers and investors. I was therefore delighted when my HSBC colleagues in New York invited me to speak to some of their largest US customers about the opportunities in Bangladesh."
   The audience was very knowledgeable, and there were many large companies that were very keen to link up with potential suppliers in Bangladesh, he said.
   "Given our global network, HSBC is in a unique position to put its overseas customers, in this case in the USA, in direct contact with HSBC customers in Bangladesh. Hopefully this event will result in new orders for some of our customers in Bangladesh, as well as increased investment in the country," the HSBC Bangladesh chief said.
   "The event was so popular that we are now planning a similar programme for companies based on the US West Coast."
   HSBC is a leading bank facilitating international trade to and from Bangladesh, having handled 9.7 per cent of the country's exports in 2007.

^ TOP OF THIS PAGE ^ MAIN PAGE