Post COVID-19 strategy: Needs to bridge between global and domestic demand for textile products

The coronavirus creates a devastating impact on the market in general, from small shops to big multinational companies. Of course, the textile market is also being affected severely, which is alarming for Bangladesh as the textile industry is the backbone of the country’s economy.

Foreign investors own only a 5% share of the textile factories in Bangladesh, where most of the production is being controlled by local investors.  In the financial year 2018-2019, the RMG industry generated US$34.13 billion, which was 84.2% of the total export earnings of the country and around 12% of the GDP (31.6 Bn).

Global business scenario has already been changed, after Covid-19 the scenario will be more significant. Now the textile industry needs to set a plan for survival, and time demands to make separate plans for the apparel industry and textile industry. I will discuss here the present scenario of the Bangladesh textile industry and opportunities for Bangladeshi Textile (and Primary) Industry.

Trade balance of Bangladesh: After the liberation, Bangladesh saw consistently negative Balance of Trade (BOT)

Fiscal Year	Total export (in bn. US$)	Total import  (in bn. US$)	Balance Of Trade (in bn. US$)
2010–2011	$22.93	$32.00	-$9.07
2011–2012	$24.30	$35.92	-$11.62
2012–2013	$27.09	$34.09	-$7.00
2013–2014	$30.10	$34.08	-$3.98
2014–2015	$31.20	$40.69	-$9.49
2015-2016	$34.97	$40.08	-$5.11
2016-2017	$35.00	$44.83	-$9.83
2017-2018	$36.63	$54.46	-$17.83
2018-2019	$40.53	$55.44	-$14.91

In the last 5 years, the average remittance in the banking channel was around 14 Billion USD/year, which is one of the major strengths of the Bangladesh economy.

In the textile sector, the import value is increasing every year. Bangladesh is the world number one importer of raw cotton as well as textile capital machinery and other raw material.

Value addition against apparel export

Most of the Bangladeshi apparel company does 40% back to back L/C for import raw material from a foreign country.

If we consider the capital machinery import and other imports the real value addition in the apparel industry will be around 50%.

Fiscal Year	RMG Export * (US$ Million )	Back to Back Raw Materials Import** (US$ Million)	Back to Back Raw Materials Import as % of Total RMG Export	Value Addition (% Share)
2012-13	21515.73	8226.97	38.24	61.76
2013-14	24471.88	9663.53	39.49	60.51
2014-15	25491.4	9591.72	37.63	62.37
2015-16	28094.16	10210.63	36.34	63.66
2016-17	28149.89	10760.12	38.22	61.78
2017-18	30614.76	11957.8	39.06	60.94

It indicates that whatever we earn from export in the apparel sector, of them, 50% is again used to execute the export. It also indicates the net value added in the apparel industry is almost the same amount as a foreign remittance. We need to focus on how to reduce the import goods to execute the export.

Present status of Bangladesh textile industry

As per the Bangladesh Textile Mills Association (BTMA) below is the present textile factory summery in Bangladesh.

Yarn Manufacturing Mills	433 Units
Fabric Manufacturing Mills	809 Units
Dyeing-Printing-Finishing Mills	246 Units
Total	1488 Units

And this is the primary textile sector (PTS) of Bangladesh to support as a backward industry of RMG unit. These 1488 units are mainly supporting the export-oriented garments industry. As per the BTMA, this 1461 industry invested 4.5 Billion USD in the country.

Once the export industry is squeezed or export order is under threat, this 1488 factories will also be in pressure and this private sector investment will face difficulties to survive.

The spinning sector of Bangladesh

In Bangladesh, 19 spinning mills are producing synthetic; 8 mills are producing Acrylic and rest 406 mills are purely Ring-Spun spinning mill mainly producing 100% cotton yarn and partial quantity of Blended Yarn.

Government policy for BTMA owned spinning mill

1. If Bangladeshi yarn is used by the RMG industry, Bangladesh Government will provide a 5% cash incentive.
2. The raw cotton import Duty, VAT, AIT everything is Zero.
3. The Land Border is not permitted to import any Cotton yarn, which is also helpful for the compatibility of the local spinning mill.
4. All of the capital machinery and initial raw material are imported duty-free for the Bangladeshi spinning mill.

Once the Bangladesh government stops to above support then immediately a 50% spinning mill will lose their business competency in this sector.

The present condition of Bangladeshi spinning mill

1. In the spinning sector, most of the mills invest a huge amount of money for brand new capital machinery (Europe and japan origin) but mostly producing 20/1 to 30/1 carded yarn.  It can be mentioned that the technical expert of this sector misguided the investor to produce low-end products from a higher price capital machine.
2. By using the same fiber Bangladeshi spinning mill manufacturing cost is at least 5% higher than India, China and Pakistan.
3. For the 40/1 and above count, Bangladeshi spinner manufacturing cost is almost 50 Cents/kg higher.
4. The productivity per spindle for an average count (30/1) is around 180 gm/spindle/shift in Bangladesh and India this is 220 gm/spindle/shift.
5. For making 30/1 viscose yarn in Bangladesh process wastage is around 6% but in china less than 1%.

Domestic demand for yarn

1. In Bangladesh handloom products mostly required 50/1 and 60/1 and higher count cotton yarn. And this product is mostly imported from abroad in both legal and illegal ways.
2. In local items there is also a huge demand of 100% viscose yarn (30/1 Viscose), which is mainly import from aboard in yarn form, also finished fabric imported.
3. There is also a big requirement of 50/2 spun polyester yarn as well as regular spun polyester yarn.
4. More on for the sweater industry local spinning mill contribution also very poor.
5. The 80/2 and 100/2 cotton yarn mercerized product can affordable by domestic consumers.

Opportunities for Primary Textile Industry (PTA)

1. If Bangladeshi spinning mill owners- like 5 industry mergers the marketing and procurement and planning management- then at least 15 cents/kg production cost will be less in overnight due to fixed count fixed plant. The productivity will increase by 20% as less count change and manpower will reduce 15%. Owners EGO is the main drawback to implement.
2. Some units can design only to fulfill the local demand; e.g. round the year makes only one count like 60/1 or 60/2 both for domestic and export. Only then the production cost will be the same as India.
3. Without detailed research, it can be told that once any mill produces only 30/1 viscose with a selling price of 5 cents higher than China (like 2.5 USD/kg) can survive in the business easily because of local demand.
4. Making coarser count cotton & jute blended yarn can meet up the local demand for home textile; denim fabric within a competitive price.

The present condition of Bangladeshi fabric mills

1. Now 40% yarn and fabric demand for woven RMG are met by Bangladeshi Primary Textile Sector (PTS) and rest is imported.
2. Due to the imported capital machine, imported basic yarn and raw material, higher rate bank finance, manpower, productivity the local fabric producing mills are losing the competency in the market.
3. There are some big invested denim mills and woven mills who cannot sell their fabric in a market price at the export market. Some big investment is going to be a bad example for the country.
4. Some big woven mills are importing capital machinery form Europe. All types of raw materials (yarn, chemical, spare)are imported from Europe, China and India and then finally need to sell the fabric in Bangladeshi export garments industry with price competitiveness on China, India and Pakistan. In this way, the earning CM will not help to survive the industry.
5. To make the value-added product in high investment factory is also a problem as Bangladeshi spinners do not support for yarn to make value-added products. As well as the total country image still is not ready to promote value-added product and value-added product market size also not so big.

Domestic fabric industry

In Bangladesh, since long the domestic garments and fabric are mainly produced in handloom. But due to functional demand, comfort, price the domestic demand and trend are changing day by day.

1. Fabric for the official dress of Bangladesh Police, Army, Navy, Air force and others are imported either in the yarn stage or in the fabric stage.
2. The outerwear garments or fabrics are mainly imported for the domestic market.
3. Still in Pakistan and Indian entrepreneurs are investing millions of USD in their country to meet up the Bangladeshi local demand of ladies’ dress.
4. The local home textile market is mainly import based.
5. The export surplus woven fabric which is available in the market- mainly imported to meet up the local demand.

The handloom census of Bangladesh

Handloom Census Year	Handloom	Total Loom unit	Manpower Involve	Total Manpower Employed
Factory	Household	Male	Female
1990	212421	571765	455642	1027407
2003	12819	170693	183512	472367	415748	888115
2018	581	115425	116006	133444	168313	301757

This Census is indicating that after 1990 there is 7 lac jobless people in this sector. If we exclude the garments industry, only Primary Textile Industry cannot create this amount of Job.

Still more than one lac Handloom weavers are doing their job to support domestic demand.

More opportunities for PTA

1. Bangladesh is a country of 170 Million people and their buying capacity is increasing every year.
2. BTMA can make a local survey of domestic demand accordingly to change the product plan.
3. In Bangladesh more than 1 lac handloom is active; once a 20% loom can possible to convert into a shuttleless loom then it can supply some basic grey fabric, which may use the export market as well. Like 40×40/133×72 Poplin, 50×50/144×80 Voile; 20×16/108×58 S twill can make low-speed shuttle less power loom in the household industry. In that case, the price of grey fabric will be competitive as well.
4. The large-scale production of different quality Chiffon and Georgette in the local mill can save a big amount of foreign currency for the country.
5. Once possible to convert 20% handloom weaver to shuttles loom weaver in the household industry and use the grey in the export market than end-product cost will meet the target. Microfinancing ( like 5 shuttleless looms in a weaver house); combined Sizing support in loom intensive area; processing and finishing support in a remote area can ensure the life standard of remote weavers.

Cost leadership, the best way of strategic marketing

Cost leadership is a result of the company’s efficiency, size, scale, scope and accumulated experience. A cost leadership strategy aims to utilize the scale of production, well-defined scope and other economies such as a good purchasing strategy, producing highly standardized products, and using modern and current technologies.

In Bangladesh, spinners were always getting fewer challenges in the business and for this reason, they were not concern about product cost, product diversification, etc. But now the time comes to survive without government subsidy. Need to make the competency like India and China as manpower and utility cost still less in Bangladesh than China.

Now end customer in Bangladesh is paying money for imported fabric, georgette share, Linen and other products. PTS needs to focus to get access to this market with a competitive price and quality.

Once the industry can offer similar quality and price for yarn and fabric compare to China and India then the buyer will not go for import rather go for a local source.

Can jute take some share of Flax?

The Flax fiber price is around 4 USD/kg and Jute Fiber price is below 1 USD/kg. Both fibers are natural Bast fiber. There is some similarity between physical properties and chemical properties on Jute and Flax.

Application-oriented research may give some answers. The bleached jute can blended up to 50% but still some difficulties and need some research to make it profitable.

The artificial coating on Jute Fabric (Fake leather finish) can be a good solution for a sustainable material source for Bag industry, Curtain industry and Covering industry. Anyone researches different application-oriented chemical finishes on Jute blended fabric, he/she will be a market leader.

Textile research and education in Bangladesh

In the last 10 years, the government expended more than 2000 Corer Taka for the development of Textile University, College and Institute. But the graduates always wanted to do work in the export industry, not in the primary textile sector.

Bangladeshi graduate has fantastic research and professional success in aboard in different upgraded parts of the textile sector.

Bangladesh textile and garments sector imports around 15 Billion USD/year. Bangladesh doesn’t need to do unique research on a big thing. Bangladesh needs research on how to do the standard copy with the quality of the goods that are being imported.

As a least developed country, the copyright law is reluctant for Bangladesh up to 2033 and during this time Bangladesh can copy other countries’ products to meet the domestic demand.

The research motto should ensure ‘textile sector Import tends to become zero either capital machine or raw material’.

Examples

• In spinning sector the entrepreneur expending millions of USD in every year for importing Bobbin (Simplex; Speed frame Ring frame). It can be made in Inject Mould plastic machine. Some are making it here, but quality is not achieve due to proper composition of material and design. More than hundreds of inject mold machines are running in Bottle and plastic industry in Bangladesh. Need the proper material composition and design.
• Bangladesh processing industry owners are expending Million of USD in every year for importing Pure Acetic Acid. By using Sugarcane waste; Poultry waste or other waste of different sectors Bangladesh may design fermentation process to make pure acetic acid in local source.
• Some dye house chemicals are diluted in here, but need to develop proper synthesis process by reactor with Europe standard. By sharing the proper data on each sector (university; BB; NBR; BTMA; ITET) and taking honest initiative, this sector can be standardize.
• Bangladesh has the raw material to make POY industry Chips crystallizer Dryer; Extruder; Melting Unit; Spin Pack and Quenching Chamber need proper design. Only import the spin winder can make POY (150 D Polyester) plant for 20 ton/day with an investment of 10 Corer taka against total Europe package 50 corer taka.
• The proper research on HR can save millions of USD in the textile sector. First, need to research why entrepreneur likes foreigner? For technical knowledge or Professional Honesty or Consistency or efficiency? First need to understand the industry demand then trained the local expert accordingly.

Relieve foreign expert this immature slogan cannot bring a proper solutions. Need research.  The foreign experts are contributing to develop the textile sector. One more example here:  Wang textile made by one single Taiwanese in Dhaka and now it is the country’s largest Nylon Dyeing unit. The investor came from Taiwan started nylon dyeing here by local made winding machine as a cost of 50 SUD/spindle and giving best support in terms of finish nylon yarn to sweater and accessories industry. Whereas Bangladeshi engineer cannot think Nylon Dyeing without Europe origin winder which is around 3000 USD/spindle.

So the foreign skill needs to replace by local skill, the emotion cannot replace the skill.  The industry-oriented education and training can replace the foreign expert.

BUTEX:  Bangladesh University of Textile

• In last 10 years BUTEX proved by changing the name and budget, a college cannot meet the requirement of University.
• The BUTEX students have research success on Graphene fiber; Bamboo Fiber; Silk Fiber; Medical textile in global arena. But it is not meeting the domestic demand. It is not helping to reduce the import of the country.
• The BUTEX teacher and student doing their PhD some others pubic university of Bangladesh like: Jahangirnagor University; Rajshai University. And mostly the scholar PhD subject is not contributing the local economy.
• The Bangladesh Government Muslin recovery research project the University partner is Rajshai University.
• The jute GENOME research Bangladeshi university Partner is DU and SUST.
• In BUTEX there is not any research journal, which can be internationally accepted.

There is huge success of Bangladesh agriculture university (BAU) and Bangladesh rice research institute to do research as per domestic demand and contribute in the GDP. The Bangladeshi textile university and college can recruit administrator from BAU or BRRI to make plan how to select the MSc and PhD subject as per domestic demand.

The domestic demand oriented research will save the foreign currency and will create several new small phase entrepreneurs.

Some Questions:  

• Walton Export electronic item to Europe… Also making medical ventilator as like USA quality; Can Bangladeshi company manufacture controller & PLC like Seetex 737 for dyeing machine.
• The several Bangladeshi shipyard exporting big sea ship to Europe. Can Bangladeshi company make Stenter like Bruckner standard?
• BSRM and AKS supplying steel in Padma Bridge, Ruppur atomic power plant. Can Bangladeshi company manufactured the main machine frame of Ring frame?
• Around 400 years before Bangladeshi hand spinners made 150 Ne cotton yarn buy hand from Bangladeshi cotton.  Can Bangladeshi spinner make 120/1 cotton yarns in latest spinning line (China i’s making in Chinese M/c).  And make muslin sari in handloom for export?
• Can Bangladeshi company fulfill the demand of chiffon and georgette
• Can Bangladeshi scientists make applicable the jute as a textile fiber like Flax?
• Bangladeshi manufacturer can overcome the yarn and processing issue of chiffon and Georgette fabric?
• For Black color dyeing (Both knit and woven) can Bangladeshi company dye it with 100 % local manufactured dyes and chemical with ensure 100% export quality.
• Can Bangladeshi Textile and Management expert is sufficient to replace foreign expert in Textile sector in considering skill to Skill?
• The ERP software is developed by Bangladeshi company is enough to meet the challenge of Industry 4.0?