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Bangladesh’s growth priorities

As Bangladesh has been on track to graduate from LDC, there will be certain changes in the global trading rules. To comply with double transformation rules of origin after 2026, there is no alternative to increase investment in the backward linkage industry.

In the last 13 years under the visionary leadership of our Honorable Prime Minister Sheikh Hasina, Bangladesh has graduated to a developing country. Our per capita income has reached USD 2,554 from USD 676 in the FY 2008-2009, which is one of the highest in South Asia. Poverty rate declined to 20.5%, both way trade increased to more than USD100 billion (estimated in 2021) during the same time. Foreign exchange reserves are standing at USD 45 billion.

Along with these achievements, Bangladesh government has taken up several mega projects which are going to change the economic and investment landscape of Bangladesh enormously, once completed. The projects especially like Padma Bridge, Dhaka metro rail, elevated expressway, Karnaphuli tunnel, Rooppur nuclear power plant etc. will definitely drive the country toward higher growth trajectory.

However, we should keep in mind that while it is important to simultaneously continue the development projects, it is also equally necessary to ensure expedited completion of these projects.

There is no argument to the fact that much of Bangladesh’s growth has been propelled by the private sector. Currently, more than 70% of Bangladesh’s total investment is being drawn from the private sector itself. Especially in the post-pandemic world, when public resources are crucial for building the capacity of the country, the private sector will continue to play a pivotal role in Bangladesh’s journey to the next phase of growth and development.

backward-linkage-investment
Figure: To comply with double transformation rules of origin after 2026, there is no alternative to increase investment in the backward linkage industry.

However, it is also true that so far our growth has been overwhelmingly dependent on a few specific sectors and products. Going forward, most importantly we need to redefine our business model through innovation, value addition and technology upgrading to complement our stride towards environmental and social sustainability.

For us, the path is to graduate from OEM (Original Equipment Manufacturer) to ODM (Original Design Manufacturer) as we focus more on design development, innovation, and end-to-end digital manufacturing. The next phase of business sustainability will also require advancement in the area of the fourth industrial revolution and take advantage of information technology to gain efficiency and optimize the use of resources and cost.

One of the major sources of Bangladesh’s competitiveness is the demographic dividend. Bangladesh has a vibrant population— 70% are below 40 years of age. Having a population as our core asset, we have to focus on human resources development that requires critical analysis and appropriate policy.

We have to take a people-centric approach in devising our strategy and policies, and priorities should be given on enhancing efficiency of the workers as standard of living is going up, and developing the management professionals with both soft and hard skills.

With only a 6.26% share in the global apparel market (as per the WTO data in 2020), Bangladesh has huge untapped potential. Products, fiber and market diversification are the key areas for this sector to sustain the growth. For that, we have to build our capacity for the backward linkage industry.

As Bangladesh has been on track to graduate from LDC, there will be certain changes in the global trading rules. To comply with double transformation rules of origin after 2026, there is no alternative to increase investment in the backward linkage industry.

Within the textile sector, there is a largely unexplored and highly potential area for investment, which is man-made fiber-based yarns and fabrics, functional fabrics like polyester, viscose, spandex, mélange, etc. Globally the share of cotton textile and clothing consumption is 25% only, whereas 75% of Bangladesh’s RMG product is concentrated on cotton items. So, huge scope and opportunity are awaiting us.

As far as the RMG industry is concerned, we need to address the overcapacity situation and diversity into high-end products like sportswear, lingerie, outerwear, etc. where we have a huge market, but an insignificant presence. There is a persisting shortage in raw materials supply capacity, especially for the woven and specialized products, where we need investment, for example – in a product category like shirting fabric, laces, hooks, etc.

This will not only meet the shortage but also substitute imports. Policy support will be crucial to draw investments in these areas which will eventually create more employment.

Going forward, we also have to keep in mind the environmental aspect. As Bangladesh has moved towards rapid urbanization in a mostly unplanned way, the environmental issues in many cases are not dealt with enough consideration. Our population density in certain cities has reached more than the tolerance level.  Whereas in 1975, the percentage of the urban population was only 10% of the total, it has reached up to almost 45% in 2021 (Worldometer).

The concentration of the economic activities to a few major cities is not only depressing the ecosystem of the respective regions but also creating inequality and limiting the growth prospect. In this regard, infrastructures like the establishment of 100 economic zones and the Parma Bridges will be crucial for us.

I want to proudly mention that as the Bangladesh RMG industry has grown to a level of $35 billion worth of export earnings in 2021, we have also done a paradigm shift in the area of environmental sustainability.  Bangladesh has the highest number of green garment factories in the world. US Green Building Council (USGBC) certified a total of 153 Bangladeshi factories as LEED (Leadership in Energy and Environmental Design), among them 46 are LEED platinum-rated. 40 out of the world’s top 100 garment factories are in Bangladesh.

Moreover, 500 more factories are in the pipeline for certification. BGMEA joined the UN Fashion Industry Charter (UNFCCC) with an ambition to reduce GHG emissions by 30% by 2030. BGMEA has also been recently awarded the USGBC Leadership Award 2021, which is the first of its kind for any association in Bangladesh.

Faruque-Hassan-BGMEA
Author: Faruque Hassan, President, BGMEA.

We must be grateful to our governments for extending the policy support to the RMG industry. Policies like back-to-back L/C, bonded warehouse facility, etc. had helped us enormously to build the ground that we are standing on today.

Thankfully, during the pandemic, when order cancellation, deferred payment and buyers’ bankruptcy filings put the challenge of surviving before our manufacturers, policies like a wage assistance loan package which came at a minimal service fee, stay on loan classification rules and regulations related to export proceed realization and simplifying the use of EDF were time-befitting.

To pursue continued and robust growth in line with the eighth five-year plan, we need further policy intervention as well as strategic efforts both from public and private ends to harness the ever-growing local market and go global with our own brand.

Last, but not least, we have to keep in mind that ensuring better livelihood for the working class will also be vital in the upcoming days, as they are a vital part of our industry. It is not always wage that can ensue economic well-being, focus should also be given on non-wage benefits by the state. A special safety-net program for workers will add to our productivity and competitiveness.

The BGMEA with its limited capacity has been working to upgrade the standard of living of our workforce. Starting from women empowerment, running heath centers with our own cost, maintaining a free school for the children of our workers, arranging several training programs to build their capacity, the BGMEA and the RMG industry at large are empowering millions of workers with dignity.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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