Backward linkage factories of Bangladesh are facing hard challenges and losing business as yarn and fabric are imported to Bangladesh at a lower price from China, Pakistan and India. China is providing straight cash returns to exporters of about 16 to 21% on its export of material to Bangladesh.
In March 2019, the rate of cotton fiber reduced owing to lower cotton rates in the international marketplace, along with a sufficient supply of yarn and fabric from China, Pakistan, and India.
United States Department of Agriculture (USDA) states that the imported yarn and fabric with zero tariffs are then illegally sold to the local market which forces down prices in the domestic market and makes local weaving mills and spinners more competitive.
Local readymade garments (RMG) manufacturers are importing yarn and fabric from India, Pakistan, and China using a bonded warehouse (zero tariffs on the import of raw materials for an export value-added product) advantage.
USDA also said that the local textile millers of Bangladesh are facing tough competition due to ample imports of low-cost yarn and fabrics. Some of them are about to leave the marketplace and are facing a challenge selling with a huge stockpile of unsold fabric.
Textile millers of Bangladesh have urged the government to take necessary action in order to protect the textile industry.
Presently it has 431 spinning mills, 23 home textile mills, 804 weaving mills, 32 denim fabric mills, 2445 dyeing and finishing mills, and a complete of 6,502 registered and 526 un-registered garment industrial units.
More foreign consumers of value-added apparel are buying from Bangladesh due to low labor cost, competitive rates, and an appreciated US dollar versus the Bangladesh Taka. So, some high-end millers have increased manufacture capacity to satisfy higher national and international demand says USDA report.
Nearly 80 percent of garments made in Bangladesh are sourced from cotton; the rest is made from viscose, polyester and other materials.
Local spinners supply 90 percent of raw materials for knitwear and 40 percent for the woven garments sector.