The crisis in the sector
The leaders believe there are multiple factors intertwining behind the crisis of the sector. Some are feasible to improve by the apparel manufacturer and some are related to getting policy support from the government. According to the below factors are responsible for the recent situation.
Wage hike: The distress situation in the Bangladesh RMG sector embarked on after the minimum wages increased at 51% at the end of last year. During the period apparel manufacturers were expecting that brands will pay a few cents more to give support on wage hike. But the true scenario is brands are reluctant to pay extra cents rather RMG owners are perused to reduce product price. This is in putting the extra pile of load on the apparel manufacturer.
Limitation of efficiency development: There is a certain limit to improve efficiency and productivity based on the basic category whereas overall product cost is soaring day by day. So RMG owners are really not able to run the production line keeping the employee idly.
To reduce overall cost only one option is left to survive is to cut excessive manpower. The man to machine ratio for a country like Sri Lanka is reported to be 1:1.7 whereas Bangladesh stands for 1:2.5 which is not prospective for the manufacturing company.
Amin Khan, Chairman, Ananta Companies said, “Ideally, we never cut job until the employee becomes really burden for the organization. Getting a real technical person is not easy to get, so we always try to keep the efficient employee for a longer period but some time reality does not allow us what we don’t want to do to cut jobs in the organization.”
US-China trade dispute: Bangladesh is not fortunate enough to grasp benefit over the US-China trade war rather it has gone to others’ pocket mainly Vietnam, Cambodia and India. Because Bangladesh’s top 16 apparel items matched in the list of USA’s top 30 sources items from China. More interestingly those 16 items also basic kinds of product that has to compete severely in the global market.
Value addition, not enough: A report from Bangladesh Bank showed that the import price of raw materials in the July-December period of FY 19 stood at $6.28 billion which is 36.77% of total export earnings from the RMG sector of $17.08 billion in the period. Thus, raw materials prices shared 36.77% of the total value of RMG export.
It means local value addition is estimated at 63.23%. So, we have to produce more back end items for the RMG export.
Inamul Haq Khan (Bablu), Managing Director of Ananta Companies expressed his views, “This is a vital area where Bangladesh has good progress particularly in accessories because once we had to import carton for garment shipment but now day by day this industry is getting stronger. In this regard, we must work on fundamental materials like woven fabric which is the core item for a garment.”
Possible way to improve the situation: Every problem has a solution in its opposite direction so Bangladesh RMG sector should stand for moving forward. Leaders of the sector should think over the solution and take a longtime plan to stay competitive in the global apparel market. The below can be a possible way to improve the situation-
Effective IE department: Industrial Engineering is the prime area to turn down overall expense in the apparel industry but the term was not even known to the RMG sector before the end of the last era. This is due to the shortfall of production engineers in the sector and textile education also could not get attraction in that period.
Actually, some apparel entrepreneurs are not devout enough in production engineering to improve productivity as well as reduction of costs. Even if the IE department exists in some of the factories that also not functioning to improve overall productivity. So, a functional IE department is inevitable to set in each of the RMG units.
Inamul Haq Khan (Bablu), Managing Director of Ananta Companies, said, “Nonfunctional IE department will not help to improve productivity and reduce cost. So, maturing production engineering in the sector should be a prime task to survive in the present crisis moment.”
Innovation of technical fabric: Development of technical fabric such as firefighting equipment, the medical textile can be extra value addition in the apparel export. The basic cotton fabric is no more attractive in the retails shop so manmade fiber is going to be popular.
As activewear has more demand in the market so this is high time for the Bangladeshi textile millers to invest in this kind of fabric. Otherwise, imported fabric from abroad never can meet shorter lead time as well as product price also cannot be competitive.
In this respect, Bangladesh must concentrate on the textile and weaving sector to make it stronger so that apparel makers can get more local fabric and reduce valuable lead time. But the backward linkage of the sector is going to weaken year by year in lieu of policy support as well as power crisis.
Investment behind innovation: Diversification of product and innovation of fabric have to be major areas for Bangladesh to keep investing and building expertise as well. This might take time but subsequently, the investment can recompense of the initial loss behind all development and certainly, it can bring forth the profit at the end.
But Bangladeshi entrepreneurs should contemplate for investment and innovation pensively. For sure, there is no alternative way left other than innovation and diversification of fabric and apparel products.
Amin Khan, Chairman, Ananta Companies said, “Many of the fabric millers think investment for the high-end fabric can be immense of risk so they always focus on basic fabric based on cotton. Actually, the present crisis is showing us that we should come out from our traditional business concept and start investing in innovation and diversification of product.”
“Bangladesh’s RMG sector has been playing a pivotal in facilitating the country’s export earnings but recently it is facing adverse situation due to down prices in international market and sluggish pace of export. In this regard, Textile Today has met the sector leaders to find out the solution of the distress situation.”
New market exploration: Recently Eastern Europe is discovered as the new apparel market for the Bangladeshi apparel maker to grab more opportunity and get the order. Russia can be a new market to explore the apparel business as the Bangladesh government concluded a bilateral agreement for banking transactions.
Apparel manufacturers always look for a secure business with the brand regardless of country. So, they try to make business with brands that have a reputation in the Bangladesh market. This is the basic reason when a customer pays a visit to Bangladesh and then many of the RMG people try to reach them by offering the lowest price.
Currency depreciation: Depreciation of money is one of the solutions to get rid of the present distress situation through the sector. If Bangladesh could set depreciation of its currency Taka 90 this year and next year 95 in exchange for Dollar the RMG sector could get way to survive.
Inamul Haq Khan (Bablu), Managing Director of Ananta Companies, said, “Sector leaders are asking to depreciate of Bangladesh currency Taka in exchange of dollar and if the government set the policy RMG sector will be beneficiary.”
Stable political situation: Political stability is most essential to make good business in the global platform. Bangladesh is now a safer and stable country for foreigners so the RMG sector can do progressive business.
“We are fortunate to have long-time political stability in our country. Regardless of supporting any political party as an RMG business man stability in the country is more important. No strike, road blockage even no unrest situation that helps us to do business, thanks to all political party,” said Amin Khan, Chairman, Ananta Companies.
The strategy of Ananta Companies in the crisis moment: In an answer to a question the leaders said that at present Ananta Companies is halting all kinds of expansion and investment plans due to slowdown trends in the global apparel business. Basically, quality improvement and concentrating on the upper zone of the product category are now the main strategy set by the group. In this regard, building a relationship with the brands is the key focus area to keep business stable where the group is focusing.