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Strong backward linkage is a must for woven sector to grow its fullest

As a whole, the country’s apparel sector is in a cheer-up mode with the present robust export growth and work orders inflows by the global retailers and brands.

According to Export Promotion Bureau (EPB) data, Bangladesh’s exports earnings from clothing products posted a robust growth of 30.73% to $27.50 billion in the first eight months of the current fiscal year 2021-22.

During the July-February period of FY22, the woven sector’s earnings jumped by 28.23 percent to $12.43 billion against and knitwear’s 32.87 percent to $15.07 billion.

Bangladesh-woven-Strong-backward-linkage-must
Figure: Economists laid emphasis on fresh investments in woven backward linkage to reduce import dependence and technology upgradation.

In the growth of the overall apparel sector, knitwear’s contribution is higher than woven products, which means export growth is led by knitwear products.

During the July- February period of FY22, Knitwear products contributed $15 billion or 54.80 percent to total exports of $27.50 billion. While woven products contributed 45.19 percent or $12.42 billion to total RMG exports.

In Just 10 years back, the woven sector contributed 50.30% or $9.60 billion to overall exports of over $19 billion in the fiscal year 2011-12, while knitwear products contributed 49.69% or $9.48 billion.

On the issue, economists and industry people blamed the lack of a strong backward linkage industry in the segment. In addition, the ongoing Covid-19 pandemic expedited the growth of knitwear products as demands went up due to people’s longtime stay at home due to the travel restrictions.

“Knitwear products export is doing better gradually in the last few years because of a strong backward linkage industry. The Primary Textile Sector is able to supply about 90 percent of the demand of yarn,” Faruque Hassan, BGMEA president told the Textile Today.

“Textile millers have to focus on investment in woven fabrics manufacturing. The fresh investment will improve the country’s production capacity. This will help reduce import dependency and increase competitiveness in the global markets.”

Khondaker Golam Moazzem, CPD Research Director

On the other hand, woven products manufacturers are highly dependent on imports for fabrics, which cost more. That is why export earnings from woven goods have seen slower growth, said Hassan, also Managing Director of Giant Group.

According to Bangladesh Textile Mills Association (BTMA) data, around 90% yarn demand for knit RMG and 35-40% yarn demand for woven RMG are met by the country’s Primary Textile Sector (PTS).

“Woven products exporters are highly dependent on imports of raw materials for executing export orders. Most of the woven fabrics are imported from China,” Shahidullah Azim, Managing Director of Classic Fashion told the Textile Today.

As a result, supply disruption with the Chinese affects Bangladesh’s woven sector. To overcome the challenge and reduce import dependency, we have to strengthen our capacity, said Azim, also a vice president of BGMEA.

Recipe to grow

In growing simultaneously with the knitwear sector, there is no alternative to new investment. Economists laid emphasis on fresh investments in backward linkage to reduce import dependence and technology upgradation.

“Despite having vast opportunities and demands, Bangladesh is able to meet about 35% woven fabrics demands, which is over 90% in case of knitwear,” Centre for Policy Dialogue (CPD) Research Director Khondaker Golam Moazzem told The Textile Today.

Right now, textile millers have to focus on investment in woven fabrics manufacturing. The fresh investment will improve the country’s production capacity. This will help reduce import dependency and increase competitiveness in the global markets, said the economist.

In addition, allowing foreign investment could be a great tool as it needs more investment to set up textile mills as well as high technology, said Moazzem.

It is good news for the RMG sector mostly woven that the textile industry recorded an investment of Tk5790 crore in 2021 to ensure the supply of fabrics from local sources.

According to the Bangladesh Textile Mills Association (BTMA) data, a total of 26 primary textile manufacturers invested Tk 5970 crore in 2021.

“The need for a strong backward linkage industry especially for woven fabrics became more prominent during the Covid-19 pandemic,” BTMA President Md Mohammad Ali Khokon told the Textile Today.

During the pandemic we supplied fabrics and helped to keep the factory running and meet the lead time, said Ali, also the Managing Director of the Maksons Group.

However, we are yet to meet the demands of the woven fabrics from the local source. But we are increasing capacity and making huge investments as demands of products made of recycled fiber are increasing and becoming more popular to the consumers, said the business leader.

“Focus should be given on the value addition and research and development for turning around from the setback. Market diversification could be another tool,” Zahid Husain, former Lead Economist, World Bank, Dhaka told the Textile Today.

We should develop products that the global consumers are demanding, while the exporters have to follow the global fashion trends that are taking the lead, he added.

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

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