Leaders in the sectors welcomed the budget for 2021-22
The Parliament passed the finance bill for fiscal 2021-22 on June 28 without any major changes in the proposed budget of the year. The government also did not bring any major change in the finance bill for the textile and garment sectors.
The textile and garment manufacturers and exporters demanded some facilities before the budget for fiscal 2021-22. Both the finance bill and budget itself did not meet the demand of the textile and garment manufacturers and exporters.
However, the textile and garment manufacturers welcomed the budget as the new tax was not
imposed and for allowing whitening the black money scope with paying 10 percent tax in the manufacturing sector.
Allowing undisclosed money to be invested in the manufacturing sector will increase investment in the textile and garment sector, said Faruque Hassan, President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the leading platform for the sector.
More investment means more employment and more income for the people and finally more revenue generation by the government, he said.
Hassan expects undisclosed money to flow into the productive sector. The BGMEA chief also demanded a 10-year tax holiday for investments in the manmade fiber (MMF) sector alongside a 10 percent incentive for manmade fiber-based garment exporters. The textile and garment sectors need a lot of investment in the time of COVID-19 when the global economy and global supply chain is jolted with losing jobs by thousands of people.
The garment sector also needs a lot of investment even during this pandemic time as the demand for value-added Bangladeshi garment items has been growing worldwide.
However, most of the demand for raw materials is met through imports. For instance, Bangladesh imports raw materials, mainly fabrics, cotton and chemicals worth $12.50 billion in a year to serve the local apparel industry.
The local spinners can supply 90 percent of raw materials and the local weavers can supply 40 percent of the raw materials to feed the local garment manufacturers and exporters.
In Bangladesh, some 74 percent of the total export of garment items made from cotton fiber and the remaining 26 percent are made from manmade fiber and other non-cotton fibers.
However, the global scenario is different. Globally, of the total fashion industry, some 78 percent are made from non-cotton fiber and the remaining 22 percent made from cotton fiber.
Most of the countries that make garment items from non-cotton fiber are getting premium prices from international retailers and brands. However, Bangladesh has not been getting premium prices because of cotton-made garment items.
For instance, a t-shirt made from cotton fiber is sold at $5 per piece but the beginning price of the same T-shirt if is made from manmade fiber is $10 per piece.
“So, we need more investment in the primary textile sector so that we can serve more to the local garment exporters and manufacturers,” said Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA) in his post-budget reaction.
The Hong Kong-based supply chain compliance solutions provider “QIMA” ranked Bangladesh as the 2nd highest Ethical Manufacturing country in its recent report “QIMA Q1 2021 Barometer”.
Currently, the total investment only in the spinning sector is more than $8billion. More investment will come in the primary textile sector if the government gives some facilities in the textile sectors, he said.
Bangladesh needs more investment in non-cotton fiber as the market of this kind of segment is very high globally.
The demand for MMF-based garments is growing all over the world mainly due to being comfortable, durable and functional and the ability to protect against cold.
Khokon also said the government should withdraw the nearly 15 percent advanced income tax and advanced tax on manmade fiber imports to help expand the sector.
For example, a more sophisticated section of MMF-based industries is the filament yarn industry, where it takes at least Tk 500 crore to set up a factory. So, in the future entrepreneurs will set up these types of factories in Bangladesh if the local MMF-based industries can shine, according to the BTMA chief.
Khokon pointed out that Bangladeshi garment manufacturers used to import a large number of fabrics to make jackets but local mills are now supplying the high-end textiles required, thanks to investment in the sector.
So, he demanded Tk3 per kg VAT on sales of non-cotton yarn in the local markets to match with the cotton yarn VAT amount.
Currently, the cotton yarn sellers enjoy Tk3 per kg VAT on sales of yarn but the non-cotton yarn sellers face Tk6 VAT per kg in the local markets. Bangladesh’s primary textile sector is undergoing rapid changes with local millers taking to producing significant amounts of MMF alongside cotton fibers to meet rising global demand.
Import of MMF grew a substantial 45.72 percent to reach 99,597 tons in the first five months (January to May) of this year compared to 68,348 tons during the corresponding period in 2020, according to data from the BTMA.
Of the imports, about 61,693 tons were polyester staple fiber, 32,454 tons viscose staple fiber, and around 5,450 tons of Tencel and flax fiber. The spending on such imports also increased amidst the ongoing coronavirus pandemic, which had disrupted the global supply chain for a long time.
Local importers, millers, traders and spinners spent about Tk 1,221 crore during the January-May period this year compared to around Tk 706 crore in the same period the last year, registering 73 percent year-on-year growth.
The three main MMF — polyester, viscose and Tencel — have emerged as substitutes for cotton fibers, bringing on a revolution in global fashion trends. Even during the pandemic time, the import of capital machinery, investment in the primary textile sector and Balancing, Modernization, Rehabilitation and Expansion (BMRE) is not stopped in the textile sector, said Monsoor Ahmed, Additional Director of BTMA.
Demand for new products is growing now from the international and local buyers is increasing, he said. So, the investment is taking place in the primary textile sector.
For instance, a new company alone invested Tk676crore to set up a new spinning mill recently, he said declining mention of the name of the company. The import of fiber, demand for yarn and fabrics indicates that the investment is taking place in the sector and local investors are importing a lot of capital machinery to meet the demand.
Shahidullah Azim, Vice-President of the BGMEA, urged continuing to keep the current source tax at 0.50 percent and corporate tax at 12 percent for non-green and 10 percent for green garment factories for the next five years.
Bangladesh is the champion in green garment factories in the world as the consumers are preferring a green production system to save the environment from pollution and the world.
The tax break in green initiatives has been helping more investment and brightening the image of the sector and the country. While 9 out of the top 10 positions of green factories are being occupied by the Bangladesh RMG industry, Bangladesh has 144 LEED-certified (41 Platinum) factories and 500 more factories in the certification pipeline.
Apart from the sector’s participation in initiatives regarding climate change and circularity, BGMEA has also taken a Pledge to Sustainability. In collaboration with UNDP and GRI, a survey on “Sustainability Reporting Study Mapping in 47 RMGs in Bangladesh” to develop a report highlighting the impact of Ready-Made Garment (RMG) factories on Sustainable Development Goals (SDGs) has been conducted.
Recently the McKinsey & Company in its report titled “What’s next for Bangladesh’s Garment Industry, after a decade of growth?” also appreciated Bangladesh’s progress in safety, green initiatives and sustainability.
The report indeed portrays a picture of the progress that Bangladesh’s RMG industry has made over the past decade. The report correctly addressed Bangladesh’s progress in terms of sustainability.
Also, the Hong Kong-based supply chain compliance solutions provider “QIMA” ranked Bangladesh as the 2nd highest Ethical Manufacturing country in its recent report “QIMA Q1 2021 Barometer”.
The rating included performance against parameters like hygiene, health and safety, child and young labor, labor practices including forced labor, worker representation, disciplinary practices and discrimination, working hours and wages, and waste management.
The study was conducted at a time when COVID disrupted the global fashion industry and supply chain and maintaining such a level of compliance testifies our resilience and commitment.
In addition, the progress made in the areas of cleaner and greener manufacturing testifies the industry’s commitment and actions toward building a sustainable supply chain.
BGMEA, as the only association in the world, is honored with the “2021 USGBC Leadership Award” for its exemplary leadership in promoting environmental sustainability and green industrialization in the RMG industry.
“While we commit ourselves to maintain the social and safety standards, we have aligned with global pledges like reducing Green House Gas (GHG) emission by 30 percent till 2030,” Hassan also said.
“Through these actions and transformation, Bangladesh has well positioned itself as the preferred sourcing partner for a conscious brand like Disney, which is committed to fostering safe, inclusive and respectful workplaces in its manufacturing facilities worldwide,” he added.
