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Background. Traditionally a textile country. Jute exports supported economy. Declined in 80’s due to technology and nationalization; had to look for alternative. Textile & Clothing (T & C) replaced jute as the major export : (a) East Asian wages were going up
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Background • Traditionally a textile country. • Jute exports supported economy. Declined in 80’s due to technology and nationalization; had to look for alternative. • Textile & Clothing (T & C) replaced jute as the major export : (a) East Asian wages were going up (b) Problems in Sri Lanka (c) Labour intensive industry (d) Favorable quotas and GSP Policy from EU and USA
T & C Export Journey • Initially garments were produced with imported yarn & fabric. • Growth could not be sustained with imported inputs : • Cost too high Smaller margins. • Inconsistent quality leading to claims / rejections. • Undependable deliveries Extended lead times. • Unable to respond to fashion changes. Thus, Bangladesh Government and the Textile & Clothing (T & C) industry decided to approach the market with dual supply chain: • Export using imported fabric. • Export using local yarn and fabric.
Policy Result :Domestic Market • Growth in population & per capita consumption, multifold increase in demand. • BTMA members & handloomweaversmet market needs & kept foreign competition out. In spite of lowering import duties and lifting all import bans/restrictions.
Positive Impact of Using Local Inputs Knit garment export fueled by the supply of indigenous yarn has overtaken woven garment export
Value Retention Using Local Fabric 2006 Bangladesh T & C business & FE retention: (all figures in mil US $)
Export Growth to the EU • Export using the GSP facility to the EU increased eleven fold • in the period 1998-2005. • Huge local inputs & foreign exchange retention. • Massive domestic investment in T & C. • Industry very favorably responding to EU GSP facility.
Home Textile – Bangladesh in the EU market • Bangladesh fastest growing exporter. • Grew from €49 mil 2003 to €98 mil in 2004. Source : EUROSTAT
DENIM Local availability of yarn stimulated growth in Denim fabric manufacturing : • This resulted in : • Bangladesh top denim supplier to EU in 2006 (26.76% market share) • Growth • 26.15% for Men’s denim • 91.00% for Women’s & Girl’s denim • Export to USA in 2005 • 850,000 doz. • 160 % Growth
Post MFA Challenges • World T&C market growing at 5% annually. • Buyers moving to targeted countries. Large volumes and economies of scale needed. Bangladesh is strong in sweater, knit, denim and home textiles. • All buyers give preference to countries / companies with vertical operations to meet lead time and fashion changes, local fabric availability is necessary. • Bangladesh only nation excelling in dual supply chain management for export using • Local Inputs • Imported inputs • Therefore, in order to maintain its competitive advantage in garment • exports, Bangladesh supported local textile industry.
Top Ten Gainers in USA Market 2004 - 2006 Source : OTEXA. USA Bangladesh gains inspite of US import duty.
Top Ten Losers in USA Market 2004 - 2006 Source : OTEXA. USA Reduced from $24.94 Billion to $18.979 Billion in two years.
Opportunities Export to the US Market Bangladesh has take steps to fill the space created by the above countries – inspite of uneven competition Bangladesh’s Post-MFA US Market Growth In Million $
Position of our Competitors China: • Price deflation ended. • Domestic retails growing 20 – 25% yearly - 2001 – 3.95 Trillion Yuan - 2006 – 7.84 Trillion Yuan • Wages – upward. • Subsidies reducing. • Currency appreciation. • India: • Hasn’t mastered high volume growth. • Very weak post spinning Textile industry. • Alternative export opportunity. • Still a low volume exporter. • Rising Wages.
Position of our Competitors Vietnam, Sri Lanka & Mauritius : • Doesn’t have a local textile industry. • Skilled labour shortage . • Trying to get value added product. Africa: • Hasn’t picked up inspite of duty free access. NAFTA & Central America: • Losing out to Asia. • Inspite of duty free preference still occupies 6 of the top 10 losers to USA. • Reduction of US inputs.
Bangladesh Textile & Clothing Export in Post MFA – Era • Strengths • Aggressive investors • Efficient and trainable labour force • Dual Supply Chain Management : • Export with local inputs • Export with imported inputs • Backward linkage • Market access Areas for Growth • Knitting • Sweater • Denim • Bed sheet • Woven Garments