Bangladesh: A Growing Textile Economy

Bangladeshs textile industry is comprised of a mix of small- to large-scale

privately and publicly owned companies.

T he textile industry has played an important role in Bangladeshs economy for a long time.
Currently, the textile industry in Bangladesh accounts for 45 percent of all industrial employment
and contributes 5 percent to the total national income. The industry employs nearly 4 million
people, mostly women.

A huge 78 percent of the countrys export earnings come from textiles and apparel, according to
the latest figures available. Bangladesh exports its apparel products worth nearly $5 billion per
year to the United States, European Union (EU), Canada and other countries of the world. It is
the sixth largest apparel supplier to the United States and EU countries.

Major products exported from Bangladesh include polyester filament fabrics, man-made filament
mixed fabrics, PV fabrics, viscose filament fabrics and man-made spun yarns. Major garments
exported include knitted and woven shirts and blouses, trousers, skirts, shorts, jackets,
sweaters and sportswear, among other fashion apparel.

Textile and apparel firms in Bangladesh are mostly concentrated around the capital city
of Dhaka.

A Picture Of Bangladesh's Textile Industry

Bangladeshs textile industry can be divided into three main categories: public sector; handloom
sector; and the organized private sector. The private sector is the fastest growing sector in the
country.

The handloom industry provides employment for a large segment of the population of
Bangladesh and supplies a large portion of the fabric required by the local market.

Mahmud E. Alam, managing director, Famano Textile Mills Ltd., said about 20 percent of
existing mills in Bangladesh are large-scale mills, roughly 30 percent are medium-scale mills,
and the remaining 50 percent are small-scale mills. Alam said the number of spinning mills in
the country is increasing day-by-day.

The textile quotas under the Multi-Fiber Arrangement of January 2005 have been moderate in
Bangladesh and the industry is divided on their impact. While industry analysts say
Bangladeshs garment and textile manufacturers will have to face steep competition from
countries such as India, Pakistan, China and Thailand as a result of new policies, the textile
companies see no impact on their business.

Alam feels the lifting of quotas is not going to affect his business. The future of the textile
industry here is very bright, Alam said. Even the lifting of quotas is not going to affect the
industry as was worried, he said.

Mostafizur Rahman, managing director, Pawrob, also is of the view that lifting quotas is not
going to have very much of an effect, but he fears China will affect the Bangladesh textile
industry in the long run.

The main reason behind this is the leap factor, Rahman said. Chinese companies have an
edge of 30 days over Bangladeshi textile companies.

Combined, the textile and apparel sectors consist of 3,600 firms. There is a concentration of
manufacturing activity in and around the capital city of Dhaka and a growing garment
manufacturing presence in the countrys export processing zones.

Bangladesh Textile Mills Association Secretary General Taufiq Hasan said that because textiles
and ready-made garments are the two largest export sectors and employers in Bangladesh,
government support will continue and there are no restrictions on repatriation of profits and
investment or tax-free imports of machinery and raw materials for export. The government also
is liberal toward work permits.

According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the
total fabric requirement in the captive market is about 3 billion yards, of which roughly 85 to 90
percent is imported from countries such as China, India, Hong Kong, Singapore, Thailand,
Korea, Indonesia and Taiwan. Fabric demand is increasing at the rate of 20 percent per year.

Although the industry is one of the largest in Bangladesh and is still expanding, it faces serious
problems, principally because the country does not produce enough of the raw materials
necessary for the industry to expand. The primary materials used in the spinning sector are raw
cotton and man-made fibers such as viscose and polyester staple fibers. Unfortunately, none of
these raw materials are produced in Bangladesh.

Most spinning mills in Bangladesh produce low-grade yarn. Available figures show that current
yarn production satisfied only 22-percent of the total yarn demand. In spite of this drawback, as
many as 116 new spinning mills, each having the capacity of 25,000 spindles, will be
established in the near future.

The weaving sector also is plagued by a lack of organization and coordination. The existing
weaving capacity in Bangladesh can meet only about 40 percent of fabric demand; the rest is
imported. However, the increasing trend of expansion in the weaving sector is clear from the
fact that 223 modern weaving plants, each with an annual capacity of 10 million meters, will be
set up in the near future.

The knitting and hosiery sectors look brighter than weaving, and about 80 percent of garment
accessories like cartons, threads, buttons, labels, poly bags, gum tapes, shirt boards and neck
boards now are being produced within Bangladesh and contribute to the the national gross
domestic product. However, the textile industry is just budding.

Bangladesh Textile Mills Corporation

When Bangladesh gained its independence from Pakistan in 1971, the new government
nationalized the textile industry. All of the countrys textile factories were then organized under
the Bangladesh Textile Mills Corp. (BTMC).

The role of BTMC within Bangladeshs textile industry has substantially been altered since the
denationalization of a large number of public sector textile mills over the last decade and a half.
Prior to denationalization, BTMC enjoyed a near-monopoly within the yarn and fabric market in
Bangladesh.

At present, there are 21 textile companies under BTMC. They operate 24 spinning facilities with
an installed capacity of 490,892 spindles and 1,036 looms. Out of that total, 13 of the
companies which operate 16 plants utilize 320,228 spindles under the service charge
system producing different counts of yarn in the range of 32/1 to 80/1. Another five companies
have 128,088 spindles in operation.

Among the 21 mills, Valika Woolen Mills Ltd., Nasirabad, Chittagong, is the only specialized
BTMC company, producing knitting wool, woolen suiting, mens and womens woolen shawls,
and woolen blankets.

Other leading textile associations in the country include the BGMEA, Bangladesh Jute Mills
Association, and Bangladesh Knitwear Manufacturers and Exporters Association.

According to Bangladeshs Textile Minister Shajahan Siraj, the government had initiated various
policy measures such as rationalization of tariffs and taxes on imports of capital machinery, raw
materials, dyes and chemicals, and reduction of interest on long- and short-term loans.

Mahmudur Rahman, executive chairman of Bangladeshs Board of Investment, said in a
recently published interview that in the next five years, the country needs an investment of US
$3 billion in the textile sector. He said the countrys textile market, during the last fiscal year
(July 2004-June 2005) totaled $21.5 billion, compared to $3.2 billion 20 years ago. Rahman
predicted the market could grow to $23 billion in the next fiscal year.

The Bangladesh government offers great incentives for encouraging the use of local fabrics in
the export-oriented garment industries. To encourage textile export, companies can import
capital machinery duty-free. Cotton also may be imported duty-free. Moreover, the government
recently has implemented several policy reforms to create a more open and competitive climate
for foreign investment.

Rising garment export trends from Bangladesh, along with some benefits provided by the
government, have created concerns for Pakistan's government. Textile tycoons in Karachi are
thinking about shifting their business to Bangladesh.


Investment In Bangladesh

As reported by Bangladesh news agencies, the Bangladesh textile sector acquired an
investment influx of Tk 622 crore (approximately US $95 million) between January and May of
2005. Twelve textile mills primarily spinning mills located in Dhaka benefited from the
investment, which is said to be the largest investment in textiles in a five-month period since
Bangladesh became an independent country.

One of the recipients of this investment, Badsha Spinning Mills Ltd., recently purchased a blow
room and 20 TC 03 cards from Germany-based Trtzschler GmbH & Co. KG. The Trtzschler
equipment will be used to produce sliver for Ne 30 hosiery yarns in Badshas ring-spinning
plant. Nepcontrol NCT, featured on all of the cards, monitors neps, seed coat fragments and
trash particles on-line. According to Trtzschler, Badsha Spinning, which will export the majority
of the yarns it produces, selected Trtzschler equipment because high yarn quality is important.