7.bangladesh mr m a awal

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Presentation on Bangladesh Strategy in Post MFAEnvironmentBy

Mr. M A Awal

Director of the Board&

Chairman

Standing Committee on Textile, Specialized Textile & Backward Linkage

Industries of

The Federation of Bangladesh Chamber of Commerce & Industry (FBCCI)&

Chairman

Bangladesh Textile Mills Association (BTMA)

Date: June 2, 2005

Place: Beijing



BANGLADESH

Where we are?



Textile as a whole is a heterogeneous product

market where yarn, fabric, fashion, material design,quality, colours, brands etc. create values.

Therefore, constant innovation and improvement

is a pre-requisite for increasing competitiveness.

My presentation will therefore, have two-phases ±

one, dealing with Primary Textile Sector (PTS)

having a brief on present status & potentials and

the second phase with present status of Export

Oriented Readymade Garments Units, in the post

MFA challenging environment.

INTRODUCTION



CONTRIBUTION TO NATIONAL ECONOMY

Textile Sector as a whole plays an important role in the economic

life of Bangladesh.

The sector contributes 38% industrial value addition.

Earns around 78% of total export earnings.

Employs around 4.5 million workforce of which majority is women Generates huge cliental base for Banking, Insurance, Shipping,

Transport, Hotel, Cosmetics, Toiletries and related other economic

activities.

Provides indirect employment to 0.80 million workforce in

accessories industries related to garments. Provides 0.2 million job to waste recycle industry related to RMG

sub- sector.

Contributes 10.50% to GDP through RMG sub-sector.



INSTITUTIONAL FRAMEWORK

Textile Sector in Bangladesh has a number of sub-sectors; eachoperates independently, but works as complementary to each other. InBangladesh RMG Sectors activities start from backward linkage to forwardlinkage that is apparels manufacturing. The whole chain of production processspans from yarn manufacturing to garmenting.

From the processing point of view Textile sector has the following sub-

sectors:

- Yarn Manufacturing: Manufacturing of yarn from natural fibre & MMF- Fabric Manufacturing: Woven & Knit Fabrics.- Textile Product processor: Dyeing & finishing of grey fabrics & yarn dyeing- Knitting Mills

- Knit-Dyeing-Finishing Mills- Woven Composite Mills (more than one process is carried)- Knit Composite Mills (more than one process is carried)- Hosiery Units- Readymade Garments Industry (RMG): Apparel manufacturing.



The market share of Bangladesh apparels can beseen from this table (2003-04)

(Value in $Mn)

Country Total RMGImport

RMG Importfrom BD

% share of BD

EU 74150.00 3651.81 4.92

US 66400.00 1628.59 2.45

Canada 3700.00 256.40 6.93

Japan 19700.00 19.79 0.01

Hong Kong 1700.00 6.59 0.39

S.Korea 900.00 3.15 0.35

Others 32350.00 119.76 0.37

Total 198900.00 5686.09 2.86



Bangladesh achieved a phenomenal growth in ReadymadeGarments exports, which is evident from the table below.

(Value in Mn. US$)

Year Total Export RMG Export % of RMG tototal export

1995-96 3882.00 2547.13 65.61

1996-97 4418.28 3001.25 64.93

1997-98 5161.20 3781.94 73.28

1998-99 5312.86 4019.98 75.67

1999-00 5752.19 4352.39 75.66

2000-01 6467.30 4860.12 75.15

2001-02 5986.09 4583.80 76.57

2002-03 6548.44 4912.10 75.01

2003-04 7602.99 5686.08 74.79

2004-05 (Jul-

Mar) 6097.12 4734.14 77.65



Growth of Woven Vs Knit RMG1993-94 Million Dozen %

Total Export 541.99 100%

Woven 412.21 76.05%

Knit 129.78 23.95%

The share of woven RMG export has been declining as the growth of Knit RMG export supported by local inputs had been much higher.

2003-04 Million Dozen %

Total Export 2185.06 100%Woven 1085.86 49.70%

Knit 1099.20 50.30%

In 2003-04 knit RMG export has surpassed the woven RMG export because knit

has competitive advantage due to availability of local inputs



Factors that contributed to the growth and expansionof RMG exports in Bangladesh are :-

±MFA ( Protected Market )

± G S P ( Preferential Market)

± Dynamism of Private Sector

± Policy support from Govt. & Continuity of Policies

in successive Govts. ± Decontrol of Reserve Sector.

± Financial and Non-financial incentives

± RMG Sector in the list of free sector.

± Introduction of Back-to-Back L/C and

± Bonded warehouse

± Structural adjustment policies of Govt.

±

Low labour cost.



The table below shows the product categories of our apparels export to major markets (2003-04)

Market Total ExportEarnings(In MnUS$)

Share ofWoven

Products

Share ofKnitted

Products

U.S.A 1628.59 85.46% 14.54%

EU 3651.81 51.24% 48.76%

Canada 256.40 72.44% 27.56%

Overall toall Markets

5686.09 62.22% 37.78%



TREND IN EU MARKET ± In EU market Bangladesh enjoys GSP facilities.

The facilities have been further relaxed throughEverything But Arms (EBA) scheme.

± There is no quota for Bangladesh in the E Umarket.

Export Trend in EU(Value in Mn. US $)

2000-01 2001-02 2002-03 2003-04 Export of

Knit and

WovenProducts 2418.00 2411.00

(- 0.3%)

2712.00

(+ 12.48%)

3651.79

(34.65%)

Export of TC to EU declined by 0.28% in 2001- 02 over 2000 -01, but bounced back by 12.48% in 2002-03 over 2001-02, 34.65%

in 2003-04 over 2002-03



Foreign Exchange Retention on National basis

Particulars Total Exportin Million

US$

2003-04

Total FERetention inMillion US$

2003-04

% of

NationalFE

Retention

RMG Export withlocal fabric

2603 1953 25.70

RMG Export withimported fabric

3083 770 10.14%



Major Problems Confronting RMG Sector in Bangladesh.

Heavy dependence on imported fabrics.

Long lead time. Difficulties in compliance of various standard without

increasing costs.

Low Labor productivity.

Shortage of Working Capital. Large scale production of low value added products.

Passive marketing approach.

Lack of direct contact with buyers.

Inefficient functioning of ports. Poor infrastructure.

Regular interruption in our power supply

Lack of product and market diversification.

Negative impact of FT A/RT A. (TD A/2000)



Major steps for effective Cost reduction strategy

Improvements in Labour Productivity

Better industrial Relations

Reduction of high dependency on imported fabrics

Reduction of lead time

Improvement in Backward linkages

Efficient management of port

Maintenance of Direct Relationship with Clients Provide incentives, Provide Marketing Support

Ensuring compliance of standards



STRATEGIES TO MEET POST - MFA CHALLANGES.

The major strategies are : Export TradePromotion, development of infrastructure,easy access to fabric, reduction in dutiesand interest rates, human resource

development, marketing support, settingup of garment villages, provision for separate economic zones for privatesector investment in PTS, provisions of

investment incentives, improvement inlocal operating environment, improvementin social accountability and labor safeguard etc.



Competitiveness Issues



Increase Productivity

Supply Chain Management

Design/Fashion/Market Development

Service Orientation

Managing Competitive advantage involve :



Probable reasons for fall in average price

Global manufacturing is having over capacity

Weak US market following terrorist attacks of September 11

In fighting among suppliers to maintain market share

Global recession Fierce competition among inefficient small and medium

size producers

Entry of new suppliers

Phasing out of quota, exports soared and prices fell

Cost of buying quota over, exporters were able to drop

their prices without sacrificing margins.



Code of Conduct : Ethical Sourcing (Stop Sweat Shops)

- Social sourcing as a criteria for trade

- Increased insistence on socialresponsibility of

manufactures/suppliers

- Corporate code conduct / business values to

guarantee certain standards:

* No child labour * No discrimination

* Working condition * Working hours* Minimum wages compensations * No forced labour

* Freedom of association



What will be requested

Strong buyer¶s market: Concentration on a fewcountries where they can source best.

Pure CMT business will phase out, buyers will ask forservices (approach to customer satisfaction)

Retail- Suppliers partnership (transparency, jointplanning )

Craftsmanship will be taken for granted

Lean retailing: Transfer of inventory management tosuppliers

Active marketing approach will replaced passivemarketing approach



Strong Trade Association to :

Develop a strong negotiation power

Participate in trade negotiation

Take lead role in fulfilling labour standards

Take over regulatory function of govt. (issues of IRC/ERC, CO, GSP etc)

Represent sector in national committees

Provide strong support to members (marketintelligence, trade fairs, e-portals, lobbying etc)



Working together creates synergies :

With friendly competitors of the same level of production chain (sub- contracts)

Clustering e.g for dyeing, printing finishing

Strategic alliances between larger and smallercompanies

Alongside the textile production chain (strategicalliances with local fabric suppliers to cut down

lead time)

To streamline training programmes



Increased competitiveness through flexibility :

Be able to respond to specific client demands

Develop capability to handle smaller and more

difficult orders

Develop merchandising capabilities

Develop an efficient sales network

Develop synergies with buyers : to jointly developpatterns, designs, exchange of data through e-networks



Increased productivity through HRD & Fashion :

Enforce in house training

Create training cooperation agreements betweencompanies from different levels of production chain

Diversify into creative training (design, fashion etc)

Combine R & D

and training Diversify products and markets

Improve product quality and diversify into new product lines

Develop more fashionable products

Develop small sized fashion line to be flexible in market

penetration

Active product marketing, focusing on fashion, trends, formality

going beyond pure functionality



Capacity Building

Use electronic data interchange for :

Receiving & processing orders,

Receiving market & sales information

Facilitating production planing

Handling complicated packaging instructions Providing customers with speedy information on

production status, shipping status, inventory etc



So What to do?Close Dialogue with Decision makers to :

Monitor the new political economy for textile

& clothing

Compare/benchmark with others

Develop a national/regional supply chain

HRD to increase productivity and flexibility

Develop an active marketing approach based

on a positive country image

Create a service oriented mindset and a closer

regional cooperation

Globalization is yesterday¶s news now. The eraof regionalization has began & we should take

advantage of that.



THANK

YOU

7.bangladesh mr m a awal

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