DHAKA: The burgeoning Bangladesh readymade garment and knitwear sector has set a goal to reach $50 billion export by 2021. While this appears quite a daunting task, but industry sources claim it is doable provided the government and its concerned ministries make determined efforts to help achieve it as textile manufacturing sector and readymade garment industry (also the knitwear segment) are in fact inseparable and rolled into one.
While talking about investment in textile, RMG and knitwear industries, one has to remember a few relevant factors. The value addition in the RMG (woven) sector is relatively low – only over 20 percent and in knitwear sector, it is high, nearly 90 per cent. The $50 billion target for garment exports by 2021 has some visible problems which needs government’s undivided attention.
For example, the rules of origin are important factor for sustaining the flow of exports. RMG’s low value addition is being accepted by the European Union – largest importer of their garments. Other major and rising markets are still okay. But the 2021 export target was fixed considering the industrial restructuring in China as rising wages there making them uncompetitive. China is concentrating on high value garment providing an opportunity to cheaper countries like Bangladesh and Vietnam. This is both an opportunity and challenge for Bangladesh.
China has provided duty-free access to its market of all types of goods from Bangladesh which has resulted in picking up exports to China. But rules of origin (RoO) have posed a problem for the woven garments because it has envisaged 40 per cent value addition for such goods. Knitwear sector, however, with its high value addition has no problem. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the concerned government agencies are trying to negotiate with the Chinese authorities for a favourable decision.
Analysts feel that while a receptive Chinese government may temporarily overlook the rigid RoO factor, it is unlikely to work for long. Besides, as the worldwide economic recession is showing no signs of improvement anytime soon, other sophisticated and developed markets may impose stringent RoO to safeguard their interest.
This leaves Bangladesh with the only option: to try and increase value addition, which the industry owners are aware of. In fact, this realization has prompted many of them to expand their production capacities of spinning, weaving and finishing segments.
According to Bangladesh Textile Mills Association (BTMA) Secretary, during FY2014-15, the import of textile machinery has accelerated by 54 percent and as many as 26 new textile mills in spinning, weaving, dyeing and finishing were established.
