DYNAMIC PERFORMANCE AND INTERNATIONAL MARKETING OF TEXTILE MILLS IN BANGLADESH: A CASE STUDY OF ECHO COTTON MILLS LTD.
Introduction
1.1 Background of the Report.
Textiles have been an extremely important part of Bangladesh’s economy for a very long time for a number of reasons. The textile industry is concerned with meeting the demand for clothing, which is a basic necessity of life. It is an industry that is more labor intensive than any other in Bangladesh, and thus plays a critical role in providing employment for people. Currently, the textile industry accounts for 45% of all industrial employment in the country and contributes 5% of the total national income.
However, 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, unfavorable trade policies, and inadequate incentives for expansion. As a result, Bangladesh’s textile industry relies heavily on imports, and the country does not earn as much foreign exchange from its textile industry as it should.
History of the Textile Industry in Bangladesh
Traditionally, artisans working in small groups, in what are often referred to as cottage industries, produced most of the textile in the sub-continent. There were many such artisans in the area that was to become Bangladesh. In fact, from prehistoric times until the Industrial Revolution in the eighteenth century, East Bengal was self-sufficient in textiles. Its people produced Muslin, Jamdani, and various cotton and silk fabrics. These were all well regarded even beyond the region as they were manufactured by very skilled craftsmen.
The material produced by the artisans of Bengal started facing vigorous competition beginning in the eighteenth century after the growth of mechanized textile mills in the English Midlands. This eventually led to a great decline in the number of Bengali workers skilled enough to produce such high quality fabrics. According to popularly held beliefs, as the region’s spinners and weavers meant competition for their emerging textile industry, the British imperialists responded by trying to force the artisans to stop production. Theywere said to have sometimes used methods as harsh as cutting off the thumbs of the craftsmen so they would never be able to spin or weave again.
Not only were huge amounts of fabric produced in Bengal, the area was also a prime producer of the indigo plant, from which the indigo dye was extracted. This natural dye was widely used before the advent of chemical dyes in the nineteenth century. In fact, the rich blue color provided by the dye is still sometimes used for dyeing denim. Bengali dye masters had special recipes for producing the desired colors, just as chefs have recipes for achieving desired flavors. However, as was the case with the traditional handloom fabrics, indigo dye production also gradually declined.
The problems of the indigo industry were principally a result of two factors. First, because indigo was a cash crop, the British administrators in this part of the empire forced farmers to grow the indigo plant in order to increase the administrators’ profits. Unfortunately, the indigo plant is nitrogen depleting and thus exhausted the soil very quickly. The farmers received little real income from the crop since the British kept most of the profits, and in times of economic hardship, such as when the indigo price fell, they were unable to survive by eating their produce, unlike farmers who grew staples such as rice or wheat.
Another reason for indigo’s gradual disappearance as a dye stuff was the unpredictable nature of the plant. Sometimes one farmer would have a good harvest, while his neighbor would not be able to produce anything. The combination of poor yields and the unpredictability of the crop gradually led farmers to cease growing the plant and moving on to other, more profitable crops.
The fabric produced and dyed in British factories flooded the Indian markets. In time, its importation became one of the points of contention in the growing Independence Movement of the Sub-Continent. As separation from Great Britain was becoming a foreseeable reality and local production again profitable, the textile industry was reorganized as new methods of production were adopted. Water, a necessity for the chemical processes involved in processing the modern dyes now used, was abundant in East Bengal. This contributed to the establishment of mechanized textile factories in the area.
However, after 1947 and the partition of East and West Pakistan from India, most of the capital and resources of Pakistan came under the control of West Pakistanis. The textile industry thus stagnated in East Pakistan as momentum for development shifted from the eastern part of the country to the west. The west also grew more cotton than the east, which was used as a plea for developing the industry in the west instead of in the east. The majority of all industries in the east were also owned by West Pakistani industrialists.
When Bangladesh gained its independence from Pakistan in 1971, the new government nationalized the textile industry, as it did with many other businesses in which West Pakistanis had been the principal owners. Although there were some Bangladeshi industrialists, they did not form a large or politically powerful group and thus had to surrender control of their factories to the government as well. All of the country’s textile factories were then nationalized and organized under the Bangladesh Textile Mills Corporation, or BTMC.
The industry remained under the control of the BTMC until 1982-83. Bureaucratic obstacles combined with other problems such as low productivity in the labor force, lack of planning, indiscipline, lack of accountability, and poor machine maintenance and operation resulted in a lack of profits.
The government thus gradually denationalized the production of textiles. Factories were privatized, beginning with the dyeing and weaving units. Since that time, much of the industry has been privatized through auctions and other means.
The textile industry has been the catalyst for industrialization in numerous countries. For example, in England, the Industrial Revolution with the new development in coal and steel led to the establishment of a mass textile industry, which catalyzed the industrialization process in the eighteenth century. Similarly textiles played a major role in the industrialization of Japan, South Korea, Taiwan, Hong Kong, and Indonesia. The same has been true to a certain degree in this country. After privatization, the quality of the fabrics produced improved significantly, leading to a great increase in the demand for Bangladeshi textiles in both the international market, as well as the export oriented garment industry of Bangladesh. This launched the industry into a period of rapid growth that is continuing at present.
The Production of Textiles
The textile industry has seen the application of many new technologies over the centuries. However, the basic steps have remained the same. What is known as the textile industry includes all the steps necessary to transform fiber into fabric that is ready for stitching, sold either in the market or used in the RMG, or ready made garment, sector. These basic steps are spinning, weaving or knitting, and a combination of dyeing, printing and finishing.
Spinning
The principal materials used in the spinning sub-sector are raw cotton and synthetic fibers such as viscose and polyester staple fibers. None of these materials, however, are produced in Bangladesh on a large enough scale to supply a significant part of the demand. The reasons for this are complex.
Cotton needs to be grown in fields, and then ginned, which is the removal of seeds from cotton. At present, the cotton produced in Bangladesh is of an acceptable standard. However, the increased cultivation of cotton in this country is not feasible because the crop requires large amounts of land for a substantial yield. In overcrowded Bangladesh, farmers choose to grow rice over cotton. Locally grown cotton currently meets only 4-5% of the total requirement. The remaining 95% of the cotton needed must be imported at very high prices. The production of the synthetic/man-made fibers used in the textile industry requires fairly advanced technology and investment.
Once the raw materials have been obtained, spinning is the first step in textile production. This is the process by which natural or synthetic fibers are cleaned and twisted into yarn.
The raw materials first move through the blow room where all impurities are removed, for natural fibers only and the fibers are rolled into laps. The laps then go through a carding machine, where they are cleaned further and formed into slivers, thick and loosely spun yarn. In order to produce combed yarn, the fibers need to undergo further processing in the comber machine where the short strands are removed, and the remain processed into sliver. The sliver is then fed to the draw frame, and speed/roving frames where they are twisted to form what are called rovings. The rovings are finally placed in spinning frames where further twisting and drafting take place, and yarn is produced. The yarn is then spun around a bobbin or cone, using autoconers or cone winding/reeling machines, packed and marketed.
The cotton industry has been widely recognized as the ‘leading sector’ in the industrialization of several of the world’s major economies, and more particularly of Great Britain, the country that first experienced an ‘industrial revolution’. Its importance was recognized and widely discussed from the early years of the factory system in spinning. Modernization efforts have- brought major changes to the Bangladesh textile industry. Equipment has been streamlined and many operations have been fully automated with computers. Machine speeds have greatly increased. At most mills the opening of cotton bales is fully automated. Lint from several bales is mixed and blended together to provide a uniform blend of fiber properties. To ensure that the new high-speed automated feeding equipment performs at peak efficiency and that fiber properties are consistent, computers group the bales for production/feeding according to fiber properties.
The blended lint is blown by air from the feeder through chutes to cleaning and carding machines that separate and align the fibers into a thin web. Carding machines can process cotton in excess of 100 pounds per hour. The web of fibers at the front of the card is then drawn through a funnel-shaped device called a trumpet, providing a soft, rope-like strand called a sliver (pronounced SLY -ver). As many as eight strands of sliver are blended together in the drawing process. Drawing speeds have increased tremendously over the past few years and now can exceed 1,500 feet per minute.
Roving frames draw or draft the slivers out even more thinly and add a gentle twist as the first step in ring spinning of yarn. Ring spinning machines further draw the roving and add twist making it tighter and thinner until it reaches the yarn thickness or “count” needed for weaving or knitting fabric. The yarns can be twisted many times per inch.
Ring spinning frames continue to playa role in this country, but open-end spinning, with rotors that can spin five to six times as fast as a ring spinning machine, are becoming more widespread. In open-end spinning, yarn is produced directly from sliver. The roving process is eliminated. Other spinning systems have also eliminated the need for roving, as well as addressing the key limitation of both ring and open-end spinning, which is mechanical twisting. These systems, air jet and Vortex use compressed air currents to stabilize the yarn. By removing the mechanical twisting methods, air jet and Vortex are faster and more productive than any other short-staple spinning system. After spinning, the yarns are tightly wound around bobbins or tubes and are ready for fabric forming. Ply yarns are two or more single yarns twisted together. Cord is plied yarn twisted together. With the initiative of the entrepreneurs of Echo Cotton Mills Limited came to existence in 1982 by incorporating as a public limited Company under the company’s Law of Bangladesh.
The company is the first project that financed by the Consortium members headed by Bangladesh Shilpa Rin Songstha (BSRS) with the participation of the Sonali bank, Agrani Bank. The Company concerned erected in 1995. And started trial production in May 1996 and started commercial production in September 1996. Echo Cotton Mills Limited is a well-established company in Textile, Spinning Industries sector in Bangladesh and contributed on RMG by producing Export Quality Cotton, 65:35 Blended and 100% Polyester yam. The Current Position of the Textile industry in Bangladesh:
Textiles have been an extremely important part of Bangladesh’s economy for a very long time for a number of reasons. The textile industry is concerned with meeting the demand for clothing, which is a basic necessity of the. It is an industry that is more labor intensive than any other in Bangladesh, and thus plays a critical role in providing employment for people. Currently, the textile industry accounts for 45% of all industrial employment in the country and contributes 5% of the total national income. Today, the textile industry of Bangladesh can be divided into the three main categories: the public sector, handloom sector, and the organized private sector. Each of these sectors has its advantages and disadvantages. Currently, the organized private sector dominates, and is also expanding at the fastest rate. The public sector is that portion of the industry controlled by organizations that are part of the government. The factories in the public sector enjoy certain privileges such as government funding. However, in Bangladesh, factories in the public sector are not well supervised. There are frequent changes in officers, and many of these officials do not have a personal interest in the factory for which they are responsible. In addition, the equipment in this sector is not well maintained, as much of the money allocated for this purpose is not spent as planned, but is wasted through corruption and poor accounting. Handloom Sector The rural group of textile producers includes operators of handlooms and a number of organizations, which employ rural women, such as BRAC, or the Bangladesh Rural Advancement Committee. The Handloom industry provides employment for a large segment of the population of Bangladesh. The industry also supplies a large portion of the fabric required by the local market. Factories in this sector are usually we well looked after by the owners and are quite productive, considering the equipment available. However, the inferiority of their machinery, mostly due to their narrow width, means that the fabric production is slow, and usually falls short of the quality needed for export. The most productive of the three categories is the private sector. This, as the term suggests, is made up of those factories owned by companies or entrepreneurs. Since the owners of such factories are directly affected by their performance, they take an active part in planning, decision-making, and management. Most of these factories also have machinery that is superior to those in the two other sectors because the owners are well aware of the connection between their equipment and their profits. In the year 2005, some of the international policies regarding the export of textiles and garments will change, which may present the Bangladeshi textile industry the greatest challenges it has had to face so far. There is much speculation at present about the situation of the RMG (Ready Made Garment) exporters in the post-MFA (Multi-Fiber
Arrangements) period, when the World Trade Organization, or WTO, instead of GATT (General Agreement on Tariff and Trade) will control the sector. Under the WTO all quotas will be removed, resulting in a free market worldwide. Bangladesh’s garment and textile manufacturers will have to face steep competition from countries.
1.2 The Future of the Textile Industry in Bangladesh
The textile industry in Bangladesh has grown in an unplanned manner and a critical demand-supply gap has arisen for both yarn and fabric. The crisis will naturally deepen unless appropriate backward linkages, the incorporation of the fundamental steps in the textile industry all through to the RMG industry, can be built to meet the rapidly approaching challenges in the global textile market. As the population is growing and the standard of living is increasing in Bangladesh, the demand for textiles is increasing rapidly. This presents an urgent need to dramatically increase capacities in spinning, weaving, knitting, and dyeing, printing, and finishing sub-sectors. This will require the adoption of the most modern and appropriate technology to ensure quality products at competitive prices.
The possibility of increased yarn production in Bangladesh is an issue that has been looked into extensively by many researchers. These investigations have revealed the country actually has a comparative advantage over all competitors in terms of the expense of yarn production. However, in regards to the total yarn cost, Bangladesh’s advantage over India and Pakistan disappears, even though it remains competitive with other producers. This is essentially a result of the higher cost of raw materials in Bangladesh, as most need to be imported.
As can be seen in chart 2, Bangladesh has a lower waste percentage than all its competitors. Power along with Korea is the cheapest in Bangladesh amongst all the yarn producers. The country also has a very low depreciation rate and a fairly low interest rate as well, aided by a low conversion cost as well. However, the price of auxiliary materials in Bangladesh is the highest among all the yarn producers, as is the price of raw materials. Due to these two factors Bangladesh loses its comparative advantage over India and Pakistan.
Most of the raw cotton imported by Bangladesh comes from overseas. The country is not only handicapped by the import tariffs and shipping expenses, but India and Pakistan subsidize the raw cotton, which is sold locally, resulting in countries like Bangladesh paying more for the same cotton.
The outcome for the Bangladeshi spinning mills of such price differentials is that they obtain raw cotton of the same quality at prices, which are approximately 30% higher than the Indian mills, and Pakistani mills. In addition, Bangladesh’s spinning mills have to pay another 6 to 7% for handling, freight, and commission charges which put them in a disadvantageous situation. The new infrastructure development surcharge, or IDS, on all imports, which was stipulated in the 1997/98 fiscal year, added another 2.5% to the price of imported raw cotton.
The weaving and knitting sub-sectors will also need to expand at a rapid rate, as there is a large demand-supply gap in the country. With increased investment in the sub-sectors and modernized machinery, Bangladesh could profit greatly from larger and more competitive weaving and knitting sectors.
As the current dyeing facilities are mostly dependent on imported fabrics, they are expanding at a rate which is not dependent on any of the other sectors. However, as local grey becomes more competitive, and its production is increased, the dyeing, printing, and finishing sub-sector will also need to expand to accommodate for the increased supply.
The leakage from bonded warehouse facilities and smuggling of materials across borders also need to be monitored closely in order to assure the competitiveness of the local industry. The reduction of such problems will automatically improve the market position resulting in improved opportunities for the expansion of the Bangladeshi textile industry.
The cotton industry has been widely recognized as the ‘leading sector’ in the industrialization of several of the world’s major economies, and more particularly of Great Britain, the country that first experienced an ‘industrial revolution’. Its importance was recognized and widely discussed from the early years of the factory system in spinning. Modernization efforts have- brought major changes to the Bangladesh textile industry. Equipment has been streamlined and many operations have been fully automated with computers. Machine speeds have greatly increased. At most mills the opening of cotton bales is fully automated. Lint from several bales is mixed and blended together to provide a uniform blend of fiber properties. To ensure that the new high-speed automated feeding equipment performs at peak efficiency and that fiber properties are consistent, computers group the bales for production/feeding according to fiber properties.
The blended lint is blown by air from the feeder through chutes to cleaning and carding machines that separate and align the fibers into a thin web. Carding machines can process cotton in excess of 100 pounds per hour. The web of fibers at the front of the card is then drawn through a funnel-shaped device called a trumpet, providing a soft, rope-like strand called a sliver (pronounced SLY -ver). As many as eight strands of sliver are blended together in the drawing process. Drawing speeds have increased tremendously over the past few years and now can exceed 1,500 feet per minute.
Roving frames draw or draft the slivers out even more thinly and add a gentle twist as the first step in ring spinning of yarn. Ring spinning machines further draw the roving and add twist making it tighter and thinner until it reaches the yarn thickness or “count” needed for weaving or knitting fabric. The yarns can be twisted many times per inch.
Ring spinning frames continue to playa role in this country, but open-end spinning, with rotors that can spin five to six times as fast as a ring spinning machine, are becoming more widespread. In open-end spinning, yarn is produced directly from sliver. The roving process is eliminated. Other spinning systems have also eliminated the need for roving, as well as addressing the key limitation of both ring and open-end spinning, which is mechanical twisting. These systems, air jet and Vortex use compressed air currents to stabilize the yarn. By removing the mechanical twisting methods, air jet and Vortex are faster and more productive than any other short-staple spinning system. After spinning, the yarns are tightly wound around bobbins or tubes and are ready for fabric forming. Ply yarns are two or more single yarns twisted together.
1.3 Objectives of the report:
Performance dynamics of Textile mills in Bangladesh. A case study of Echo Cotton Mills Ltd. & Shabnam Textile Mills Ltd.
Objectives of the study :
The Main objective of the study is to assess the performance dynamics of textile mill and backward linkage cotton mills. In the light of Broad objective specific objectives may be stalled as under :
i) To review the polices & program of the company,
ii) To review Corporate governess of the organization
iii) To assess the performance dynamics of the company. (total production, total profit & productivity) productivity-total production/total employees.
iv) To conduct SWOT analysis.
v) To suggest possible majors to improve performance.
vi) Finally International Marketing of Textile products.
The broad objective of the study is to sketch out an overall Activities of ECML & Shabnam Textile Mills Ltd.
The overall objective behind the report can be represented as:
Ø To present an overview of To appraise Activities of various Department in ECML.
Ø To Identify the problems related to ECML
Ø To recommend suggestions for the various department of ECML
The main objectives of preparing this Internship report is to develop our knowledge about, Overall activities of the Echo Cotton Mills Ltd. Management Structure, Production Process Analysis, marketing Strategy, Store Inventory management and Financial Management/Analysis Specially, develop our practical knowledge about, how to operate this type of manufacturing Industries, how to produce the finished yam, and how to marketing that finished goods, how to control the inventory and how to control the financial management fact as prepare the books of Accounts and other financial statement.
Scope of the report of Echo Cotton Mills Ltd.are as follows :
- Analysis of Echo Cotton Mills Ltd., Management structure:
i) Structure of the management
ii) Different Departmental Activities.
- Production Analysis:
i) Material
ii) Source of Raw Materials
iii) Machineries of ECML
iv) Different Product
v) Production Analysis
vi) Quality Control
vii) Packaging.
The Performance and Marketing Scenario of Textile Mills in Bangladesh
2.1: Textile Industry in Bangladesh
The textile industry in Bangladesh is thriving. Bangladesh has relatively good access to EU and other marketsfor textile products, has availability of an industrious and low-wage work force, and has supportive government policies designed to increase investment in the industry. According to the Bangladesh Textile Mills Association, the sector provides direct employment to 2.75 million people, including 1.25 million women, and is the source of direct and indirect employment for 10 million people. According to the Ministry of Textiles (1995), employment in the industry accounts for 45 percent of the total employment of the industrial sector, and contributes about 65 percent of the total export earnings of the country. The textile industry is seen as an engine for the economic development of Bangladesh, where per capita income of about $200 is among the lowest in the world.
The demand for ready-made garments from Bangladesh is strong. The United States alone imports $1.7 billion per year of garments from Bangladesh, an amount which could be higher but for quota limitations. The Government of Bangladesh has requested that quota access to the U.S. textile market be increased by 30 percent, after it acceded to U.S. demands for an end to child labor in textile factories. Bangladesh’s other major market, the EU, has provided a Generalized System of Preferences (GSP) facility to Bangladesh knit wear industries on the condition that the yarn used in the garments is manufactured in Bangladesh.
This trade access has resulted in considerable growth in export-oriented yarn manufacturing. With additional mills currently being financed, the Bangladesh Textile Mills Association (BTMA) expects the country to be self sufficient in yarn production by 1999.
Yarn demand for domestic use is expected to increase from 186 million kg in 1997/98 to 207 million kg in 1999/2000, and for the export oriented garment industry from 398 million kg in 1997/98 to 434 million kg in 1999/2000. Total domestic fabric production currently meets only 32 percent of the country’s total fabric requirement, and only 10 percent of the woven requirement for the export oriented garment industry.
The government of Bangladesh has established a textile policy to attain self sufficiency in fabrics by the year 2005 by promoting linkages within the various components of the industry (spinning, weaving, knitting, dyeing, finishing and garment manufacture), providing loans to modernize the industry and liberalizing import restrictions on raw materials.
Local cotton production meets approximately 15 percent of domestic consumption. While the BTMA would like to see this increase to some 50 percent by the year 2005, it is very unlikely to occur due to the lack of suitable soil and growing conditions for cotton, and strong farmer preferences for rice. Annual population growth is forecast by the government at 1.8 percent, and GDP growth at 7 percent, which will increase cotton consumption for domestic needs.
The United States has significant potential to increase cotton exports to Bangladesh and increase market share as well. In 1996/97, U.S. cotton exports to Bangladesh were 124,000 bales, representing 23 percent of Bangladesh’s cotton imports. To date, commitments of U.S. cotton in 1997/98 have reached 210,000 bales, which if shipped this marketing year, would result in a U.S. market share of over 30 percent. Bangladesh also imports cotton from Australia, Africa,
Fig: 2.1 – Bangladesh Cotton Import from World and U.S Source: International
Textile Journal
The Commonwealth of Independent States, and Pakistan, often due to attractive prices. Bangladesh is an important market for high-quality cotton, and is one of the top markets for U.S. exports of Pima (extra-long staple) cotton. In 1997/98 the United States is likely to export about 70,000 bales of Pima to Bangladesh, which would represent a market share of 90 percent. Bangladesh spinning mill managers laud U.S. cotton for its regular and reliable shipment, known quality, and low contamination. The United States is likely to be able to count on Bangladesh as a good cotton export market for many years to come.
2.2: The Milestones of Textile Sector in Bangladesh under different Political Era
Ancient Bengal: Handloom had been in operation in the territory now comprising Bangladesh before the inception of the Christian era, believe many. The history and literature contain some piecemeal abstract information about handloom weaving of Sulatni era in between 1000 BC to 1600 BC.
Mughal Era: The word muslin reminds the glorious days of Bengal textiles, particularly of Dhaka, during the Mughal era and the early colonial period. Muslin is an exceptionally high quality fabric of plain construction, woven in handloom with finest yarn measuring up to 250 Ne. The modern cotton spinning is able to spin cotton yarn only up to 120 Ne. Muslin and other textiles were exported in mass scale to different parts of India, Europe, and Central & West Asia. At that time Bengal also became the world famous silk producers because of huge sericulture concentration in Rajshahi & Murshidabad regions. Indigenous technology based (but high accuracy oriented) manual cotton spinning, quality katgahi silk-reeling and decorative handloom weaving were the causes of Bengali’s in textiles advantage over any Asian & European nations of the time. Bengal muslin and other textiles boomed at that time because of the business friendly environment created by the Mughal regime. Under the umbrella of the social security and political blessing to business, Bengalis felt convenience to make investment in the sector and applied their inherited talent.
British Era: In the middle of the British colonial era, the muslin technology was lost from the Bengal due to the tyrannies of the colonial rulers and marketing agents of UK based textile industries, and also the uneven competition with the low cost products of the mechanized textiles. Lack of political support, state’s non-cooperation and lack of social initiatives (at least for lack of documentation through literature) have deprived Bangladesh and the world from muslin. The Singer’s sewing machines created new era of mechanized tailoring in the land by the end of 19th century. The colonial regime also introduced Bengal with the mechanized textile industry since 1930s. But the participation of local investors in establishing mechanized textile industry was constrained due to break out of the World War-II and the division of India in 1947.
Pakistan Era: The supply of raw cotton from the then West Pakistan to Bangladesh opened new avenue for developing cotton spinning industry in the then East Pakistan, where handloom weaving was again on the verge of revival. Mostly the non-Bengali entrepreneurs availed the scope of establishing mechanized textile industry, which was blessed by the liberal business policies issued by the then Pakistan government and technical cooperation extended by East Pakistan Industrial Development Corporation (EPIDC). As a result, prior to 1971, Bangladesh had 858,000 spindles and 7,400 power looms and 375,00 operable handlooms, registering a good growth as compared to 1947 situation when the country had only 110,000 spindles and 2,700 power looms comprising 11 Textile Mills. Early 1960s was the beginning of ready-made garments manufacturing, which was then simply an initial venture of the local investors aiming to capture a share of the domestic market that remained under the custody of West Pakistani apparel manufacturers.
Bangladesh Era: As compared to 1972-73, today’s capacity of Bangladesh Textile, Composite Textile & RMG industry is mammoth. The landscape changed largely in the last 22 years. The export oriented RMG started its journey only since 1977-78 with 6 manufacturing units. As a matter of fact, the Bangladesh Primary Textile (PT) & RMG industry started to be a little dynamic since 1983-84 when the country started earning some significant proceed (116.203 US $) through exporting RMG. At that time, the country’s spinning sub-sector manufactured only 60.13 million kg of yarn and the power loom weaving produced 109.63 million meters of fabrics and handloom in excess of 600 million meters of finished textiles (national assortments like sari, lungi, towel/gamcha, wrapper/chador, etc.). Contrasting to that scenario, Bangladesh RMG industry exported in excess of US$ 8 billion in 2005-06; the primary textile as a partner of export oriented RMGs and domestic apparel industries produced 538 million kg yarn and 6,515 million meters of fabrics. However, the handloom production has declined from 630 million to 480 million meters in this period of time.
2.3: Performance of Composite Textile Mills in Bangladesh
Composite Textiles and clothing account for about 85% of total export earnings of Bangladesh. The share of clothing has increased dramatically from .2% of total exports in 1980 to about 74.8% in 1997-98. Exports of clothing from Bangladesh are characterized by (1) high concentration on low value-added products; (2) heavy dependence on imported intermediate inputs; and (3) high regional concentration of exports. Liberalization of trade following the Uruguay Round agreement presents opportunities as well as challenges for a developing country such as Bangladesh. In the Post-Uruguay Round period, traditional instruments of trade policy such as tariffs, quotas, and subsidies will become less feasible and less relevant. In a liberalized trade regime, competition among textiles and clothing exporting countries is likely to become intense. For a developing country such as Bangladesh, low relative labour costs may not be sufficient for improving the competitive position of the clothing industry. The patterns of comparative advantage and hence the structure of exports and imports depend on stage of economic development (Balassa, 1979).
A country’s comparative advantage is expected to change as a result of changes in factor endowments, accumulation of human capital, and technological innovations. Countries move along a ladder of comparative advantage as development proceeds: relatively advanced countries will lose competitive advantages in product groups intensive in unskilled labour and will shift to products and processes intensive in capital, skilled labour, and innovations. Bangladesh, being a labour-abundant country, started the process of industrialization by concentrating on labour-intensive products such as textiles and clothing. Since clothing is more labour intensive than textiles, it is logical for Bangladesh to demonstrate its comparative advantage in clothing. Over the last decade or so Bangladesh has substantially liberalized its trade regime, moving away from costly protectionist policy toward a more export-friendly trade regime.
The Uruguay Round presents opportunities for Bangladesh by liberalizing trade in textiles and clothing over a ten-year transition period. Several factors however, generate uncertainty and present challenges for Bangladesh: trade diversion induced by regional trade blocs, special trade relationships between trade blocs and some non-member countries, safeguard mechanisms and stringent “rules of origin” introduced by developed countries, China’s accession to the World Trade Organization in the near future, greater competition from major developing countries such as China and India which have a well-integrated textiles and clothing industry
The phenomenal growth in RMG, a part of Composite Textile Industry was experienced in the last decade. In 1984-85, No. of Garment factories was 800 RMG jointly with knitwear accounted for more than 70% of total investments in the manufacturing sector during the first half of the 1990’s. At present with about 4000 factories and a workforce of two million, 80% of which are women, employing over 50% of the industrial workforce and having 75% of the total exports earning of the country.
GDP growth of broad Industry like Composite Textile sector was 8.43% in the last year compared to 7.10% in the preceding year. The performance of the industrial sector was mainly based on the growth in textile and wearing apparel. In the last year the contribution of this sector in national income is 28.44%. During 2004-05 export performance of Bangladesh raised up to US$ 8654.52 million (13.83% growth). Most contributors to the exportable items are RMG (Woven Garments and Knitwear).
The Ready Made Garment industry in Bangladesh accounts for more than 75% of total exports. Bangladesh is best placed in the region for textiles and garments because of low-cost labor, preferential trade status and advantageous global market access. Government incentives for the spinning and weaving industries include a 15% cash subsidy of the fabric cost to exporters sourcing fabrics locally. There is a huge fabric demand supply gap in the RMG industry which is being met by imports. Thus, the potential for backward linkage industry is enormous. The phenomenal growth in RMG was experienced in the last decade. With about 2,600 factories and a workforce of 1.4 million, RMG jointly with knitwear accounted for more than 70% of total investments in the manufacturing sector during the first half of the 1990’s. At present, number of RMG factories exceeded 3,000, employing over 50% of the industrial workforce and having 75% of the total exports earning of the country.
The textile industry in Bangladesh is thriving. Bangladesh has relatively good access to EU and other marketsfor textile products, has availability of an industrious and low-wage work force, and has supportive government policies designed to increase investment in the industry. The textile industry is seen as an engine for the economic development of Bangladesh, where per capita income of about $200 is among the lowest in the world. The demand for ready-made garments from Bangladesh is strong. The United States alone imports $1.7 billion per year of garments from Bangladesh, an amount which could be higher but for quota limitations.
The extent of the impact of the removal of the MultiFiber Agreement (MFA) quotas on world textile and apparel trade patterns is likely to depend on a number of factors including the degree of restraint imposed by the quotas. This reviews analytical studies that have looked at the direct impact of quota elimination on the global pattern of textile and apparel trade and production. Second, it discusses the different competitiveness factors identified in the literature as potentially affecting post- trade patterns
| 7000 | 6418 | |||||||||||||
| 6000 | 5787 | |||||||||||||
| 5000 | In Millionon US$ | 4020 | 4352 | 4860 | 4584 | 4912 | ||||||||
| 4000 | 3001 | 3783 | ||||||||||||
| 3000 | 2547 | |||||||||||||
| 2000 | 131 | 1064 | ||||||||||||
| 1000
0 |
7 | |||||||||||||
| 1981-82 | 1985-86 | 1991-92 | 1995-96 | 1996-97 | 1997-98 | 1998-99 | 1999-2000 | 2000-01 | 2002-03 | 2003-04 | 2004-05 | 2005-
06 |
Fig 2.2 : Performance and Growth of RMG Exports from Bangladesh (1981-82 to 2005-06)
Prepared By
BRIG GEN MD. ZAKIR HOSSAIN psc, G (Retd)
Executive Chairman
Bangladesh EPZ Authority, BEPZA
Multi-Fiber Agreement (MFA) and Generalized System of Preference (GSP) of the EU are the main actors behind acquainting Bangladesh RMG products to global market ensuring assured market access. Bangladesh is now a significant RMG supplier to North America and Europe. Due to phasing out of MFA, many are doubtful about Bangladesh’s ability to maintain the fast growth of the recent years in this sector. However, on a more positive note, Bangladesh is expected to maintain its tariff-free access to EU under the European GSP, since the GSP is not covered by the Uruguay Round Agreement. Recently, Canada has also provided tariff-free access of all the items from Bangladesh. Meantime, Bangladesh RMG industry has earned strong competitiveness as a global standard RMG source. Marketing network has been spread over the economics of the continents. End users could well recognize and differentiate the products confidently.
2.4: Composite Textile & Clothing Industry in Bangladesh Economy
Textiles and clothing sector is the largest manufacturing sector in Bangladesh contributing to nearly 5% of its GDP and 50% of the industrial employment. Bangladesh’s economy is largely driven by exports of readymade garments; almost 75% of Bangladesh’s foreign exchange earnings are by way of readymade garments’ exports. Although historically, Bangladesh has not been a major exporter of T&C products, the preferential access for LDCs in the EU and the US market paved way for an explosive growth of T&C industry in Bangladesh with a strong support from the Bangladeshi Government.
Bangladesh import market for cotton textiles: Bangladesh’s textile industry is highly dependent on imports of yarns and fabrics, which are processed for export purposes. Bangladesh’s imports of cotton textiles were worth US$ 883.1 mn in 2003, registering a CAGR of about 13% since 1998. In terms of volumes, cotton textiles imports of Bangladesh have increased multiple times during the period 1998-2003. India is the second largest exporter of cotton textiles to Bangladesh, catering to 19% of its total imports in 2003. In relative terms, however, India’s share in this market has gone down (from 24% in 1998) owing to China’s growing dominance in this market.
Cotton yarns and fabrics comprise almost the entire portfolio of Bangladesh’s cotton textiles imports basket, with made-ups imports being almost negligible. Cotton fabrics form the largest import segment, accounting for 77% of total cotton textiles imports in 2003. It is followed by imports of cotton yarn, representing almost 23% of the total cotton textiles import basket.
India has been the leading supplier of cotton yarns to Bangladesh. However, India’s share in cotton yarn import market of Bangladesh has dropped to 46% in 2003 from as high as 93% in 1998. During this period, Pakistan and Hong Kong have emerged as major competitors for India in this market. Amongst the cotton fabric imports of Bangladesh, dyed fabrics constitute the single largest import category, representing 75% of total cotton fabrics imports in 2003. India’s market share in the cotton fabrics’ import market of Bangladesh is around 12%.
2.5: Composite Textile Industry Boom in Bangladesh
It would be an unjust to give all the credits to any single part (e.g., global market, Bangladesh business community, or the government policy) for the boom of Bangladesh textile & RMG industry. In fact, a range of internal and global factors & issues combined has caused it to happen. Bengalis have century long history of mechanized tailoring and several thousand years of experience in hand stitching. The aptitude and art of sewing/stitching has genetically transmitted through the females of this land. Even today, one can hardly find a rural female adult who does not know hand stitching or embroidery work. From long since the textile industry and garmenting have been in this very land that has past export experience too. By exploiting the demand of the global apparel market, the local manufacturers/exporters backed by the responsive state polices have successfully utilized the skilled but cheap manpower resource to recover the land’s lost
Table2.1: Growth rate of Textile industry in Sector wise
Source: Bangladesh Textile mills owners association
pride, once again. Bangladesh Era: As compared to 1972-73, today’s capacity of Bangladesh Composite Textile & RMG industry
.
The landscape changed largely in the last 22 years. The export oriented RMG started its journey only since 1977-78 with 6 manufacturing units. As a matter of fact, the Bangladesh Primary Textile (PT) & RMG industry starteto be a little dynamic since 1983-84 when the country started earning some significant proceed (116.203 US $) through exporting RMG. At that time, the country’s spinning sub-sector manufactured only 60.13 million kg of yarn and the power loom weaving produced 109.63 million meters of fabrics and handloom in excess of 600 million meters of finished textiles (national assortments like sari, lungi, towel/gamcha, wrapper/chador, etc.).
Contrasting to that scenario, Bangladesh RMG industry exported in excess of US$ 8 billion in 2005-06; the primary textile as a partner of export oriented RMGs and domestic apparel industries produced 538 million kg yarn and 6,515 million meters of fabrics. However, the handloom production has declined from 630 million to 480 million meters in this period of time.
Bangladesh RMG, Textile & Accessories Industries together now;
· Account for 77% of the total national export earning.
· Contribute 38% value addition of the industrial sector.
· Provide some 63% employment in the whole industrial sector of the country.
Fig: 2.3 : Trend of Yarn Production
Prepared by Dr. Md.Ali Nesar Khan, Ex Principal, Textile Industry Development Centre. Published January, 2007 in a Global Textile Magazine.
The production growth of the first decade Bangladesh Textiles could not be characterized as any thing closer to impressive, not to speak of booming. The public sector endeavor for development of textile industry in the first decade of Bangladesh was an aftermath of the political philosophy of production imposed by the first government of the country. Inefficiency, corruption and strong trade unionism were the other real barriers to the potential growth of production. Female participation was not significant in this decade
Fig:2.4: RMG Export from Bangladesh
Prepared by Dr. Md.Ali Nesar Khan, Ex Principal, Textile Industry Development Centre. Published January, 2007 in a Global Textile Magazine
Fig:2.5: Fabrics Production in Million Meter
Prepared by Dr. Md.Ali Nesar Khan, Ex Principal, Textile Industry Development Centre. Published January, 2007 in a Global Textile Magazine
2.6: Growth rate of Textile industry in Bangladesh
The Textile and Clothing Sector in Bangladesh, predominantly consisting of the Readymade Garments(RMG) industries is currently the largest contributor to the national export earnings.
Starting in the late seventies as a minor non-traditional Sector with as negligible export base, the Sector has growth over the years in geometric progression mans presently accounts for about 75% of the total exports of the country. In FY 2001 the Sector earned US$ 5.2 billion in which the contribution of RMG alone was US$ 4.9 billion. The Sector consisting of 3700 enterprises has a contribution of 5% to the GDP of the country. The Sector represents 24% of all manufacturing production and employs 1.6 million people including 150,000 in backward linkage industries. In the initial years the RMG Sector was heavily dependent upon imports. Imports were as much as 80% of the export value. In addition to fabrics all other accessories like interlining, labels, buttons and sewing threads, all the packaging materials like neck boards, backboards, plastic collar stays, tissue papers, hangtags, pins and clips, hangers and polybags, zippers and draw strings and export cartons used to be imported.
Over the last decade, a large number of accessories industries have come up to fill in these gap to the extent of about 70% of the total requirement of the industry. While the country has more or less achieved self-reliance in supply of accessories, the progress is less noticeable in the fabric manufacturing, especially the woven fabric. While the RMG Sector as a whole grew from US$ 867 million in 1989-90 to US$ 4.35 billion in 1999-2000, the knit sub-Sector grew at a faster rate than the rest of the sub-sectors. During the period under reviews, the share of knit sub-sector grew from 15.14% of the total RMG export to 29.16% whereas that of the woven sub-Sector fell from 84.86% to 70.84%.
Bangladesh achieved a phenomenal growth in Readymade Garments exports, which is evident from the table below.
(Value in Mn. US$)
Year Total Export RMG Export % of RMG to total export
1995-96 3882.00 2547.13 65.61
1996-97 4418.28 3001.25 64.93
1997-98 5161.20 3781.94 73.28
1998-99 5312.86 4019.98 75.67
1999-00 5752.19 4352.39 75.66
2000-01 6467.30 4860.12 75.15
2001-02 5986.09 4583.80 76.57
2002-03 6548.44 4912.10 75.01
2003-04 7602.99 5686.08 74.79
2004-05 6097.12 4734.14 77.65
The table below shows the product categories of
our apparels export to major markets (2003-04)
Total Export Earnings
Market (In MnUS$) Share of Woven Products Share of Knitted 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 to all Markets 5686.09 62.22% 37.78%
2.7: Major Problems Confronting Textile Sector in Bangladesh.
The government’s efforts to aid the textile and clothing industry are undermined by “delays in customs clearance, hassles in accessing duty drawbacks, port congestions and various rent-seeking activities.” Both the restrictions and the multiplicity of incentive programmed create serious problems with corruption and illicit activities. In Transparency International’s 2003 Corruption Perceptions Index, this is based on surveys from independent institutions. Bangladesh had the highest perceived level of corruption among 133 countries.
“There is a general consensus,” according to one analysis, “that a lot of wealth made by garment entrepreneurs in Bangladesh was government’s own Textile Policy ? 1995 explicitly recognized that “illegal imports of yarn and fabrics earned through illegal means.” in the country is a serious constraint,” and proposed a series of steps to address the problem.
While corruption is among the more intractable problems facing Bangladesh, efforts are underway to address it. Working with outside donors, the Government of Bangladesh is promulgating a new law to establish and Independent Anti-Corruption Commission. The problems stemming from the bonded warehouse system may also be reduced by reforms of that system, which was revamped at the end of 2003. Under those reforms, all imports for domestic consumption and most of the export-oriented are subject to bank guarantees for import duties (100 percent) and the value-added tax 25 % Complementary reforms are also underway in the government procurement system, as well as the withdrawal of tax holidays for the expansion of existing units and the elimination of certain tax exemptions.
Besides this the following problem also arising in to the Textile Sector.
· 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 FTA/RTA. (TDA/2000)
· Government inefficiency and corruption
To review the Policies & Program of the Company
3.1 Company Profile And Historical Back Ground of Echo
Cotton Mills Ltd.
ECHO COTTON MILLS LTD is one of the largest textile mills in Bangladesh. ECHO COTTON MILLS is the spinners of quality polyester, TC, Viscose’s, Cotton yearn, Semi synthetic yearn in Bangladesh. This textile mills is establish 1996. So considering their time period this is the oldest textile mills are in private sector in Bangladesh.
The location of ECHO COTTON MILLS is Sreepur Gazipur. The company head office is in Dhaka, the address is 67, Motijheel C/A, Dhaka-1000. The distance of this renowned mill is only 25 minutes drive away from the heart of the capital city Dhaka. The land area of the mill is 12.36 acre of high developed land.
This projects enjoys excellent infrastructure facilities like electricity, gas, water, land telephone and mobile or radio phone link up it is also connected by high way. This one of the biggest Textile Spinning Mills of the country is as well as very nearer to the biggest Cotton yarn market of Narshindi, Madhobdi Baburhat and also Narayangonj.
This Project has been installed with world class technology from Europe Origin with SKF Germany drafting Zone. Which is capable to produce excellent quality yarn both for domestic consumption to feed local garments industrial as well as the export market.
The project has started its commercial production in 1996. Its products by this long time have created a good name in the domestic market. The quality of yarn produced by this is comparable with any well reputed spinning mill of the country. This good quality also enables the company to sell at a higher price. All of the name and fame of the ECHO COTTON MILLS does not gather in one day. This is the fruit of the staffs hard working and long term vision of the board of directors.
Products:
The company is producing yarn mainly consumed by the local weavers and indigenous manufacturers. Though there is a little thrust for the products diversification but differentiation is a major Criterion of the business. In addition to the clients requirement seasonally pushed the company to innovate new item category. The lower count category yarns spring seasons and the higher count categorized are for the winter season.Some of the differentiated products and names of the capacitors are listed below.84 counts, 14 counts, 60 counts, 50 counts, 40 counts, 30 counts 20 counts, yarn. Yarn is an essential commodity and there are various Classifications cauterization in core products. The company is able to make the following kinds of yarn and by related cotton for which there is demand situation in the local and international Garments and textile markets. The products however emphasize on local weavers because of the relatively higher rate of return and better market ability since the sector grows very fast and requires successive demand, which made it a lucrative segment for many successful spinning industries. ECHO COTTON MILLS manufactures various kind of yarn in 3 shift operation (each shift of 8 hours)
Production schedule on the basis of different counts for the period 2007-2008.
Type of Yarn |
% of Production |