Maeen Md. Khairul Akter
Managing Editor, Textile Focus
Another eventful year passes by as the textile and RMG industry of Bangladesh emerges as one of the safest and favorable in the global market. The New Year starts with new expectations for the transformation of the industry towards value addition and sustainability. With formidable improvement in the working conditions in the RMG industries for the past couple of years now Bangladesh is becoming destination for more and more buyers. After the intervention of Accord & Alliance; unprecedented effort was evident from the stake holders from different sides to ensure a safe and secure industry base. Energy crisis and inefficient mid-level management still are the next big challenges to overcome. It seems 2018 can be the beginning of the transformation of the textile and RMG industry towards value addition and sustainability.
RMG Export Backed by Primary Textile
The availability of cheap manpower and some enthusiastic entrepreneurs led the RMG industry to reach today’s position. The ever growing RMG industry is being assisted comprehensively by the Primary Textile Industry to maintain competitiveness as the room for profitability is shrinking day by day. With more emphasis on the OHS and compliance issues and with the emergence of more and more potential competitors around the world, the dynamics of the RMG business has changed considerably. Fortunately, Bangladesh is still holding a top place firmly amid multifaceted weaknesses and threats.But business is becoming very tough in the upcoming days as the costs are inexorably rising in parallel with the buyers’ crave for low prices. That’s why the transformation of the textile and also the RMG industry is a call of time. The growth of RMG export didn’t register negative growth after the 80s making Bangladesh the second largest RMG exporter in the global market. But the exports of textiles and textiles’ article has not been something formidable in those years. Textile industry remained more of a backward linkage industry for the RMGs rather than an exporting industry.
The above chart clearly depicts the dependence of our economy on the exports of RMG. The % of RMG exports to the total exports has been remaining on average above 80% over the years. The number of garments industries are growing; around 150 new RMG units have been installed in the last year according to BGMEA statistics. But the primary textile industry which supplies the lion’s share of the raw materials for the RMGs are facing a dearth of fresh investment for the last few years due to gas crisis and scarcity of bigger industrial land.Only 5 new spinning, 3 weaving and 2 dyeing mills with an investment of about Tk. 1,300 crore were set up in the last four years, according to data from the Bangladesh Textile Mills Association. The textile industry supplies about 90% of the raw materials for the knit RMG industry and about 40% of the woven RMG industry. Butthe contribution of textile industry directly in export basket is very low compared to the other RMG making countries. In fact the exports of textiles and textiles articles are decreasing year on year which is an alarming issue. As the chart below depicts the export of textile goods has been declining over the last five years to only 1.91 billion USD. The export from textiles was 2.09 billion USD five years ago. In fact the other RMG exporting countries are also emphasizing on developing the textile industry and capitalizing the global textile market alongside garments.
Among the top 10 textile goods exporters to the global market China, India, Vietnam, Turkey and Vietnam are close competitors in terms of RMG export as well. This implies the final verdict for sector is that though the RMG industry is growing, the textile industry is still confined to supplying yarn, knit fabric and regular woven fabrics to the export oriented RMG industry. The importance of the primary textile sector is immense as a backward linkage of RMG but the real sustainability of the sector heavily relies on how the textile industry transform to produce export items in large scale like the RMG industries.
Transformation for Sustainability and Value Addition
A woven RMG industry that sources fabric from abroad can export a basic shirt yielding up to 10-15% profit on its FOB price. A knit RMG industry can produce a T-shirt or a Polo-shirt yielding profit at most 15-20% of its FOB price and a knit composite industry can retain up to 30% profit. Whereas, a blazer or a suite can yield up to 40-50% profit.
This is how profitability rises with more sophisticated products. Interestingly many of the transformations needs no major up gradation of technology. The profitability is even higher with functional apparels, technical textiles and nonwoven products.
This is why the industry needs to transform slowly but steadily towards sophistication unless it would be really tough for industries to retain enough profit in the upcoming days to remain competitive.
An industry making only low end RMGs like T-shirts, Polo-shirts or shorts (FOB less than $10) have really a small room for margin and often they have to cut their operational costs. In such circumstances, they may have to sacrifice with their working conditions or compliance or building safety issues.
But it’s also true that for a country like Bangladesh, basically laggards in technology usage, it’s hard to transform overnight to hi-tech products. That’s why a gradual transformation has to be initiated right now.
Gradual transformation will come into play when the industry would start embracing innovation; innovation in technology, innovation in design, innovation in process and innovation in R&D. According to Business Dictionary, Innovation means the process of translating an idea or invention into a good or service that creates value or for which customers will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. And innovative capacity in an industrial context is defined as the ability of a firm to innovate that is to introduce a new product, method or process that is new to them, that creates value and the customers are willing to pay for it.
For example, a RMG industry that only produces low-tech consumer apparels like shorts, polo-shirts or tank tops decides to do suits and jackets for the first time. This is innovation for that particular factory. Making suits and jackets may not be a new thing to the world for that factory as they are introducing the products for the first time, it is innovation for them.
This is how gradual transformation can take place as industries will start to compete searching for the appropriate product or technology or process to innovate according to the their indigenous capability and industry framework.
The future of textiles is trending towards technical items and nonwoven products and the future of apparels towards functional wearables. New technologies are being introduced every year designed to manufacture variety of functional products in the field of technical textiles, functional apparel and nonwoven. In fact, technological innovation has become the driver in growth of the textile industries in the textile value chain.
Apparel in known to perform multiple functions – from basic protection to aesthetics. Functional apparel can therefore be defined as a generic term that includes all such types of clothing or assemblies that are specifically engineered to deliver a pre-defined performance or functionality to the user, over and above its normal functions.
The industry has to learn exploiting technical textile technology to design functional apparels gradually so that the immense pressure on basic apparel to yield the required profitability is optimized.
Functional apparels have a huge market and it is increasing every year globally. The global market for functional apparel is rising and it has a higher range of profit retention compared to basic apparels.
China has been transforming their industry gradually for 8-10 years and they have already developed their indigenous capability to produce range of functional items in textiles and apparels.
Time has come for Bangladesh to conceptualize the issue and should start from now on as the academic and industrial innovation and adaptation capability is quite weak compared to China.
When the textile industry is in concern, Bangladesh has gained self-sufficiency in basic knit fabric production, dyeing and finishing. Now the industry should concentrate on warp knitting and the range of warp knitted technical products to innovate.
The global technical textiles market is also a big opportunity for Bangladesh as it has already a formidable market penetration through the RMGs. Range of technical textiles starting from geo textiles to medical textiles can be produced through appropriate technology transfer and innovation.
Textile engineering is not anymore decades-old stereotypes of a labor-intensive, factory-based industry in which men and women toiled over looms and spinning jacks. In fact, the clang of the early production machinery is being replaced by modern computer controlled technologies that are able to produce revolutionary products with diverse range of functionalities. So, there is no scope to develop as a textile producing nation clinging only to the basic apparel production. The industry must transform towards the hi-tech technologies and value added products gradually for sustainability. But, the transformation must be in an optimized manner so that the business remains sustainable. Leapfrogging from a low tech RMG industry to a hi-tech technical textile industry is a bit too ambitious, but the roadmap should be there to transform the industry slowly and steadily starting right from the New Year.
1 The information are provided by senior merchandisers working in the RMG industries.
2 Functional Clothing-Definition and Classification, Deepti Gupta, Indian Journal of Fibre & Textile Research, Vol. 36
3 Performance Apparel Outlook, 2014