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Hitory of Textile Industry in Bangladesh Essays

Principles of Management Term Paper ON “The History of Textile Industry in Bangladesh” Submitted to: MD. Rehan Masoom Course: Principles of Management Course code: MNG1203 Submitted by: Atqiya Mahila Trisha; ID-121113006 Syeda Tasneem Humayra; ID-121113008 Rajoshi Jahangir (Rajoshi); ID-121113007 Sirajum Munira; ID-121113001 Sec: A History of Textile industry in Bangladesh Introduction While agriculture for domestic consumption is Bangladesh’s largest employment sector, the money gained from exporting textiles is the single greatest source of economic growth in Bangladesh.
The Bangladesh Textile Industry has a long history of many centuries and has been seen as the part of an economy of undivided India and later on of Pakistan. It was only after the liberation of Bangladesh that the Textile Industry had to be considered independently to meet the needs of the large population. Until 1990s the Textile Industry was basically meeting the local needs. Following the increase in the export of readymade garment industry, the textile industry started catering to the export market in the 1990s. The Government Policy in Bangladesh always favored the backward linkage industry.
However, the most dynamic policy was the announcement of Textile policy in 1992-1994 when textile was declared as a Thrust Sector and an alternative cash assistance of 25% given to garments exported using local fabric to compensate for the benefit/advantage and subsidies given by other countries and also to encourage the local backward linkage industry. The aims of this policy were: 1. To increase the value addition of the RMG (Ready Made Garments) export this was at that time 25% of the FOB value. 2. To retain higher level of foreign currency within the country. . To reduce lead-time for export. 4. To generate employment and other economic activities. 5. To give an overall price advantage to the export of the garment industry. Bangladesh Textile Mills Corporation was brought into existence on March 26, 1972 with the promulgation of the BIE order, 1972 and started its formal function from July 1972. At present, 18 textile mills (22 units) are in operation under service change system and producing different counts of cotton yarn and polyester yarn in the form of 32/1 to 80/1. Another 11 mills are under process in operation.
History 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.
They were 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. 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. Immediately after the founding of Bangladesh, tea and jute were the most export-oriented sectors. But with the constant threat of flooding, declining jute fiber prices and a significant decrease in world demand, the contribution of the jute sector to the country’s economy has deteriorated. Bangladesh is a developing country. After the liberation war the condition of Bangladesh was very poor. It was quite impossible to improve the condition of Bangladesh. But day by day it develops.
Textile industry change the fortune of Bangladesh . Textile and apparel industry plays a very vital role in the export history of Bangladesh. 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. At the beginning developed countries helped Bangladesh by taking textile and garments product based on quota. In 1995 quota system was cancelled and everybody thought that like every developing country Bangladesh too will face problems.
Fortunately the change made good roll for Bangladesh, because the salary of the worker was very low and textile manufacturer could produce high quality products at low prize. The garment industry in Bangladesh became the main export sector and a major source of foreign exchange starting in 1980, and exported about $5 billion USD in 2002. Bangladesh Textile Industry has been substantially altered since denationalization of large number of public sector textile mills that took place over the last 15 years.
Prior to denationalization, BTMC enjoyed nearly monopoly within the yarn and textile clothing and apparel market of Bangladesh and there was no competitive source for the yarn product of BTMC. Consequently the Corporation was an alert to dispose of its entire output to the domestic market. Since demand for the domestically manufactured textile products was such that BTMC lacked the capacity to supply yarn requirement of the industry. For this reason denationalization of the textile and apparel market situation has changed dramatically in Bangladesh.
Today, approximately 80% of the foreign exchange revenue generated by textile, apparel and garments industry in Bangladesh. The textile and garments industry generates employment opportunities for more than 4. 5 million people of Bangladesh. The industry employs about 3 million workers of whom 90% are women. Two non-market factors have played a crucial role in ensuring the garment sector’s continual success namely (a) quotas under Multi- Fiber Arrangement (MFA) in the North American market and (b) preferential market access to European markets.
The industries are making a notable contribution for the growth of the country’s economy and foreign exchange earnings. Until the liberation of Bangladesh, the textile sector was primarily an import-substitution industry. It began exporting ready-made garments (RMG) including woven, knitted, and sweater garments in 1978, which grew spectacularly during the next two and a half decades-from US$3. 5 million in 1981 to US$10. 7 billion in FY 2007. Apparel exports grew, but initially, the RMG industry was not adequately supported by the growth up and down the domestic supply chain (e. g. spinning, weaving, knitting, fabric processing, and the accessories industries). Until FY 1994, Bangladesh’s RMG industry was mostly dependent on imported fabrics-the Primary Textile Sector (PTS) was not producing the necessary fabrics and yarn. 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 readymade garment, sector.
These basic steps are spinning, weaving or knitting, and a combination of dyeing, printing and finishing. 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. Fabric Forming 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. 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 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 roving’s. 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 autosomes or cone winding/reeling machines, packed and marketed. Weaving and Knitting: Next the yarn is made into grey, the early stage of fabric processed using looms or knitting machines. The name indicates that the material has no color at this point.
These are fairly simple procedures and can even be done by hand, as they were for many centuries in cottage industries. Weaving produces cloth that has a rigid structure, such as the material used for making trousers, shirts, bed sheets, etc. Prior to weaving the yarn is wrapped around beams and dipped in a size, an adhesive, which when dries gives the yarn a rigid and uniform structure. This yarn is then fed into the looms and called the warp. A thread of yarn, called the weft, passes between alternating warp yarn with the aid of a shuttle, air jet, or rapiers. Knitting, however, can also be used to make grey.
Instead of looms, circular knitting machines are used for knitting. These machines use needles fed with yarn that moves in an up and down motion and knit interlocking arrangements of yarn. Knit fabric is much softer and more flexible than that produced on looms, and is commonly used for producing articles of casual wear such as t-shirts, and under garments. Dyeing, Printing, Finishing: The grey then undergoes the three steps of dyeing, printing, and finishing. After the grey is inspected, it goes through a process called the batch method when it undergoes scouring, bleaching, and dyeing.
Scouring is the treatment of grey in chemical solutions in order to remove the size, natural fats, waxes, proteins, and other impurities, and to make the fabric hydrophilic, which means it no longer repels water. The bleaching process is next. It is essential in giving the cloth a clean white color. It is done using one of two different methods: bleaching with dilute hypochlorite solution at room temperature, or by using hydrogen peroxide solution at elevated temperatures, usually 80 to 90 degrees Celsius.
The latter method usually results in better and longer lasting whiteness, however is the more expensive of the two methods. The scoured cloth is then dyed, and then printed on. Printing is done using perforated rollers that allows certain chemicals and colors to diffuse through the holes. After the printing has been completed, the fabric is washed, soaked in chemicals under elevated temperatures for color fixation, and then washed again. Knitted fabrics are loaded on to a jigger machine, which performs the processes of scouring, bleaching, or dyeing. The fabric then moves on to a achine called either de-watering or de-twisting machine, which removes water from the fabric. The fabric then goes through a shrinkage tensionless drier which is designed for drying, shrinking, and relaxing the knitted fabrics. The final process before the fabric is ready for stitching is compacting. During this step the fabric is steamed and ironed between roller assemblies. The fabric is then folded and is ready for marketing. Readymade Garments Industry and its Growth The RMG industry can then cut and stitch the finished product into apparel, which is then marketed.
In 1978 the RMG industry was established in Bangladesh with nine enterprises and has grown at a blistering pace since. This phenomenal growth is due largely to the simple level of technology required in the industry. The machinery is relatively inexpensive and easily available. In addition, garment producers can operate in smaller premises than those required by most of the processes in the textile industry. On top of this, Bangladesh has an abundant supply of cheap labor consisting mostly of women for whom this is one of the most suitable forms of employment.
These factors, as well as incentives such as liberal trade policies, low tariffs on imported machinery, and bonded warehouse facilities, which allow the importation of raw materials to be processed for export have done much to facilitate the growth of the garment industry. However, probably the most important factor in this growth is the benefit of reserved markets that Bangladesh enjoys under the Multi Fiber Arrangements, or MFA. The Textile exporting nations in the world fall under the trading conditions determined by the MFA, which is included in the General Agreement for Tariff and Taxation, or GATT.
According to the MFA, developed nations are required to guarantee the import of a certain amount of their textile needs from developing nations. For example, the United States may have assigned the production of a certain amount of textiles to Bangladesh. This would mean that countries such as Bangladesh are assured a market for a specified number of yards of textiles each year. This agreement served to limit the dominance of the textile industries in the more developed world by limiting their share of the global market.
In addition, Bangladesh’s garment exporters enjoy the privilege of quota-free entry into the European Union, or EU, whereas their major competitors, such as China, India, Indonesia, Pakistan, Sri Lanka, and Thailand, are subjected to the restrictions of an assigned quota. As a result Bangladesh is able to export everything that it produces, while its more developed competitors are limited to specific amounts assigned through quotas. The Current Position of the Textile Industry in Bangladesh
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. Public Sector: 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 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. Private Sector: 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. Demand Supply Gap The phenomenal expansion of the RMG industry in Bangladesh and the dramatic increase in the population in addition to an increased standard of living in the country has led to a large demand-supply gap. Only 21% of the total demand for yarn is met locally in Bangladesh.
The figures for grey are not much better as only 28% of the total demand is met locally. The finishing sub-sector currently is able to process all of the locally produced grey, but will need to expand at as with the weaving and knitting sub-sectors. As evident from the Table 3, all sectors of the textile industry face many of the same challenges. These problems include lack of power, obsolete technology, low capacity utilization, lack of machinery maintenance, a workforce that is not adequately trained, problems with labor unrest and militancy, political unrest causing disruption such as hartals, and a lack of working capital.
The problem with electricity was evident to me on my visit to the Rahim Textile Mills; I was told that it is more efficient to power the factory continuously by a generator, instead of letting production be hampered by power failures. In addition, each of the sub-sectors face various other problems. The Spinning Sub-Sector Problems related to spinning have an extremely negative impact on the textile industry. The production capacity of the spinning sub-sector is estimated at approximately 183 million kg per year. However, only 125. 16 kg, or 67. 3% was produced in 1997-98.
One of the main causes of this under production in the spinning sub-sector is the fact that approximately 38% of the spinning mills in the country are more than twenty-five years old and therefore are not able to produce as much yarn as their initial capacity. The principal reason behind the machinery being so outdated and poorly maintained is the high import duty on textile machinery and their spare parts. Many have not been maintained or repaired as they should have been because in addition to the high cost of the spare parts, there is a shortage of technicians in this field, resulting in both very expensive and sub-standard repairs.
Other reasons for the low production figures include frequent power failures, a shortage of raw materials, a high import duty on raw materials used for local consumption, and a high percentage of wastage. The labor productivity in the spinning sub-sector is also lower than that in competing countries. The output of labor in the industry is about 0. 65 kg per man-hour. A recent World Bank survey indicated that the number of spindles installed in Bangladeshi spinning mills could produce twice as much yarn while using only 10% of the labor force.
Obviously, obsolete machinery is having an extremely negative impact on Bangladesh’s textile industry. The Weaving Sub-Sector The shortage in supply from the spinning sub-sector also has a negative impact on the amount of grey produced. The unmet demand for yarn is filled by importing 3. 15 billion meters of grey annually. In order to import grey, the subsequent sectors have to invest more in transportation, import taxes, etc. , resulting in a more expensive end product. The weaving sub-sector is plagued by a lack of organization and coordination.
There are many small-scale manufacturers dispersed all over the country, which results in replication and a lack of specialization. Instead of working in organized groups, many of the small producers try to do everything on their own, leading to an end product of inferior quality. The Handloom Sub-Sector The handloom industry, traditionally an important part of the textile industry in Bangladesh, is still responsible for a very high percentage of the nation’s economy. It is the second largest source of rural employment after agriculture.
Even without being dependent on electricity, there are numerous problems faced by the handloom industry. Many of the weavers cannot work steadily due to the irregular supply of the yarn, dyes, and chemicals they require. The primary reason for this is that many of these producers are located in places with poor access to transportation. Most of these weavers obtain their raw materials from brokers at their local levels. These brokers gather money from many small scale manufacturers and travel to the urban centers to purchase the required materials, which they then take back to the weavers.
Unfortunately, not all of these brokers are very experienced and some are dishonest. Those in the handloom industry are very vulnerable; even a minor problem such as a heavy rainfall might prevent them from obtaining their raw materials or selling their finished product. Most export oriented garment factories reject a large quantity of the grey produced by the rural handlooms in Bangladesh. When fabrics were examined of similar type and patterns, one of which was produced using handlooms, and the other on power looms, the superiority in uniformity and quality of the cloth produced using the power looms was obvious.
In addition, handlooms also have a narrower width than power looms, and usually cannot produce fast enough to meet the deadlines set by export oriented customers. Knitting/Hosiery The hosiery industry produces different types of products such as undergarments, socks, stockings, and other soft apparel. These factories were originally designed for the local market, but recent improvements in quality have propelled them to enter the export market and knitting has become another rapidly growing textile sub-sector. The Knitting and Hosiery sub-sector is faced with the lack of modern facilities needed for producing quality fabric.
There is also a shortage of raw materials in the sub-sector. However, the factor that has the most negative impact on the industry is the lack of working capital. Even though the sub-sector has to overcome some obstacles, it has been extremely successful recently. Currently the demand for knit grey can be met locally. The quality of the local knit grey is also competitive as most of the knitting units have been installed recently and the machinery is not obsolete. Dyeing, Printing, and Finishing Dyeing, printing, and finishing, the final steps in the textile industry, are also the most complicated processes.
It is the quality of this work that determines the appearance of the fabric and thus its marketability. In order to be competitive in the future, this sub-sector of the textile industry will need to expand at the same rate as the weaving sub-sector, in order to make the country self-sufficient in grey production. The dyeing, printing, and finishing sub-sector has improved dramatically over the last five years. However, due to a lack of modern equipment and facilities, the majority of dyeing, printing, and finishing units are still unable to meet the standard of quality demanded by the export-oriented RMG industries, or the export market.
Those that are producing fabric suitable for export are heavily dependent on imported grey. As is the case with most imported goods, they face a number of restrictions, such as import taxes, transportation, and various others. However, the successful expansion of the knitting sub-sector has made the country self-sufficient in all knit grey. The 2005 Challenge In the year 2005, some of the international policies regarding the export of textiles and garments had changed, which presents 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 exporters in the post-MFA period, when the World Trade Organization, or WTO, instead of GATT controlled the sector. Under the WTO all quotas were removed, resulting in a free market worldwide. Bangladesh’s garment and textile manufacturers faced steep competition from countries such as India, Pakistan, China, and Thailand, from whom the country now imports fabric to meet the demands of its RMG sector. When the WTO free market was established, all these countries were able to expand their RMG exports, now limited by quotas.
As a result, these countries were able to utilize more of their locally produced yarn and fabrics internally, resulting in the rise of prices for these in the export market, putting pressure on the industries of countries such as Bangladesh. Role Of The Government To aid the expansion of the textile industry in Bangladesh, the government is currently providing numerous incentives. 1) Bonded warehouse facilities: These facilities allow export-oriented factories to import their raw materials duty free. However, the bonded warehouses privileges have not been monitored closely enough, which has resulted in them being abused.
The materials imported duty free to be used for producing garments intended for export are sometimes released into the local market. The leakage of these inexpensive items into the local market cause unfair competition for local producers. 2) Duty Exemption Drawback Organization, or DEDO: Factories which do not take advantage of the bonded warehouse facilities and import their raw materials independently can claim the duty they paid under the Duty Exemption Drawback Organization, or DEDO. Provided that the finished goods are being exported.
This system is mostly applicable for the dyeing sub-sector of the textile industry. 3) 25% export cash incentive: For producers who do not use their DEDO or the bonded warehouse privilege, and utilize local materials. These producers obtain 25% cash compensation from the government for the items they export. 4) Tax holiday: Five to nine years of tax exemption for new factories. 5) Duty free importation of raw materials of export in the RMG. 6) Avoidance of double taxation for joint venture projects. 7) Income tax exemption for up to three years for foreign technicians. ) Duty free import of capital machinery. Other steps are also being taken. The Government of Bangladesh has devised a Textile Policy designed to make the country competitive in the WTO free market by 2005. Its main objective is for the country to achieve self-sufficiency in yarn and fabrics to meet the needs of the RMG industry through backward linkages and by encouraging investments by private investors. The Textile Policy makes some of the following suggestions in order to develop the sub-sectors of the industry in a harmonious manner. – Closer monitoring of leakage in the market Appoint an advisory committee to represent the industry to the government   – Improvement of research and computer technology – All sectors of the industry will be Modernized – rehabilitated as much as possible – tariffs will be rationalized  Spinning – 116 new spinning mills each having the capacity of 25,000 spindles will be established immediately   Weaving – 223 modern weaving units each with an annual capacity of producing ten million meters will be set up Handloom – supervised credit system for long term loans will be established   – necessary training will be provided various means of encouragement and exposure will be established such as exhibitions and competitions. Dyeing, Printing, and Finishing – new units will be set up with appropriate technology – bonded warehouse will be provided until local grey production can meet the quality and quantity required by the sub-sector – duty on dyes and chemicals will be withdrawn However, from analysis of the Textile Policy, it appeared to be very theoretical and failed to address a number of issues. 1. The policy calls for the establishment of many new factories and projects, but does not provide a scheme for financing them. . The lack of training and technology is mentioned, but no steps are suggested for enhancing the skills of the workforce and engineers. 3. No suggestions are made for setting up institutions to conduct the technical and marketing research needed to upgrade the quality of Bangladeshi products to make them more appealing in the international market. 4. The need for the expansion of the Bangladesh’s infrastructure such as road, port, and railway capacities to accommodate increased imports and exports is not mentioned. . The great problems arising from the shortage of land on which to build the necessary factories is also not considered. 6. The policy states that environmental pollution is negligible, but does not go further into the matter. However, it was very obvious that affluent treatment and disposal in the industry is a very serious problem. 7. The need for more power is mentioned, but no plans have been devised on how the expansion will be undertaken. 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. 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. % 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. Conclusion
The importance of the textile industry in the economy of Bangladesh is very high. Furthermore, the industry is expected to be the catalyst in the industrialization of Bangladesh, and has been declared as a thrust sector by the government. However, the largest sub-sector of the industry, spinning, faces numerous problems, coupled with faulty government policies and a lack of fairness in competition from neighboring countries. The explosive growth of the RMG industry in the country, however, has not been supported by the growth of backward linkage facilities.
Because of the inferior quality and supply of local fabrics, which are also non-competitively priced, the RMG industry is almost completely dependent on imported fabric. As a result, the foreign exchange earnings from the RMG industry are extremely low. This value addition could obviously be boosted if appropriate backward linkages were established in the textile industry. Therefore, it is extremely important that some remedial measures are taken for the effective development of the industry and to achieve the targets set by the government for 2005 to meet the post-MFA challenges.
When I began my research I was quite negative about the future of the industry seeing little opportunity for it being competitive in the post GATT period. However, over the course of my Senior Project investigations, I have realized that Bangladesh’s low labor cost, skill development potential, a presently expanding market, and favorable conversion cost can be used to turn the challenges of the quota-free market into a window of opportunity. In addition, most developed countries are turning away from industries like the textile industry and investing in other sectors, thus creating a vacuum in the market.

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