Published in The Financial Express on Tuesday, 4 March 2014.
Proposed FTA between India, EU
Boosting pry textiles production capacity to help RMG exporters cope with emerging challenges
Badrul Ahsan
Enhancement of the production capacity of primary textiles would help local apparel exporters to cope with emerging challenges after the signing of the proposed Free Trade Agreement (FTA) between India and the European Union (EU), industry insiders said.
According to them, if the country fails to enhance production capacity of yarn and fabrics, then the local garment exporters might face stiff competition with their Indian counterparts after signing of the proposed agreement.
India is negotiating with the EU to get duty-free access to the market for apparel products.
The India-EU free trade area negotiation under which New Delhi might get the zero tariff access is likely to resume late this year and it is expected that it would be concluded by next year, diplomatic sources said.
EU provides duty-free access facility to Bangladesh and Pakistan while Indian products are subject to about 12 per cent duty.
“India is self-reliant in production of cotton, yarn and fabric, so they are already one step ahead of us relating to shipment lead time. If we fail to ensure availability of yarn and fabric locally, then Bangladeshi exporters would face a serious setback after the FTA signing,” Managing Director of Onus Garment Shafiul Islam Mohiuddin told the FE.
He said local exporters usually have to spend more or less 30 days to import fabrics from India whereas the exporters of our next-door neighbour can make shipment within the same time. “It would really be a big threat for us if we fail to make ourselves ready to tackle the situation.”
General Manager (merchandise) of Ananta Apparels Ltd, a leading exporter, said being a third party; it would be very difficult for Bangladesh to stop EU to provide duty-free access to India.
“Local exporters are already in dire straits following the emerging pressure from the buyers mainly from those of the USA and EU. Now signing of the FTA would no doubt be a big challenge for Bangladesh; so the government should ensure all sorts of support to make raw materials available to lower the lead time,” he added.
According to him, Bangladesh might lose competitiveness largely in basic RMG products like T-shirts and home textiles. “If we offer higher lead time, then buyers would not consider importing goods from Bangladesh.”
Executive Director of Centre for Policy Dialogue (CPD) Mostafizur Rahman said availability of raw materials in Indian domestic market has already given New Delhi more competitiveness as it has less lead time.
In this backdrop, if India gets the duty-free facility, it would have a major negative impact, he said. “We should now concentrate on ensuring availability of raw materials.”
However, President of Bangladesh Textile Mills Association (BTMA) Jahangir Alamin said the existing mill owners cannot utilise their installed capacity for want of gas and electricity.
“If the government can ensure adequate supply of gas and electricity, then production of fabric and yearn would automatically increase,” he added.
“Many new and existing entrepreneurs are waiting for fresh investment, but if the situation does not favour them, then how can we make investment?” he questioned.
Meanwhile, according to a recent study conducted by the ministry of textiles and jute (MoTJ), the country’s private sector has been meeting nearly 50 per cent of the total demand of yearn and fabric, while the rest is imported.
The MoJT study showed that the country’s aggregate annual demand for cotton yarn is around 2,172 million kg. Local mills produce about 1,051 million kg.
Besides, the country annually needs 6,112 million metres of fabric, and the demand would increase up to 8,164 million metres within the year 2015.
Presently, the country has over 1,158 cotton and textile mills, of which the private sector owns 1,136 mills and the BTMC (Bangladesh Textile Mills Corporation) 22 mills.