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rakibhabib@yahoo.co.uk
ABSTRACT
In global apparel markets, international buyers place an order with competitive pricing along
with shortest possible lead time. For Bangladesh, lead time is fast emerging as a serious
bottleneck. Backward linkages are playing major part of a garment industry to reduce lead time
and offer competitive price in the international market. It is inevitable that one of the major
issues of success in readymade garment (RMG) industry in Bangladesh must depend on
backward linkage conditions, support, and strategy formulation. This paper briefly discusses the
present condition of backward integration, needs for further development within respect to Post
Multi-fiber Arrangement (MFA) situation in the RMG industry in Bangladesh. This paper will
focus on policy implication on backward Linkage sub-sectors in respect of free trade apparel
market.
Keywords: Readymade garment industry, Bangladesh garment industry, policy formulation,
backward integration.
Introduction
The performance of the readymade garment
(RMG) sector has been one of the most
notable success stories of the Bangladesh
economy over the last two decades. Nearly
two million women workers were directly
and more than ten million habitants were
indirectly associated with this industry. Over
the past twenty years, the number of
manufacturing industries grew from 180 to
over 3600. On the average this sector alone
fetches over 75 % of the total export
earnings of the country (BGMEA, March
2007). Today, the RMG export sector
consists of multibillion dollar manufacturing
and export industries in the country. The
Article Designation: Scholarly
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Table 1
Steps from fibers/cotton to finished fabrics
Fibers/
Fabrics
Cotton
Yarns
Spinning
Grey fabrics
Weaving or Knitting
Finished
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HOURLY WAGE(US$)
SINGAPORE
MEXICO
MALAYSIA
THAILAND
PHILLIPINES
INDIA
PAKISTAN
INDONESIA
VIETNAM
SRILANKA
CHINA
BANGLADESH
3.56
2.40
1.20
1.04
0.78
0.56
0.49
0.43
0.40
0.39
0.40
0.23
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Cotton
Cotton is the main raw material for yarn
production while production of cotton in
Bangladesh has very limited profit margin.
Hence, Bangladeshi spinning mills depends
on imported cotton from international
markets. India, Pakistan, Turkey, China,
Uzbekistan, USA are the main production
sources where Bangladesh largely dependent
on. Bangladesh Cotton Development Board
(BCDB) undertakes cotton promotions
activities but achievement is not satisfactory.
BCDB is striving for higher production of
cotton with a production range of 1,03,620
bales in four cultivating zones in southwestern part of the country. Cotton
production requires vast land areas whereas
in Bangladesh the land is in scarcity at only
144,000 square kilometers. Farmers prefer
agriculture products that are more profitable
than cotton. So in the context of cotton
production, Bangladesh is in a dreadful
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Cotton
Cotton considered the first stage of
backward linkage sub-sector which is the
main
source
for
producing
yarn.
Bangladeshi garment industry is fully
dependent on imported cotton to fulfill the
huge shortfall of yarn souring. Though
Bangladesh needs to support cotton
production but due to scarce land in
Bangladesh, to build cotton industry in
Bangladesh may not be recommended. This
view is supported by Ahmed Khander
Habib, who does not recommend it due to
shortage of land as well as the high cost
involved. This situation is similar to
Anatolia Project of Turkey. (Habib, 2002).
But in the another study in Development in
Democracy (DID, 1991) argues that not
having cotton is actually not a disadvantage
due to increased import of high quality
cotton from neighboring countries (mainly
India and Pakistan) where low quality of
cotton are produced.
Accessories
Only for accessories, Bangladeshi garment
industry is in quite good position. About
80% of those known as accessories (zippers,
buttons, threads, stiffeners, inter-linings,
packaging materials, etc.) are available
locally and meet the requirements of the
international buyers. A considerable amount
of backward linkage has already been
established in this export support sector and
it maintains its excellent position.
Policy Implications and Conclusions
This study briefly discussed the present
condition of backward integration and its
prospect as well as the negative impact on
Bangladeshi garment industry in future.
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Spinning Sector
Hand loom is the largest support in yarn in
the Bangladeshi clothing industry. This
sector contributes TK 10 billion to national
economy and is capable of fulfilling threefourth of the local requirement in the apparel
sector. Bangladesh is only 10-20% selfsufficient in spinning in input supply or
degree of backward integration. In the
knitting and woven sectors, there are huge
shortfalls in the RMG sector mainly in the
export oriented operation. To overcome the
gap between supply and demand of yarn in
RMG sector, it was necessary to establish 98
spinning mills to have their estimated cost to
be about Taka 73.5 billion, or equivalent to
USD $1.05 billion (approx. US $1 = Taka
70 in 2008). Before making a huge
investment to develop backward linkage
sub-sector in spinning mills, it is imperative
to assess the level of competitiveness and
viability for such project. The conversion
costs and the total manufacturing cost must
be considered and must compare with that in
China, India and Pakistan as Bangladesh
import cotton from these competing
countries.
It was also suggested by the Bangladesh
Ministry of Commerce (2004) that the
handloom sector should be modernized. A
comprehensive training designed for the
RMG sector, Skilled and Quality
Development Programme (SQDP) imparted
training at the grass root level to apply
modern design, dyeing and weaving. The
project tenure was five years at a cost of $4
million.
Government should take some initiatives
such as; to impose no barriers on import
mechanism on back-to-back letter of credits
(LCs); not to import yarns through ports; to
ask recipients of cash subsidy to encourage
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References
a) Books
Ahmed, Khandker Habib (2002) Textile and
clothing: Experience of contemporary
leading countries, Backward Linkage to
Ready Made Garments Bangladesh
Perspective(1st Ed.), (pp. 117). Bangladesh:
Academic Press and Publishers Limited.
b) Conferences
Bangladesh Garments Manufacturers &
Exporters Association (2004, April 22)
Central Bonded Warehouse (CBWs): A
Winning Formula for Bangladesh Textile &
Clothing, Presented at the meeting of
Bangladesh Garment manufacturers &
Exporters Association, Dhaka, Bangladesh.
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d) Newspapers
Editorial (October 5, 1999) Garment exports
face global competition, Backward linkage
industries need investment worth TK50b.The
Daily Star, Business & Finance, Volume 1,
Number 318.
Editorial (October 5, 1997) No policy
guidelines yet to face the quota-free regime,
The Daily Star , Volume 1, Number 54.
e) Websites
Alan V Deardorff (2001) - Deardorffs
Glossary of International Economics,
February
24,
2008
http://wwwpersonal.umich.edu/~alandear/glossary/b.ht
ml
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