Uninterrupted energy supply key to retaining textile, apparel industry competitiveness

When the Russia-Ukraine war broke out in the beginning of 2022, growth in the apparel market started slowing down. By June, it was clear how bad the situation was as our orders were stuck because of global political factors and rising energy costs. 

Our LNG supply had been interrupted, but from June, it dropped drastically. About 30-50% production dropped and cost of production went up. Our products lost market value and we even had to sell off our stock at the price of raw materials. 

But on the other hand, we are now seeing that the global political situation is slowly improving. So even though 2023 is not starting out well, we believe it will get better by the end of the year. For instance, the Russian chain stores that shut down are reopening under different brand names. This means demand is not falling, which is good news as we just want our fabrics and apparels to be sold. 

And there is no alternative to Bangladesh in terms of last moment order fulfilment. Bangladesh, in terms of cotton yarn, is 100% self-sufficient. Vietnam for example, does not have that, maybe they are more advanced in manmade fibre. 

Asia is leading the apparel supply chain, and Bangladesh is leading in knit fabrics, cotton yarn and denim in Asia. But to maintain this position, we need uninterrupted gas supply. If we do not get that and if gas prices are raised every year, then it will keep hampering production. So our cost of production will also keep going up. This will, in turn, intensify competition in the global market. 

So, 2023 will be a year of high competition, and only if Bangladesh Bank and the government support us the way they supported us before with policy, uninterrupted gas supply, and the EDF, will we be able to overcome it.

The government has said that no new EDF will be given. The EDF fund gave us access to Tk70,000 crore, but the substitute fund is only one-seventh that. So, 2023 will be a very scary year for the industry. We have already sent a letter to the authorities regarding the EDF. We hope the government will reconsider expanding the substitute fund to Tk70,000 crore from Tk10,000 crore. 

We are getting orders again and Bangladesh is prepared to fulfil orders worth $100 billion. If we needed Tk70,000 crore for $44 billion apparel exports, then we obviously need more support for $100 billion export. In 2023, we have a $60 billion export target, and by 2030, we want to take it to $100 billion. But that will be difficult to achieve with this substitute fund.

In recent times, the lending interest rate has started going up to 12%. That was one of the reasons our GDP went up. Of the $400 billion economy of Bangladesh, industries contributed 32.31%. Of that, 84% was by the textile and apparel sector.

We are making clothes for 16 crore people at home. If we had had to import those clothes, it would have cost us $9 billion. Instead we just import the cotton and locally add $6 billion to $7 billion in value.   

Our retained earnings from this sector is an estimated $21 billion. Yet many of our experts say that our sector does not add enough value and that not supporting us is okay. But what if we had to import clothes? Now that we do not have to do it, we can use our export dollars to purchase other necessary goods. 

Moreover, the dollar rate differential causes us to lose money as well. A Tk7 differential means that bringing in Tk100 crore sees us losing Tk7 crore. The differential should be maximum Tk1 or else banks will be the lone gainers. 

Moreover, the 19% tax for back to back L/Cs for trade with local suppliers is unfair. How will the industry survive with that? How will we pay for cotton with dollars? Without dollars, banks won't let us open LCs. And when we don't have dollars, the backward linkage industries will die, and then RMG will die.

The author is the president of the Bangladesh Textile Mills Association and the managing director of Maksons Spinning Mills Limited