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To retain forex reserves and to boost garment value addition, the textile millers of the country requested a temporary halt on the import of cotton yarn used in readymade garment (RMG) industry.
In a letter to the Bangladesh Bank governor on April 3, Bangladesh Textile Mills Association (BTMA) President Mohammad Ali Khokon outlined the proposal, which has drawn opposition from exporters who argue that the move would undermine their competitiveness in global markets.
In the letter, the BTMA claims that some 510 local spinning mills, with a 3,600 million kg production capacity of cotton yarn, can meet 70% of the demand for the export-oriented garment industry.
Khokon said that the mills have a significant stock of raw materials due to a fall in demand.
On the other hand, the export-oriented RMG industry imports a large quantity of cotton carded and combed yarn through bonded warehouse facilities, which requires a considerable amount of US dollars.
“If the locally produced cotton yarn is sourced or used, the value addition would be up to 60% against the 30% value addition of imported ones,” he also said.
Khokon urged the central bank governor to take measures to stop back-to-back letters of credit (LCs) opening for cotton yarn imports, saying that Bangladesh is 100% capable of producing cotton yarn.
However, the apparel manufacturers of the country opposed the decision of banning yarn imports as it may reduce their competitiveness.
Talking to Dhaka Tribune, Shahidullah Azim, vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said that if any initiative is taken to ban the import of yarn, it will reduce competitiveness.
“By doing this, the local mill owners will start taking advantage of the monopoly business. We saw the price of yarn climb up to $5 per kg from $2.5. As the buyers won’t increase the products’ price, it will reduce competition,” he added.
He also said that if the price of local and imported yarn is the same, there are no problems as they always prefer to source from local suppliers.
“According to the rules of the free market economy, we can buy from wherever the yarn is available at the lowest price in the world. As it is a buyer-driven industry, our strategy is to always buy cheap and fast delivery,” he added, saying that they currently source 60% of the cotton yarn locally and import the rest.
The knitwear sector, which sources most of its yarn and fabric domestically, also expressed opposition to any restrictions on imports.
The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Mohammad Hatem said that there should not be any restriction for an export-oriented industry to sustain its competitiveness in the global market.
Moreover, the local spinners cannot meet the export sector’s full demand for yarn and fabric.
As a result, garment exporters have to import yarn and fabric, especially the special kind of such products, while sometimes buyers nominate the required raw materials from abroad.
According to BTMA, Bangladesh imported 0.543 million tonnes of cotton yarn in 2022, which was 0.297 million tonnes in 2019.
In the last fiscal year, Bangladesh fetched $42.61 billion from RMG exports. Out of which, $23.21 billion and $19.39 billion came from knitwear and woven items respectively.
The textile millers meet 80% and 35%-40% of the knitwear and woven sectors’ demand for yarn and fabric, respectively.
The entrepreneurs of the textile sector have made large investments to increase the capacity of yarn production considering the potential of the country’s market.
According to industry insiders, by next year, the sector is going to see a new investment worth $4 billion in yarn production.
BTMA also said that before the end of next year, the yarn production capacity of the sector is going to increase to 35 lakh bales (per bale = 480 pounds or about 218 kg).
Central bank data showed that value addition in the sector declined to 54.38% in the last FY22, which was 64.32% in FY19, mainly due to the high import of raw materials.
(DT)
