OUTSOURCING FINANCE – A sustainable way to keep the Garment & Textiles Industry inhale!!

I think, it is the high time to appeal and bring the foreign investment in the 35 Billion Dollar industry to keep it running and sustain in the long run. Considering the pandemic effect from a country like Bangladesh we should not expect a huge support from Bangladesh. Government must look after every industry of the economy as almost everyone is affected during ongoing crisis.

Some Challenging Factors

Standing at 2020 if we look at the overall industry of Garment and Textile, I must say we are covered by uncountable number of issues which is created and developed both internally and externally as well over the time. If we analysis a figure of FDI in Garment sector from 2014 – 2018, we will see the foreign investors are not getting trust from us to invest in this sector. In 2018 the foreign investment was dropped down to USD 13 Million compared to 2017. While in the same year the total foreign invest in other sector have seen a 68% rise compared to previous year. There are couple of reasons why the investors are getting less interest on investing on an industry which contribute 85% of total export. Main reason why they are losing interest is the government policy which in unfavorable to some extent and the rising production cost due to increase in energy cost.

Bangladesh as a country have a major constraint in cotton growing. Due geographical position and shortage of land, we cannot grow cotton to ourselves. We must remember in coming future customers will move to the one stop solution. They will likely to move where the industry enjoying the full length of value addition in backward and forward linkage. By 2030 automation will take plan in apparel manufacturing and Bangladesh will lose the advantage in low cost labor and mass production factor. For example, investors are more likely to invest in the African region as they are good at cotton growing.

The value addition in primary textile is missing. Still we are stuck to basic in terms of yarn & fabric manufacturing. currently primary textile sector can meet around 90% yarn demand for knit RMG and 40% yarn demand for woven RMG. On the other hand, denim fabrics in the country can meet around 50% demand, where higher-end fabric is mostly dependent on import.

Value addition in Garments also missing. We don’t have up to the mark design house. We don’t concentrate on research and development. We just obeying the buyer placement. We don’t have capabilities to offer solutions to the buyer as matter of fact we don’t have any negotiation power over our buyer.

Why we need FDI

According to me, YES, we do need FDI right now to sustain. We cannot put the full pressure on the government and the recovery of the other sector is as important as garment industry.

We need FDI to produce non cotton based fiber manufacturing. We need to bring upgradation to the yarn and fabric manufacturing. Bringing value addition in the primary textile.

We need to develop the design house, research and development team to gain the negotiation power over the customer.

We need to keep our workforce updated and develop in technical skills to retain the industry in the long run.

Foreign investment can be encouraged even developing the technical institution to replace the foreigners. We must change the whole institutional guideline and bring the most modern subject in textile and apparel manufacturing.

ROLE of the Association

The governing bodies of the textile and garment industry, BGMEA, BKMEA, BGBA and other relevant association must sit with the international fund riser like ADB, IFC, World Bank, ILO with specific proposal to attract the FDI for next 10 – 20 years. However, a combine approach with government is required. I will discuss the potential government role in the next section. The association should make joint venture program with international companies to bring the investment.

Besides encouraging the Green Factories, the association must help and encourage to establish R&D with professionals, design and concept house, modern sampling unit to make the industry sustain in long run.

ROLE of the Government

The foreign investment is encouraged to reduce the pressure from the government. But government must play a huge role to make it happen.

Government must ensure the favorable business environment by taking policy. Must take decision on reducing the energy prices or create opportunity for the renewable energy to support in reducing the production cost of the industry.

Government must take policy which ensure security of the return on investment to attract the fund raiser. Strict policy should be made to develop joint venture of the well-established industry leaders with foreign body for next 3-5 years. Any new investment by the industry leaders should be approved upon joint venture.

TRADE WAR – The New Horizon

The ongoing trade war between world vs. China have opened an opportunity for us to bring investment. Investors are moving their capital from CHINA to anywhere else depending the opportunity offered by the country.

In the concluding part, I must say, our business leaders from this sector have not make money by doing business from last 20 years. They were keep invested in the industry to ensure compliance security, worker welfare, building security, Fire security and so many other things. We have invested a lot and we are not getting the return from customers. Investors are getting frustrated and shutting down the floor. Its time for the industry leaders to be strict on getting the right CM from buyer. Of course, price benefit should be offered by bringing efficiency in production.

I have shared by thoughts as a very tiny part of the industry so that this can be eyeopener of the leaders, governmental body and the association bring a prosperous future in our “Made in Bangladesh”.

SALAUDDIN

Chairman, ASK Apparel & Textiles Sourcing

Chief Advisor, BUNON

Son of Mr. Reazuddin, REAZ Garments.

12th December 2020