The COVID-19 pandemic may have proved disastrous to most businesses including the readymade garment sector of Bangladesh, but it has apparently opened windows of opportunity for the locally produced yarn and fabrics, which – after initial loss suffered due to countrywide shutdown and consequent closure of industries – is witnessing a significant spurt in sales lately in the run-up to the holy festival of Eid-ul-Azha!
The reason? Sealing of the international borders with India for some time, which sort of, clamped the rising trend of import of Indian yarns and fabrics, both through the legal and illegal channels.
It may be mentioned here that the import of cheaper yarns and fabrics from India has long been a contentious issue with primary textile millers in Bangladesh calling upon the Government to impose anti-dumping duty on Indian yarn imports to protect the US $ 8 billion domestic textile industry.
The Bangladesh Textile Mills Association (BTMA) sent letters addressed to Finance Minister AHM Mustafa Kamal, Commerce Minister Tipu Munshi and Textiles and Jute Minister Golam Dastagir Gazi for taking necessary measures to stem the entry of cheap Indian yarn to the country, which also called upon the concerned authorities to scrutinise import prices of yarn at land ports along the Bangladesh-India border.
There have been allegations of local garment manufacturers importing low-price yarn from India to make apparel items for export. According to BTMA, the local millers sell the widely consumed 30 carded yarn at a price between US $ 2.80 and US $ 2.90 per kilogram, while the same quality Indian yarn is sold between US $ 2.60 and US $ 2.70 per kilogram in Bangladesh, according to BTMA.
The Indian yarn is highly subsidised as their Government provides incentives in cotton purchase and production of yarn at the mill level, said BTMA Secretary Monsoor Ahmed, while adding that the Indian yarn is cheaper also because of stockpiling of unsold yarn in the inventories of hundreds of mills in India amidst the global pandemic.
According to reports, Bangladesh annually produces yarn worth US $ 12 billion and the local millers supply 85 per cent raw materials to the knitwear sector and 35 per cent to the woven sector.
In the letter, BTMA President Mohammad Ali Khokon said Bangladesh exported US $ 566 million worth of garment items to India in the fiscal years 2017-18 and 2018-19, but imported US $ 7.74 billion worth of textile-related items including raw cotton, cotton yarn, cotton fabrics and textiles during the same period this year. The BTMA President further added that Bangladesh exported garment items worth US $ 35 billion in the 2018-19 fiscal of which products worth US $ 22 billion were manufactured from locally sourced raw materials, resulting in a high retention value at US $ 15 billion.
On the other hand, the retention value from items manufactured from imported raw materials was only US $ 3.25 billion, Khokon said in the letter, while explaining that the retention value on local raw materials is higher because of shorter lead time and for use of local manpower and transportation.
There is no precise information available as to the rise or fall in consumption of fabrics imported from India by the export-oriented garment manufacturers. However, the lockdowns in both India and Bangladesh subsequent to the outbreak of the pandemic and resulting in halting of cross-border trade had significantly reduced import and use of Indian fabrics for manufacturing of apparel items for the domestic market.
As per media reports, local textile millers have been unable to make any of the usual annual sales reaching as much as Taka 20,000 crore centring Pohela Boishakh and Eid-ul-Fitr this time around because of coronavirus, but of late sales have picked up as there’s not much supply of Indian fabrics and yarn to cater to the domestic demand ahead of Eid-ul-Azha.
“The yarn and fabric sales reached its peak as the local manufacturers are coming back with work orders,” claimed Mohd Khorshed Alam, Chairman, Little Group, whose company produces yarn for fabrics of three-piece clothing for ladies. Alam’s Ashulia-based mill has been witnessing daily sales of 50-60 count yarn worth Taka 15 lakh, whereas it was less than Taka 10 lakh a month or so ago.
Buyers from Narsingdi, Dohar, Araihazar, Pabna, Sirajganj, Madhabdi and Gopaldi are the main customers of the 50-60 count yarn, Alam said, adding that many small dyeing factories in Narayanganj and Narsingdi districts were on the brink of collapse due to the illegal import of Indian fabrics at cheaper rates.
However, the buyers from the two districts have reopened their small units with hopes that there would be a rebound in their businesses with the rise in demand.
The millers are now saying that as sales have picked up, they would now be able to bear some of the losses incurred during Eid-ul-Fitr and Pohela Boishakh this year. “Usually, the sale of yarn and fabrics are low ahead of Eid-ul-Azha as people are mainly focused on the purchase of sacrificial animals,” stated Abdullah Al Mamun, Director, Abed Textiles, a local spinning, dyeing, printing and weaving mill. “But this time, it seems that the sales of Eid-ul-Fitr have just started,” he added.
Mamun reiterated that it has been their demand of many years to tighten security in the bordering areas so that the cheap yarn and fabrics do not enter Bangladesh to damage the local industry.
“The work orders for finishing in my mills increased manifold now compared to that of the last month,” Mamun added.
Meanwhile, Monsoor Ahmed, Secretary, BTMA, said that currently some 270 spinning mills are producing yarn for the local markets, while the number of weaving units across the country is more than 11,000, including cottage, small and medium ones.
Some 500 weaving mills are members of the BTMA, Monsoor said, adding that the local suppliers have failed to make Taka 20,000 crore due to COVID-19 in April and May this year, but currently, there are no old stock of unsold yarn in the mills as the demand has risen lately.
Despite the increase in sale of locally manufactured yarn and fabrics on account of diminished supply from India, BTMA President Mohammad Ali Khokon said it could be difficult to cover up the losses that the sector faced in April and May.
“I believe the sector would be more benefitted if the maintenance of the tight security along the bordering areas continues so that the illegal invasion of cheap Indian yarn and fabrics does not take place,” the BTMA President stressed.
There are many other ways through which yarn and fabrics from overseas make their way into the local market as well. It may be mentioned here that as per a report published by the United States Department of Agriculture (USDA) last year, local textile millers in Bangladesh have long been facing uneven competition due to abundant imports of cheap yarn and fabrics, so much so that some of them were about to leave the market and were reportedly facing challenges dealing with a huge stockpile of unsold fabric.
The USDA attributed the phenomena to low-priced yarn and fabric imports increased through bonded warehouse import ‘leakage’, improper utilisation declaration (UD) certification facilities of readymade garment manufacturers, false declaration of product specification and smuggling through the border with India.
Local RMG manufacturers import yarn and fabric from China, India and Pakistan using a bonded warehouse (zero tariffs on import of raw materials for export value-added product) privilege. “The imported yarn and fabric with zero tariffs are then illegally sold to the local market which forces down prices in the domestic market,” stated the USDA report.
It may be mentioned here that local textile mills have long been critical of the alleged misuse of bonded warehouse facilities, as they felt that primary textile sector of the country had been facing a survival crisis due to the misuse of the bonded warehouse facility, resulting in loss of demand for local products.
The closure of international borders in the recent past on account of COVID-19 may have stopped import of cheap fabrics and yarn – through legal and illegal channels – thereby giving local mills to do some decent business ahead of the Eid-ul-Azha festival, but if the Government fails to protect the interest of the local mills, local manufacturers of fabrics and yarn would have to suffer business loss on account of invasion of cheap fabrics and yarn from other countries in the coming days as well.