Value addition static in RMG industry

Jasim Uddin

7 September, 2018 12:00 AM printer

The gross value addition (GVA) of readymade garment (RMG) industry, country’s biggest export earner, remained almost static between 70 and 75 percent in the last decade mainly.

Analysis of a number of quarterly reports of Bangladesh Bank on value addition of apparel industry suggest such value addition situation.

Economists and industry people say the RMG sector cannot cross the 75-percent value addition line due to the lack of local backward industry and quality fabrics.

They lauded local entrepreneurs who are facing challenges to make Bangladesh the second largest RMG export country despite its lacking in basic raw materials of cotton and petrochemical.

The economists stressed the need for giving more focus on research and product development. 

According to a Bangladesh Bank report on RMG, the rate of value addition stood at 74.86 percent in the fiscal year 2013-14 and the the highest 75.67 percent in FY 2014-15.

However, the central bank estimate showed that the value addition rate dropped to 74.72 percent in the first three months (January-March) of the current year 2018.

Sector people said the value addition rate of knit items is around 90 percent and woven products around 55 percent.

Once the country was fully dependent on imported denim fabrics, but now 50 percent of the fabrics produced locally are being exported with 90 percent value addition.

Those who make denim garments with imported fabrics add around 50 percent value.

According to industry insiders, the average value addition of denim products stands at around 70 percent in Bangladesh.

Some entrepreneurs are developing value added products for foreign buyers. Denim products have opportunity for huge value addition through various washing.

The packaging and accessories industries also have capacity to meet over 98 percent demand for export-oriented RMG industry.

Private think tank Centre for Policy Dialogue (CPD) Additional Research Director Dr Khondaker Golam Moazzem told the daily sun that value addition rate is not same in all products. It depends on capacity of backward linkage industries and availability of raw materials.

The local textile industry has a capacity to meet the entire demand for knitwear fabrics, but it lags behind in producing woven fabrics, he added.       

The CPD Additional research director said local textile industry has shown their capacity to produce cotton fabrics but they are not up to the mark in producing non-cotton fabrics, synthetic fabrics and man-made fabrics.

“The RMG products makers are happy to produce common items, which creates competition among them,” he added.

Dr Khondaker Golam Moazzem suggested them for  developing new products to increase the ration of value addition.

He requested RMG makers to establish research and development units for every company to create new deign and develop value added products.

Echoing the same sentiment, Bangladesh Textile Mills Association (BTMA) director Mohd Khorshed Alam told the daily sun they have a capacity to meet around 98 percent of demand for fabrics and around 55 percent of woven fabrics for export-oriented industry.

Bonded facilities misuse and shortage of gas and electricity are main challenges for setting up new textile mills for woven fabrics, he added.

BTMA Director also admitted that the country has made a significant progress in denim fabrics by setting up 28 denim textile mills. Of them, 20 mills produce 20 lakh yards of fabric every day.

Now denim makers are able to source 50 percent of denim fabrics locally, he added.

Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) president Abdul Kader Khan said, “Once RMG industry was totally dependent on the imported packaging and accessories materials. Now the local industry meets up to 95 percent of the requirement of the exporters.”

The industry also adds around 30 percent value addition to its products, he added.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Md Siddiqur Rahman said  75 percent value addition is not a matter of joke without core raw materials like cotton, petrochemical and dyes.

“If we want to increase the ratio of value addition of woven items, we need to set up textile industry as backward linkage”, he added.

He also admitted that Bangladesh has an opportunity to produce more value added products through research and development.

Many local industries have established research and development (R&D) departments to develop value added products, the BGMEA president added.

The apparel items exports fetched $30.61 billion - woven $ 15.42 billion and knitwear $ 15.18 billion-with 8.76 percent growth in the last fiscal year.