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Bangladesh’s backward and forward linkages’ integration with global value chain (GVC) are much lower than its competitors, partly due to a lack of connectivity through production networks and the regional value chain (RVC).
Last year, for example, GVC share in Bangladesh’s GDP was 13.47 per cent, compared to Vietnam’s 66.39 per cent, South Korea’s 43.67 per cent, China’s 19.47 per cent, and India’s 24.94 per cent, according to a Centre For Policy Dialogue (CPD) research.
During the period, Bangladesh’s forward linkage to backward linkage ratio stood at 0.14, compared to Vietnam’s 0.60, India’s 0.71, China’s 0.72 and S Korea’s 1.08.
CPD noted that Bangladesh’s competitors, such as Vietnam, established a range of RVCs and GVCs through production networks and supply chains, largely through backward and forward linkages within the region.
“Given the current initiatives to establish multi-modal transport linkages, triangulation of investment, multi-modal transport linkages and trade will become crucially important to reduce the lead time and raise the competitiveness of exports,” CPD’s Distinguished Fellow Mustafizur Rahman said while presenting the paper.
Industry insiders said poor backward and forward linkage forced them to import to meet their demand, which pushed up lead time.
Low use of artificial fibre
Bangladesh also lags behind its competitors in using non-cotton or manmade fibre (MMF) in exported apparel goods. This obstructs improving lead time and being competitive in the global market.
Apparel exporters said the cotton use ratio in export goods is way higher than in other countries, and now, they are trying to increase using MMF.
CPD research showed that Bangladesh exported $36.14 billion in apparel goods last year, where $25.56 billion or 70.74 per cent were cotton goods and $8.15 billion or 22.55 per cent synthetic items.
At the same time, Vietnam, the lead competitor of Bangladesh, exported $27 billion in apparel items, where $8.31 billion or 30.74 per cent came through cotton elements and $14.49 billion or 53.60 per cent from synthetic.
Besides, in 2020, China earned $124.43 billion in apparel goods, while $42.43 billion or 34.06 per cent were cotton goods, $59.52 billion or 47.77 per cent synthetic items.
India, a new emerging player in the apparel sector, earned $12.22 billion. While $6.56 billion or 53.70 per cent came from cotton products, $3.21 billion or 26.24 per cent were synthetic items.
Apparel exporters also claimed that cotton prices doubled since September last year, pushing up production costs by almost 40 per cent. On the other hand, the price of petrochemical, the primary raw material for MMF, increased marginally.
“Cotton and MMF fabrics are almost totally import-based and due to freight crisis, lead time increased minimum 20 days.
Besides, due to the high price of cotton-based products, we have to export with a minimum profit to keep buyers but our competitors can make more profit because they have MMF goods,” Md Khosru Chowdhury, managing director of Nipa Group, told The Business Post.
He said the synthetic sector needs more investment and backward linkage capacity should be increased.
Faisal Samad, managing director of Savartex Group, said, “We need research and open a window to support new investors.
In reality, there is no specific place where an investor can get a recommendation. Most investors in the apparel sector followed other investors. New investors are coming to the cotton sector as we’re in a better position.”
Focus on MMF
Industry leaders claimed that they were trying to improve the situation and sought the government’s support.
Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said, “It is true that we lag in using non-cotton fibre. But we are the second-largest country after China in terms of cotton use. It is our advantage and there is a huge amount of investment in the cotton-based garment sector.”
He said it was time to focus on MMF and for this, Bangladesh needs a huge investment and government support.
“If the government give us 10 per cent incentives for MMF export, this ratio will get a big boost within a short time,” Faruque said. Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association, said that some entrepreneurs were investing in MMF sector and some others were preparing to invest. “We also welcome foreign investors in the MMF sector,” he said.
