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Long lead times, fabric imports reduce competitiveness of woven garment exports

2018-01-24 21:01:35
  Industry insiders and trade analysts have blamed longer lead time, poor backward linkage, the absence of value addition and modern technology and lack of proper policy support on gas and electricity connection for the decline. According to the Export Promotion Bureau (EPB), export earnings from the woven garment products have seen a 2.35% fall in the last fiscal year to $14.39 billion. It has, however, posted a 4% growth in the first half of the current fiscal to $7.17 billion. During the same period, knitwear products earning has seen an 11.47% rise to $7.6 billion. The woven sector has also seen negative growth in major export destinations including Germany and the US, two of the largest export destinations. Experts have suggested new investments in backward linkage to reduce import dependence and technology upgradation for value addition in order to make a comeback.   Lack of competitiveness   f competitivenessTo boost export of woven garments, the issue of longer lead time caused by import dependence is a key factor while the price edge is another important element. “Bangladesh is doing better in knit products exports. This is because of we have strong backward linkage industry,” Faruque Hassan, BGMEA senior vice president told the Dhaka Tribune. “However, woven products manufacturers are highly dependent on import for fabrics, which costs more. As a result, export earnings from woven goods have seen slower growth and it is losing its strength in the global market,” he added. On the other hand, value addition of woven products is less than the knit products which led to lower prices, Hassan said. “We do not have manmade fibre, polyester and petrochemical, which we have to import. We will be competitive if we can meet the demand from the local sources,” he added. “Stakeholders are investing to upgrade machinery to go value addition. This will boost the buyers’ confidence and they will place orders for higher end woven products in Bangladesh,” the BGMEA senior vice president said. The challenges Shorter lead time is the key to remaining competitive in the global market. To reduce the lead time, Bangladesh has to improve its backward linkage industry to meet the demands locally. It takes about 35 days to ship goods to the US from Bangladesh. But shipping from China takes 20 days and it is 15 days for Turkey, Exporters Association of Bangladesh president Abdus Salam Murshedy noted. “As a result, Bangladesh cannot take urgent orders from buyers due to longer lead time,” he told the Dhaka Tribune. While getting a gas connection is a big challenge, business will not be viable if the manufacturers have to run a factory with diesel instead of gas. “Only using gas can make the production less expensive, which will help us be competitive,” he said, urging a proper energy policy for the sector. The size of investment and costs of land are two other challenges. “Setting up woven fabric factories cost two to three times more than establishing a knit composite factory,” Salam said. “It also needs more land.”Ways forward Bangladesh can only meet 30% to 35% of local demands of woven fabrics. So, there is a huge gap between the supply and demand of woven fabrics. It is clear that there is big opportunity to grow by making new investments. “First, we have to try to meet the demands locally to reduce lead time as it takes so many days to import fabrics. For this, new investment is a must to increase production capacity in line with the demands,” said Salam, also managing director of Envoy Textile. “Then, the government should ensure infrastructure to ship finished goods within a possible shorter time as it is the key to success to grab more orders and remain competitive in the global market,” he added. The former BGMEA president said there were many capable investors but they were unwilling to make investments due to lack of proper policy support and utility services. “Losing market share of woven garments is alarming for Bangladesh as over 82% export earnings come from apparel sector and the woven sector contributes almost half of it,” former caretaker government adviser AB Mirza Azizul Islam told the Dhaka Tribune. “We have to ensure balanced export earnings to attain a sustainable exports growth,” he said. “The government, along with the stakeholders, should jointly take steps to overcome the challenges.” He said he believed that new investment could improve the industry capacity to meet the demand of fabrics locally. Currently, Bangladeshi manufacturers mostly produce basic fabrics, which is not for higher-end products. “Since the fashion trend is changing every day and the consumers want latest fashion products, the clothing retailers are looking for more technical fabrics instead of basic ones. To cope up with the latest demand, we should focus on multifunctional fabrics to diversify products,” Md Mostafiz Uddin, managing director of Denim Expert Limited, told the Dhaka Tribune. He also suggested product development by research and innovation as well as introducing technology in manufacturing to get higher prices.   Add Comment | 0   comment page number 1

Tk 6,06,503 crore outstanding loans in last 10 years

2018-01-24 21:04:41
Finance minister AMA Muhith on Wednesday told Jatiya Sangsad that the amount of outstanding loan stood at Tk 6,06,503 crore while the amount of loan defaults stood at Tk 65,602 crore in last ten years.‘A total of 91 banks and financial institutions provided Tk 6,06,503 crore loan to 8,791 individuals and institutions. Of them, the number of loan defaulters is 1,956,’ he said while placing a list in the JS.At least Tk 10 crore was given to each 8,791 individuals or institutions in the last 10 years, he said, adding that the list has been prepared by the Credit Information Bureau database of Bangladesh Bank as of November 2017.Acknowledging the weaknesses in banking sector, the finance minister said that it would take time to get rid of the flaws.‘There are many weaknesses in banking sector and the government has been trying to get rid of it. But it will not be easy to settle the problem... it will take time,’ he said while responding to lawmaker’s queries.The list containing the names of all the defaulters also shows that the amount of classified loans stood at Tk 72,050 crore.Muhith in the list mentioned names of all 1,956 individuals and institutions that became top loan defaulters.Some of the names include Hall Mark Spinning Mills Limited, Monno Fabrics Ltd, Keya Yarn Mills, Bismillah Towels, Apex Weaving and Finishing Mills Ltd, The Dacca Dyeing and Manufacturing Company Ltd, Northern Distilleries Ltd, Dhaka Denim Ltd, Wall-Mart Fashion Ltd, One Denim Mills Ltd, Al-Amin Bred and Biscuits Ltd, Biswas Textile Ltd, Meghna Vegetable Oil Industries Ltd, One Spinning Mills, Asian Food Trading and Company, Moon Knitwear, Desh Television Ltd, Dhaka March Industries, Quantum Power Systems Ltd, Azad Trading, North South Spinning Mills Ltd and Dandy Dying Ltd.In reply to another query, the finance minister informed the House that process to take actions by the Anti-Corruption Commission against BASIC Bank and Sonali Bank loan scams were underway.On the corruption of Farmers Bank, Muhith said the central bank has instructed the newly-formed board of directors of the bank to regain depositors’ confidence by taking special measures to recover loans given to name only organisations and to recover other loans.On the loan scam of NRB Commercial Bank, he said the Bangladesh Bank reconstituted the board of directors of the bank as the central bank found evidence of involvement of its board of directors in irregularities and corruption.On the scam of AB Bank, Muhith said the ACC was investigating the alleged money laundering of Tk 3,000 crore to Singapore.He also added that Bangladesh Financial Intelligence Unit has already taken measures to collect the evidence and information about the siphoning off money to Singapore.On the allegation of making second home in Malaysia, Muhith informed the House that BFIU has already given information to ACC after collecting information from respective Malaysian authority.   Add Comment | 0   comment page number 1

Private credit growth finally hits the brakes

2018-01-24 21:12:47
After being on an ascent for the best part of 2017, private sector credit growth slowed down in December thanks to an increase in interest rate for lending and high deposit collection. At the end of last month, private sector credit growth stood at 18.13 percent, down from 19.06 percent the previous month, which was the highest in 2017. The Bangladesh Bank had targeted to keep the private sector credit growth within 16.2 percent in the first half of fiscal 2017-18. Subsequently, in the monetary policy for the second half of the fiscal year that will be unveiled on January 29, the private sector credit ceiling will be increased slightly, said a senior BB official. “There is little room for improving private sector credit growth as public credit growth has remained negative,” he said. Public sector credit growth in December was 4.72 percent in the negative against the monetary target of 3.80 percent, according to data from the central bank. Though the private sector credit growth seemed to have declined, it has not actually, said MA Halim Chowdhury, managing director of Pubali Bank. “It was a mathematical trick.” It is common practice that banks bump up their deposit collection efforts towards the end of the year to flatter their balance sheet. “As a result, the percentage of private sector credit growth seemed less.” Besides, the upward trend of lending rate also hindered the credit flow slightly, he added. The credit growth of most of the banks was well past 20 percent in October last year due to aggressive lending, said the BB official. The mismatch between deposit and credit growth prompted the regulatory authority to go for tough action by blocking funds, he said. As a result, banks became cautious in lending, causing a slowdown in credit growth towards the end of the year, he added. Deposit growth declined to 10.95 percent in October last year from 13.13 percent in December 2016, according to data from the central bank. The total deposits in the banking industry stood at Tk 9.76 lakh crore as of October last year.  Add Comment | 0   comment page number 1