The Complex Web of Challenges for Bangladesh's Textile Industry

The Complex Web of Challenges for Bangladesh’s Textile Industry

Shah Md. Adib Uddin Wasta
B.Sc. in Textile Engineering
Textile Engineering College, Zorargonj, Chattogram

The global economic downturn and our RMG industries’ conditions have cast a complex web of challenges on this vital export-oriented textile industry. Understanding these challenges is crucial for investors and policy makers to chart a path for this sector. The crucial challenges are:

1. Global Economic Uncertainty and Lack of Market Access:
The sinking global economy and inflation influence an unexpected shadow over the export-based textile industry. Due to increases in living costs of people, major markets are experiencing dampened consumer demand, leading to decreased orders for Bangladeshi garments. Again, Bangladeshi textile exports face unfair trade practices and discriminatory policies in some major markets. This limits our access to potential customers and reduces our ability to compete.

The US is showing the practice of canceling orders more frequently. It also imposes high-duty taxes to import Bangladeshi textile products. It is discouraging our buyers to order Bangladeshi apparel. Our Diplomatic relations with the US and European countries are affecting our textile industry heavily.

2. Overreliance on Markets and Products:
Even though the sector has been in operation for 4 to 5 decades, our textile markets and products have become increasingly concentrated around a few items and markets. T-shirts, trousers, and knit goods are our specialties, but according to the trend, the present global need is for non-cotton and synthetic fiber based products. Our market is likewise largely focused on the EU, the US, and a few conventional markets. To gain greater market share and capitalize on the unexplored potential, we must investigate further in the future days. Otherwise, because of the lack of diversification, we can’t compete in the global market, and being dependent on a few markets we have to endure monopoly exploitation by the market. It is one of the biggest risks for our textile industry.

3. Threats from Internal Issues of Bangladesh:
The worldwide recession, which has severely impacted the global textile industry, is not the only reason for concern. Our internal problems are creating threats too. The unstable and insecure socio-economic condition of the country makes foreign buyers and investors uncomfortable and insecure about visiting Bangladesh, making orders, and investing. Bangladesh’s textile industry is going through one of the toughest periods in decades. All the economic issues like inflation are causing a rise in energy costs, importing costs, as well as the production costs of apparel. The alarming increase in nonperforming loans is making buyers insecure about doing business with our textile. Again, an increase in the new pay scale for employees of the textile industry due to inflation and rising commodity prices has affected companies to adapt the production costs. Actually, due to the internal and external problems, socioeconomic and political conditions of Bangladesh investors are losing interest in investing. Our unpredictable state is causing a rapid decrease in foreign investment especially in the textile sector.

4. Lack of New Investment:
Bangladesh’s textile industry is still facing low productivity. One of the reasons is the use of obsolete technology and machinery and the lack of goodwill in research and development.

5. Rising Production Costs and Weak Backward Linkage:
Several factors like increasing costs of energy and raw materials significantly impact operational costs and compress margins, decrease, efficiency, and productivity, and create negative images of our RMG sectors indirectly. Increases in interest rates, double-digit inflation, and internal public dissatisfaction are causing a rise in production costs both directly and indirectly.

6. Lack of Research and Development:
Due to the lack of proper research and development to produce demanding quality cotton in Bangladesh the textile sector textile sector has to import cotton which increases production costs and makes the sector highly dependent on other countries for cotton. Farmers are demotivated to produce cotton as it is not a high-cash crop and shifting to other crops. The pesticide sector isn’t also interested in R&D for cotton as higher-yield cotton is more pesticide-resistant. We also aren’t capable enough to produce other demanding and quality both natural and man-made yarn. Our textile is highly dependent on other countries for yarn. We are still far behind in the use of modern technologies in textiles. It is one of the reasons for our inability to diversify and falling down in competition.

7. Energy Crisis- Electricity Crisis & Gas Shortage:
Textile production capacity of various subsectors has been reduced by up to 30 percent. Organizations are worrying about the consequences of load-shedding, unexpected increases in electricity prices and taxes. It’s affecting their lead times. Some are investing in generators and spending more to generate power through generators and it is increasing production costs, reducing production speeds as well as orders. Factories are admitting that they can work more efficiently by using continuous powder by generator, instead of production being hampered by power failures.

Shortages of gas are also affecting our textile sector. Companies are hesitating to take orders due to the unexpected shortage of gas. According to the Bangladesh Textile Mills Corporation, 60 to 70 percent of the industry had been affected and was unable to take orders from the international market due to the energy crisis which is affecting lead time and production costs. Companies are facing production losses and client dissatisfaction which are badly affecting the capability of the companies as well as our textile industry.

8. Raw Material Prices:
Due to the global economic and geopolitical conditions, our internal and external problems, double-digit inflation, and inconsistent import and export policies the price of raw materials for textiles is fluctuating. It is mainly affecting production costs. Our textile industry is still highly dependent on other countries for raw materials. We are still far behind the production of standard-quality raw materials for textiles.

9. Supply Chain Disruptions:
The global pandemic and ongoing wars have disrupted the global supply chain system. The shortage of raw materials and logistical bottlenecks like corruption, and poor transportation have led to delays in production and delivery and increased costs. Proper infrastructure and logistics management systems are needed for a smooth supply chain system. Unethical practices in both the internal and external sectors of the textile industry and its related industries hamper productivity and reputations in the global market.

The phenomenal expansion of the RMG industry along with the rapid increase in population as long as living the standard has led to a demand and supply gap. All the sectors of the textile industry are still unable to reach near to the local demand for yarn, fabric, apparel, trims, and accessories. Our internal and external problems are very negatively affected.

10. Shortage of Skilled Manpower and Weak Technology Management:
The shortages of skilled people cause difficulties in adapting to market trends, and updating, and operating technologies with higher efficiency, productivity, and innovations. We remain reliant on low-cost, basic garments, offering limited product diversification. Investors and the manpower aren’t confident, skilled and prepared enough to contribute to the revolution in RMG. Our inabilities affect buyers’ interest and trust in collaborating with our RMG sector to order critical apparel.

Major factories of textile are still using obsolete backdated types of machinery that are affecting lead time, production diversity, and production cost as well as leading to the decline of Bangladesh’s Textile competitiveness.

Disappointingly, our textile industry is still facing a shortage of skilled manpower. Sadly, a well-equipped industry still can’t match the targeted efficiency due to the shortage of skilled manpower.

11. Environmental Concerns and Growing Demand for Sustainable Textiles:
The use of hazardous chemicals in garment production and the lack of proper waste disposal cause serious environmental and health risks. The polluted environment of an industry affects its production indirectly and long-term sustainability.

Brands as well as consumers are increasingly demanding sustainable textile products, which is putting pressure on manufacturers to adopt sustainable productions and technologies as well as systems. Despite the will, our industry can’t bring enough product diversification due to the lack of skilled manpower. As consumers are concerned about the environmental impact of the textile industry, which is a major polluter of water and air, in 2022, the sustainable textile market size was valued at USD 45.8 billion and is poised to grow at a significant CAGR of 11.2% over 2023-2029.

For environmental regulation as per the government and international demand, factories have to invest in sustainable technologies. In 2019, the textile industry is accused of approximately 20% of global water pollution and 10% of global greenhouse gas emissions. This is a challenge for textile manufacturers, who need to balance the cost of compliance with the need to protect the environment.

12. Changes in Brand Behavior:
Due to the potential threat of a global recession, brands and buyers began taking cautionary steps. Many of our factories do not have enough orders from February 2023 onwards to run the factories at full capacity. Again, brands are ordering diversified products according to the market demand and trends. Many of the RMG factories aren’t capable enough for this diversification. So, our textile industry is falling behind the global competition. In this era of fast fashion, we need visionary and skilled manpower to understand consumer expectations, demanding quick turnarounds and constant innovation. It causes challenges to practice rapid production, diversification with sustainable practices, and ethical considerations. It often leads to challenges in maintaining high-quality standards along with tight deadlines.

13. Limited Access to Finance, Tight Monetary Policy:
Industries are facing problems in transactions and financial documentation in importing raw materials on time, confirming, exporting, and delivering orders. Smaller enterprises often struggle to access adequate financing, hindering their ability to invest in new technologies and upgrade their facilities to expand operations. These limit their ability to compete in the global market.

Bangladesh’s tight monetary policy affects production costs. According to all Bangladesh Textile Mills Corporation, our government can’t satisfy their expectations for the smooth growth of the industry. According to them, the minimum tax on domestic sales is resulting in inescapable financial problems alarmingly. Due to unsustainable markup rates, an extreme scarcity of energy supply, and unfathomable power bills for industry the textile sector is suffering a negative cash generation. Increases in interest rates are making the industry uncomfortable to invest in more efficient technology and systems, research, and development. Overall, this hectic system is slowing down the textile’s growth.

14. Weak Regulatory Framework:
Bangladesh’s textile industry’s current governing regulatory framework requires significant improvements. Inefficient bureaucratic processes, inadequate enforcement of labor laws, lack of transparency, unethical practices, and corruption create challenges and hinder the industry’s growth potential.

Our textile industry is being criticized for labor abuse and unsafe working conditions. It affects our reputation in the international market.

Again cast-based discriminating behaviors toward the subordinates caused internal problems and hampered the company’s productivity.

A combined effort from all RMG industrialists to focus on improving production efficiency, diversifying and developing products, adopting sustainable practices, and investing in R&D to remain competitive in the global market is required. The government must create a conducive business environment by improving regulations, and infrastructure, and promoting innovations. Additionally, international collaboration and support are crucial for addressing challenges and ensuring fair market access.

By addressing these complex challenges, Bangladesh’s textile industry can secure its future and continue to play a vital role in the nation’s economic and social growth.