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Challenges for textile industry

Published : Tuesday, 24 September, 2024 at 12:00 AM  Count : 525
Mohammad Khorshed Alam
Bangladesh's economic trajectory is heavily influenced by two vital sectors: remittances and textiles. Both sectors are currently at a crossroads, where political unrest, external competition, and economic policies are shaping their futures. Remittances offer a lifeline for foreign reserves, while the textile industry faces severe challenges both locally and internationally. Addressing these issues through timely reforms could drive sustainable growth and stability.

Remittances remain a crucial source of foreign exchange for Bangladesh. Recent improvements in airport facilities have made remittance channels more secure and efficient, encouraging expatriates to send money legally. Government initiatives aimed at reducing money laundering and offering favorable incentives to expatriates have also contributed to a steady rise in remittance flows. If these trends continue, projections indicate that Bangladesh could receive over $2.5 billion in remittances by the end of September or October.

To sustain this growth, the government and private sectors must continue collaborating on policies that protect and encourage legal remittance channels. This support will reduce illegal transactions and increase much-needed foreign reserves, especially during times of political and economic volatility.

While remittances provide some relief, the textile industry-the backbone of Bangladesh's export economy-finds itself grappling with instability. Labor unrest, often instigated by outsiders rather than genuine workers, has disrupted factory operations, leading to fears of revenue loss. Should these disruptions persist, export earnings could decline by 10% to 15%.

To address this, Bangladesh's intelligence agencies and law enforcement must enhance their vigilance in industrial areas to curb the activities of external saboteurs. In recent developments, the situation appears to be stabilizing, with only 13 factories out of 1,863 in the Savar region reporting wage delays. This indicates a positive shift as workers begin to better understand the economic pressures facing the industry.

One of the most pressing concerns for the textile industry is its growing dependency on foreign suppliers, particularly for cotton yarn. Local production has slowed, and Indian suppliers have stepped in to fill the gap, raising alarms about the potential for long-term foreign dependency. If this trend continues unchecked, Bangladesh's domestic textile sector could weaken significantly.

A key issue lies in the disparity between payment systems for local and international suppliers. When importing yarn from India or China, Bangladeshi producers often make payments upfront, even before the goods cross the border. However, local suppliers face delays of 7 to 9 months in receiving payments. This double standard is strangling domestic production and giving foreign suppliers a competitive edge.

The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) must address this imbalance. Ensuring fair treatment for local suppliers is essential for building a resilient domestic supply chain, reducing dependency on imports, and fostering job creation.

Another significant hurdle for the textile industry is the ongoing energy crisis. Gas shortages have left nearly 50% of textile machinery idle over the past two years, hampering production and placing immense financial strain on factory owners. Adding to their woes is the rising exchange rate. When many machines were purchased, the exchange rate was Tk 86 per dollar; today, it stands at Tk 120 per dollar, compounding their debt burdens.


Comparing this to India, which offers its textile manufacturers a range of incentives despite being self-sufficient in cotton and machinery, Bangladesh's support mechanisms seem inadequate. Indian manufacturers receive robust government backing to compete on the global stage, whereas Bangladeshi manufacturers, reliant on imports for both raw materials and machinery, are left to contend with rising costs and limited support.

Reducing gas prices for local industries and aligning them with the rates offered to independent power producers (IPPs) is crucial. A stable, affordable energy supply would not only revive the textile industry but also create jobs and reduce foreign currency outflows. Strengthening local production would give Bangladesh a competitive edge in both price and quality on the international market.

The Bangladesh Textile Mills Association (BTMA) has repeatedly voiced its concerns to the government, but little progress has been made. The previous administration struggled to implement meaningful reforms. However, with an interim government now in place, there is hope that these issues will finally be addressed.

This interim administration must prioritize creating a business-friendly environment, particularly for key sectors like textiles. By addressing energy shortages, reforming payment structures, and providing competitive incentives, the new government can help the textile industry regain its footing. Such reforms will be critical in boosting export earnings and contributing to the country's economic recovery.

As the country passing through political and economic transitions, vigilance from both the public and private sectors is essential. The challenges of political instability, labor unrest, and unfair business practices threaten the progress that has been made in vital sectors like remittances and textiles. Policymakers must take swift action to reform outdated policies, improve infrastructure, and support local industries to maintain economic stability.

In addition to policy reforms, investing in workforce training is crucial. Providing skill-based training in different districts could increase the earning potential of young people, both locally and abroad. This, in turn, would enhance the country's economic resilience and boost remittances further.

In the coming months, all eyes will be on the interim government to see if it can deliver on its promises. The textile industry, remittance inflows, and overall economic health depend on the government's ability to create a more equitable and competitive environment for businesses. Political stability, energy reform, and fair business practices will be the deciding factors in whether Bangladesh can steer its economy toward sustainable growth.

The future of Bangladesh's economy hinges on how effectively the government and private sectors can navigate these challenges and capitalize on emerging opportunities.

The writer is chairman of Little Group and director of Bangladesh Textile Mills Association (BTMA)



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