|
State of Bangladesh Textile and Cotton Industry
AThis week's release of 'October Supply and Demand' report
by the USDA was like a breath of fresh air for the
Bangladesh spinning industry. However, the wound inflicted
earlier, right after the historical cotton tsunami that
swept through the cotton and spinning industry, was so deep
that this small ray of hope could barely bring back the
optimism to the industry. The high-priced contracts worth
USD 500m are still haunting the spinners, which the industry
analysts believe will last a lot longer than expected.
But looking at the industry from a holistic perspective,
Bangladesh seems to be doing fairly well. The Apparel export
is showing a consistent and robust growth and has reached an
all time high of USD 17.9 billion during 2010-2011. This
figure is unprecedented and demonstrates an unshakeable and
robust strength of the Apparel industry. It is true that
this figure largely reflects the rise in apparel value in
dollar terms. Nevertheless, the volume of Apparel export has
also increased.
The real bad news, though, comes from the backward linkage
industry, especially the Spinning industry. After passing
through two rewarding and successful seasons, the later part
of 2010-11 has been a nightmare for the spinning industry,
when the industry watched a painful slide in cotton price
from its historic high of US $2.4/lb (C&F Chittagong) in
March-April 2011 to an extreme-low at USD 1.2/lb in just
about five months. This steep decline in cotton price left
the majority of spinners in turmoil, wondering what to do
with the high priced contracts signed earlier. The situation
has even aggravated due to low yarn market coupled with
influx of cheap yarns from international markets, mainly
from India and Pakistan, a phenomena which is widely seen as
the effect of European Union's decision to adopt an one-step
rule-of-origin policy.
A gradual decline in price would have given reasonable
breathing time to spinners to repositioning themselves with
the market force, but unfortunately that was not the case.
Therefore, a more scientific approach could have been taken
to foresee and manage this unexpected crisis. A professional
team of risk managers could be instrumental to avert this
kind of crisis. Moreover, continued investments by spinners
in various portfolios, which had happened after the last two
successful seasons should have been carefully reviewed by
the professional risk management team, before they ended-up
in a liquidity crisis. The liquidity crisis coupled with the
adverse market move put them in a vulnerable position to
stomach the market differences they endured in recent price
falls.
But of course there are other stakeholders in this
complicated textile equations, who would sigh with relief
with this bearish news from the USDA. These are millions of
poor weavers who were badly beaten by the price hike during
the last two seasons. Without having any access to credits,
these weavers helplessly witnessed two bitter seasons that
chewed-up virtually all their cash and they were left
wondering how to replace their high priced yarns stocks with
little or no money before selling their woven products often
with modest or no profit.
The Government has of course had a responsibility to strike
a balance and make sure all the stakeholders are well
protected. A limited access of cheaper foreign yarns would
help revive the spinning industry but that may prove
otherwise counterproductive for poor weavers and the
exportable Apparel industry. A balanced approach is always
welcome, as a healthy textile and cotton industry cannot
grow or survive, depending on foreign sourcing of yarns. A
value addition to the entire value chain is vital for an
industry and economy. Therefore, a careful review of policy
balancing the interest of all the stakeholders would be
necessary to develop a robust cotton and textile industry
that would only strive to earn the much needed foreign
revenues. ¨
|
Home |
|
