Bangladesh: A Rising Global Textile Hub
Minister for Textiles in Pakistan Makhdoom Shahabuddin and top textile managers of the country believe that prime reason behind migration of textile industry from Pakistan to Bangladesh is preferential trade agreements between European Union, United States and Dhaka. Often cited reason of energy crisis is important too but becomes less important when compared with previous reason. In fact due its textile quota Bangladesh has become a rising global textile hub.
Importance of Bangladesh as preferred and top supplier of textile products came into limelight after the Pakistani government revealed that in the last five years 40% of Pakistan’s textile looms have been closed and moved to Bangladesh.
The Pakistan’s Textile Minister, Makhdoom Shahabuddin said that about 200,000 power looms, or two-fifths of the industry, had moved to neighbouring Bangladesh, leaving around 200,000 families in the Punjab region without work or suffering hardship.
Bangladesh turned out as rising global textile hub due to its cheaper cost of production. It is estimated that textile production costs are around 35% cheaper in Bangladesh, mainly as a result of power costs. Additionally, many American and European buyers are increasingly concerned about the political instability in Pakistan and would rather send their representatives to Bangladesh where security arrangements are less onerous.
Growth in Bangladesh’s textile industry is not just as the expense of Pakistan. The country has a strong underlying entrepreneurial spirit that has enabled a textile industry to adapt and thrive over the years.
The migration of textile industry from Pakistan to Bangladesh also highlights an evolving trend in labour and capital transfers in a globalized world. Capital initially moved from developed economies or west to fast developing economies and it is being reshuffled within territorial limits of developing economies.
“There is a third wave of globalization into frontier markets. As some emerging markets climb up the value-added ladder, frontier markets are increasingly finding a competitive niche.” Said Frederic Neumann, chief Asia economist at HSBC Hong Kong
At a recent Finance Asia Business forum sponsored by HSBC, a number of representatives of the international textile industry were keen to support investment in Bangladesh to help its industry grow further. The position of Bangladesh as rising global textile hub was highlighted when one delegate pointed out that Bangladesh now manufactures one in ten pairs of jeans in the world. It was estimated that Bangladesh textile exports in 2011 were worth USD 19 billion, and although this was around 6.5% of the USD 300 billion global market, growth was 50-60% a year and could reach a tenth of the global market by the end of 2012.
The general view of the industry appears to be however that Bangladesh needs better infrastructure to support the logistics involved in shipping textiles. Road and rail links to China are part of this. An example given at the Finance Asia summit was the pair of jeans that were manufactured in Bangladesh from denim produced in China but for a retailer based in Japan.