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Whenever I engage in intellectual discussions with cotton and
textile experts around the world, I invariably face a question
how did it happen? Obviously the question is how the
textile sector in Bangladesh has shown a phenomenal growth
through last decade? I recall a similar discussion with Dr.
Terry Townsend of ICAC a couple of years ago. After discussing a
number of world issues on cotton and textiles, our discussion
boiled down to Bangladesh textile industry. Terry raised a
thought provoking question, what did Bangladesh do
differently that triggered the textile boom? Well the
question is very simple but the answer requires deep thoughts.
This article is making an attempt to answer this well posed
question.
 There are three synergic and intrinsic factors that triggered
the textile boom in Bangladesh. They are resources,
opportunities and policy decision. The resources include
abundant labor forces, low cost energy and natural gas.
Abundance in labor forces provides Bangladesh textile industry
with a competitive advantage in producing labor intensive goods.
Self-sustained domestic market of 140 million with a growth rate
of 3% is also a great support for the industry. In recent years
Bangladesh has shown a reasonable increase in per capita income
and improved life styles for middle class. Above all the
dedicated and sincere work force, who are eager to work extended
work hour when needed to meet the production target is the key
element to the success of Bangladesh textile industry.
Bangladesh had had a tremendous opportunity to gain
access to European and the U.S. market through MFA and GSM
agreements for its Ready Made Garments (RMG). Bangladeshi
entrepreneurs successfully took this opportunity to the fullest
extent to expand and secure their markets. The policy decision
made by the Government basically buoyed the textile growth. The
Government policy of liberalization of the economy encouraged
private sector investments.
The Government declared the textile as a thrust sector that led
to introduce a support system for the textile industry. The
support system included Fiscal Benefits, Financial Benefits and
Institutional Support.
 Two of the most important resources, labor and power are
abundant and cheap in Bangladesh. In compared to its
competitors, India, Pakistan and China, Bangladesh has an
advantage of cheaper labor and lower energy cost. Labor cost is
only 23 cents/hr. Whereas, in India, Pakistan and China the
labor costs are 43, 41 and 89 cents/hr, respectively. Gas burned
energy cost in Bangladesh is less than two cents/KWH in compared
to 9.33, 6.72 and 7.84 cents/KWH in India, Pakistan and China,
respectively.
The textile policy introduced a new tariff structure designed to
stimulate the growth in Backward Linkage Industry (BLI). Tariff
in spinning sector is strikingly absent. Whereas imported yarns
and fabrics are heavily taxed to discourage imports and
encourage local yarn productions.
 All these intrinsic factors had synergic effects on the textile
growth in Bangladesh. As a result Bangladesh spinning industry
has seen a phenomenal growth over last ten years. The ring
spinning capacity in Bangladesh was hardly 1.5m spindles in
1996. This capacity increased to 5.7m spindles in 2006, a four
fold increase in ten years. In open-end spinning sector the
number of frames (about 300 rotors on average) increased from
3000 in 1994 to 7,876 frames in 2006.
 Similarly, export in textile sectors has also seen a phenomenal
growth, from $1.5b in 1994 to $9.56b in 2006. Knit Garments
export volume in 1993-94 was almost a fifth ($264m) of the Woven
Garments export ($1,292m). Whereas in 2006, these exports are
almost equal ($4,725m in Knit and $4,736m in Woven), indicating
Bangladesh is catching up more with the Knit Garments than the
Woven Garments export demands. The quality production of knit
garments and the competitive advantage of Bangladeshi
manufacturers allow them to catch up with the increasing demand
in the U.S. and European market. Bangladesh spinn-ing mills,
there-fore, use more and more high quality and comparatively
cheaper Uzbek cotton, mostly Strict Middling and Good Middl-ing
grade and 1-1/8” and longer staple.
 As a result, Uzbekistan origin cotton enjoyed a significant
market share, 63% (in 2006), in Bangladesh. Indian cotton ranked
a distant second, only 9%, in the same year. Out of 488,691 MT
of total cotton imported in 2006, Uzbekistan supplied 309,138
MT, India supp-lied 45,438 MT, the USA supplied 26,946 MT,
Turkmenistan supplied 20,004 MT and Pakistan supplied 19,985 MT.
It is interesting to see that India and Turkmenistan have gained
a significant market share in last few years due to their
competitive advantage over Uzbekistan cotton. Nevertheless,
Bangladesh spinners would always like to pay a premium for
Uzbekistan cotton for at least 1.5 c/lb over Turkmenistan and
3-4 c/lb over Indian Sanker-6 cotton. U.S. origin cotton,
especially Eastern/Memphis growth has also gained significant
market shares in last few years due to mostly for contamination
free cotton and better alternatives for lower grade and shorter
staple cotton for the open end industry. Pakistan is struggling
to catch up with the open-end industry because
 of contamination
problems.
While Australia is still recovering from droughts, contamination
free U.S. and Brazilian cotton have long been viewed as a viable
alternatives to Uzbek cotton. Unfortunately higher price keeps
Bangladeshi spinners from using U.S. and Brazilian cotton. A few
years ago Bangladeshi spinners tried to use Brazilian cotton,
but it could not meet their expectation. However, Brazilian
cotton quality has improved significantly in recent years and it
is worth it to give another try to Brazilian growths. The U.S.
has a clear advantage over Brazil. Brazil has significant
logistics and shipping problems for years. Eastern/Memphis
growths have long been enjoyed a good reputation among spinners
in Bangladesh. But the use of U.S. Cotton has largely been
limited to open-end spinning with shorter staple and lower grade
cotton (mostly SLM and 1-1/32” and 1-1/16”).
 It has been observed that big shippers have larger market
 share
in Bangladesh, suggesting a tendency of Bangladeshi buyers to
buy cotton from reliable and resourceful big suppliers. In
recent years it is seen that a number of small and medium size
suppliers are having financial and management problems. They are
not being able to hold their market share in Bangladesh. These
companies have either gone out of business or on the verge of
collapse. Suppliers based in Switzerland have enjoyed 32% of the
total market share in Bangladesh. British companies ranked a
distant second at 19% market share. Although Uzbekistan origin
has a total market share of 63% in Bangladesh, but Uzbek
companies enjoys only a 4% market share.
Bangladeshi garments industry is one of the larger and
 comprehensive industries in the world. Bangladesh's textile
industry, which includes knitwear and woven garments along with
specialized textile products, is the nation's number one export
earner. The textile sector, which employs 2.2 million workers,
accounts for 76% of Bangladesh's total export. It has shown a
growth rate of 25.3% in 2005-06. The Bangladesh Garments
Manufacturers and Exporters Association (BGMEA) has predicted
that textile exports will rise from US$ 9.56 billion earned in
2006 to US$ 18.6 billion by 2010. The quota-free textile regime
(since 2005) has proved to be a big boost for the textile
industry.
 With the given growths in textile sectors (over 25%) it is
expected that the industry as a whole would need about 1.52b kg
of yarns and 9.17b meter of fabrics by 2010 for both the
domestic and export markets. In order to meet this demand,
Bangladesh textile industry would require additional 200
spinning mills of about 25,000 spindle capacities, 217 Weaving
Units, 216 Knitting Units and 175 Fabric Processing units.
Cotton consumption has accelerated from about 175,000 MT in 1998
to about 488,691 MT in 2006. It is expected that the total
consumption will reach to a little over a million metric tons by
2010. Bangladesh is now heavily depended on Uzbek cotton, which
undoubtedly offers excellent spinability and better values.
Sourcing a significant volume of cotton from a single source
such as Uzbekistan would place Bangladesh in a precarious
position. It is estimated that Uzbekistan will export only
800,000 MT of cotton in the year 2007. The Uzbek local cotton
consumption would be nearly 300,000 MT. The rate of domestic
cotton consumption is growing in an increasing rate in
Uzbekistan. The Government of Uzbekistan has taken various steps
to increase domestic use of cotton to enhance value addition to
their textile productions. Therefore the volume of exportable
cotton from Uzbekistan will shrink as the domestic consumption
increases.
Bangladesh should look for additional sources for a consistent
and reliable supply. Indian, Pakistani and West/East African
growths fulfill a portion of the total demand of Bangladesh, but
the quality of these growths has always been a concern. For
example, Indian and Pakistani cotton are plagued with
contamination problems and lower micronaire. West African
growths have also quality concerns. Most importantly Bangladeshi
spinners usually do not comfortably buy West African unless they
get at least three cents price advantage over Uzbek cotton.
While Australia is still recovering from droughts, contamination
free U.S.
 and Brazilian cotton have long been viewed as a viable
alternatives to Uzbek cotton. Unfortunately higher price keeps
Bangladeshi spinners from using U.S. and Brazilian cotton.
Bangladesh export oriented spinning industry is highly addicted
to Uzbek cotton. Some spinners took courageous steps to try with
Indian Sanker6 cotton in last few years with moderate success.
The most advantage of Indian cotton is its competitive price.
The quality of
 Shanker6 remains good until February and then the micronaire starts to get lower, which is a significant problem
for export oriented knit yarn industry as they need high ly
matured cotton with a micronaire range between 4.0 and 4.8.
Therefore Bangladesh's spinning industry must look for American
and Brazilian growths which have consistency in quality and
characteristics. Bangladesh is the only country which doesn't
produce but consumes a significant volume of cotton. As the U.S.
and Brazil are the net exporter of good quality cotton, they
could be a good source for Bangladesh spinning industries. ¨
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