SouthAsia Enterprise Development Facility - Special Event >> SEDF-BKMEA Trade Mission to New York City >> Bangladesh Knitwear

Bangladesh Knitwear: Facts & Figures
√	Export earnings: US$ 2051.30 million up to March 2004-05 (2nd largest sector)
√	Share of Export earnings: 38.12%
√	Net Retention Amount: US$ 1230.78 million
√	Net retention rate: 60%
√	Value addition: 75%
√	Share in net export: 32% (Highest)
√	Quantity exported: 87.40 million dozen (Top sector)
√	Labor force employed:
	•	Direct: 0.70 million; about 70% of them are women.
	•	Indirect: 0.40 million

History of Development of Knitwear of Bangladesh

The RMG business started in Bangladesh in the 70s but it was then merely a casual effort. The first consignment of knitwear export was made in 1973 and the first consignment of woven garments was made in 1977. Though started later, but it was the woven sector that first dint a spot in the

		export pie of Bangladesh. In 1981-82 the contribution of woven garments in the total export was 1.10%. Afterwards it is a story of sustained success for the Bangladesh RMG sector. Within a decade the contribution of woven to the export basket became 42.83% (1990-91) and the knitwear sector's contribution was 7.64% (1990-91).
Graph 1: Changes in combination of Export Products over time

The entrepreneurs of the knit sector stepped forward with their expertise in the late 80's. With their earnest efforts they were able to export US$ 14.84 million in 1989-90. Out of this US$ 12.22 million was exported to EU and US$ 2.02 million was exported to US. The trend continued in the knit sector because of the market access opportunity provided to the LDCs under the Generalised Systems of Preference (GSP) benefit.

This is the rejuvenated beginning of the epic story of Bangladeshi knitwear sector RMG sector that in true sense has been able to massive industrialization in a sustainable way with effect on all probable human development aspects which is the encouraging part of the story.

The growth of knitwear sector is increasing at an increasing rate. The cumulative average growth rate of the sector is 27%. And it is continuously grabbing a more portion in the export pie of Bangladesh. This is mainly attributed to the facilities provided under the EC GSP and ROO. The knitwear sector is heavily driven by these favorable policies and took the opportunity to develop a strong backward linkage for the sector.

Table 1: Comparative Statistics of Knit Wear & Woven Wear

				Volume in Million US$
Year	Knitwear			Woven Wear			Total Export
	Volume	% change	Share in BD Export	Volume	% change	Share in BD Export	RMG	Bangladesh
89-90	14.84	0	0.77	609.32	29.34	31.67	624.16	1923.70
90-91	131.20	784.00	7.64	735.62	20.73	42.83	866.82	1717.55
91-92	118.57	-9.62	5.95	1064.00	44.64	53.36	1182.57	1993.90
92-93	204.55	72.51	8.58	1240.48	16.59	52.06	1445.03	2382.89
93-94	264.14	29.13	10.42	1291.64	4.12	50.97	1555.78	2533.90
94-95	393.26	48.88	11.32	1835.09	42.07	52.85	2228.35	3472.56
95-96	598.32	52.14	15.41	1948.81	6.20	50.20	2547.13	3882.42
96-97	763.30	27.57	17.28	2237.95	14.84	50.65	3001.25	4418.28
97-98	940.31	23.19	18.22	2843.33	27.05	55.09	3783.64	5161.20
98-99	1035.36	10.11	19.49	2984.81	4.98	56.18	4020.17	5312.86
99-00	1269.83	22.64	22.08	3082.56	3.27	53.59	4352.39	5752.20
00-01	1496.23	17.83	23.14	3364.20	9.14	52.02	4860.43	6467.30
01-02	1459.24	-2.48	24.38	3124.56	-7.12	52.20	4583.80	5986.09
02-03	1653.83	13.34	25.26	3258.27	4.28	49.76	4912.10	6548.44
03-04	2148.02	29.88	28.25	3538.07	8.59	46.54	5686.09	7602.99
04-05 (up to March)	2051.30	38.12	33.64	2676.84	3.77	43.90	4728.14	6097.12
Source: Export Promotion Bureau

EU is the main export region of Bangladeshi Knitwear constituting 83% (US$ 1780.57 million) of total knitwear export in FY 2003-2004 followed by USA (11%, i.e. US$ 236.79 million).

		This has become possible because it can satisfy the ROO of EU as value addition is higher (75%) in this sector. After the adoption of the guidelines for the application of the scheme of generalized tariff preferences by EC knitwear export from Bangladesh to EU rose precipitously. The two-stage transformation requirement of ROO in 1999 boosted market penetration in EU further; it contributed a growth of 101.19% since 2000-2001.
Graph 2: Knitwear Export to Major Markets

Bangladesh RMG sector has successfully passed some critical tests and is now sailing with two masts: knit and woven. The sub-sectors are now in healthy competition among themselves to take the role of leadership within the country.

		In FY 2003-04, knitwear for the first time exceeded woven wear and became the leader in terns of quantity exported with 91.6 million dozens. The amount of woven export was 90.49 million dozens. Knitwear is still leading in terms of quantity exported and is widening the gap day by day. The present difference in favor of knitwear is 18.85 million dozens In FY 2003-04, the contribution of two RMG sub-sectors were as follows:
Graph 3: Comparison of Export Quantity

Woven Garments 47% and Knitwear 28%. In a period of just 9 months (up to March FY 2004-05) the figures have changed dramatically, the share of woven garment to the country's export has reduced to 43.90%, on the other hand the share knitwear has increased to 33.64%. It indicates clearly that the knitwear is performing well in both ways. In the first 9 months of FY 2004-05 the scenario is as under:

	Knitwear export increased by US$ 566.15
	National export increased by US$ 676.19

Therefore the contribution of knitwear in national export increase is 83.73%

Contribution of the RMG Sector in Bangladesh
In the development history of Bangladesh, RMG sector contributed a lot in terms of employment generation, involving women in the formal sector, increased substantial export earnings etc. One significant aspect of the RMG's contribution in the development is the human development aspect. The sector contributed a lot in the following areas:
√	Women empowerment
√	Gender equality
√	Improved health & nutrition
√	Reduced child marriage
√	Reduced infant mortality
The development in the sector also contributed a lot in the growth and development of the backward linkage industry of the country.

Strength of Knitwear Sector of Bangladesh

Competitive wage rate together with easily trainable workforce, entrepreneurial skill, expanding supply side capacity, and government policy support helped to translate the comparative advantages into competitive advantages. The core strength of the knitwear sector is its backward linkage. The entrepreneurs of the sector not only increased their stitching capacity overtime but also invested in the allied industry to augment the overall capacity of the total sector with the same pace. Over the period of time knitwear sector gradually became almost self sufficient in fabric and yarn. This improvement has become possible because of the integrated growth of spinning factories in line of the growth of country's stitching capacity and increased need of the yarn and fabric.

		As the export increased in the knitwear sector, the capacity of backward linkage also gradually increased accordingly. The result is local suppliers can provide 90% of the total fabric requirement of the sector. The growth of spinning mills also stepped with the growth of knitwear exports. In 1993-94 total number of spindles was 1.38 million that supplied 10.70 million KG yarn. In 2003-04 the number almost tripled and it became 3.77 million that supplies 239.00 million KG yarn. As of now the total investment in the backward linkage industry is more than US$ 2.00 billion.
Graph 4: Comparative Consumption & Local Supply of Fabric & Yarn

Comparative Structure of Gross & Net Exports of Bangladesh (FY 2003-04)


Graph 5: Structure of Gross Export		Graph 6: Structure of Net Export

Though woven is the highest contributor (47%) in terms of gross export, but knit becomes the most significant component if we consider net export with a share of 32%. This has resulted because of the backward linkage industry that has grown over time which helped the knitwear sector to have the higher value addition and there fore a much higher net retention rate.

Year	1994	2000	2004
Value Addition:	50%	70%	75%
Net Retention:	40%	55%	60%

Graph 7: Year wise knitwear export and net retention

Table 2: Year wise knitwear export and net retention

Year	Total Export	Net Retention
94-95	393.26	157.30
95-96	598.32	253.69
96-97	763.30	335.85
97-98	940.31	443.83
98-99	1035.36	530.10
99-00	1269.83	695.87
00-01	1496.23	837.89
01-02	1459.24	828.85
02-03	1653.83	965.84
03-04	2148.02	1271.63
04-05 (up to March)	2051.30	1230.78

Social Compliance Status of the Knitwear Sector
In order to be competitive in all respect in the global trade, BKMEA has undertaken a massive program for the sector to be implemented by 2010.
√	BKMEA has made group insurance mandatory for all of its member units and has signed an agreement with Jiban Bima Corporation (a govt. life insurance company) in this regard. New membership will not be offered until the applicant comply the rule.
√	Workplace safety has also become a prime issue with particular emphasis on complying building code. An approved structural design and plan by the competent authority must be submitted at the time of membership application. No membership will be offered if such documents are not provided.
√	BKMEA has undertaken the Decent Work Pilot Project (DWPP) with ILO and is working to improve the labor standards and practices as per he ILO standard.
√	BKMEA has taken initiative to establish a ‘Fire Cell' to guide and monitor the safety and security status of the member units.
√	BKMEA is also thinking to set up a central waste water treatment plant to maintain the environmental standards and has approached the international donor agencies.
√	Community health care centre for the workers of the sector is in active consideration of BKMEA and we are approaching different agencies to work jointly in this regard.
√	BKMEA has undertaken programs to organize in-house social compliance workshops to increases awareness of the member units. The program is already in operation.

Efficiency Improvement Programs

√

BKMEA has signed a MoU with SouthAsia Enterprise Development Facility (SEDF) for the development of the knitwear sector. It includes productivity improvement, social awareness raising, capacity building etc.

√

We have also signed a Cooperation Agreement with German Technical Cooperation (GTZ) for the development of the sector in three areas: enabling environment, skills development, and social and environmental standards. BKMEA is also implementing an office automation program under the IT support services with GTZ. It will help in providing online services to members, and monitoring, evaluation, follow-up the member units.

Advantages of Bangladeshi Knitwear Sector
√	Knitwear is a near self-sufficient sector in all respect; currently BKMEA members are supplying 90% of the knit fabric requirements of the sector.
√	Local yarn suppliers provide around 75% of the total requirement of the sector.
√	We have more than 100 composite factories; besides the composite units many garments have their own dying and finishing units. A separate dying and finishing industry also has grown up over the time to support the sector.
√	Good capacity exists in the sector.
√	Bangladeshi knitwear is almost unbeatable in price advantages.
√	Bangladesh provides not only a cheap labor force which is unbeatable but they are also unparallel in stitching capability.
√	Bangladeshi Knitwear is exported to 90 countries of the world.

Cost of Some Key Production Factors¹
1.	The labor costs² incurred in the Textile Industry is the lowest compared to its competitors.
	Thailand: $1.00/Hour	India: $0.60/Hour	Indonesia: $0.40/Hour
	Sri Lanka: $0.45/Hour	Vietnam: $0.40/Hour	Pakistan: $0.40/Hour
	China: $0.35/Hour	Bangladesh: $0.25/Hour

2.	Energy cost³ in Bangladesh is lower compared to India and Pakistan
	Pakistan: $0.08/KwH	India: $0.095/ KwH	Bangladesh: $0.07/ KwH

¹	Figures may vary depending on the data sources
²	Adapted from ‘The Readymade Garment Industry of Bangladesh' by Hafiz G. A. Siddiqi, UPL, Dhaka, 2004
³	Source: Ministry of Commerce