Home textile exporters in a tight corner

At a time when home textiles, especially terry towels, promise both enhanced earnings and diversity to Bangladesh's export basket, many mills are shutting down unable to compete at international markets.

At least 10 small and medium factories have shuttered in the past two years while another three to five are struggling to survive, according to data from the Bangladesh Terry Towel & Linen Manufacturers & Exporters Association.

All in all, there are some 90 factories currently in operation.

“Our factory was closed six months ago as we were in trouble due to pressure from international buyers to reduce the price,” said Rubel Hossain, a senior official of Mark Terry, which was established in Ashulia in 2000.

The buyers had the upper hand as they had competitive prices of Pakistan as a second option, he said. “Before the closure we used to export terry towels worth $2 million a month,” he added.

A production unit of Alltex Group faced the same fate in November last year failing to keep up with international competition, said a senior official of the group asking not to be named.

“At least 70,000 workers lost their jobs due to the closure of those factories,” said M Shahadat Hossain, the association chairman. The sector was just starting to grow, bolstered with some Tk 2,000 crore in investments, he said.

In fiscal 2017-18, export of Bangladesh's home textiles, including terry towels, bedsheets, linen, curtains and pillow covers, grew 9.95 percent year-on-year to reach $878.68 million.

However, terry towel export declined 4.40 percent year-on-year to $42.35 million last fiscal year, according to data from the Export Promotion Bureau.

The sector's growth started to witness a decline from January 2014, when the European Union (EU) allowed zero-duty benefit to Pakistan under it GSP Plus scheme, on export of home textiles and some other products.

The EU imported over $6.86 billion-worth home textiles in 2016, according to data from Euratex, the European apparel and textile confederation.

Of it, China accounted for 33 percent, Pakistan 25 percent, Turkey 16 percent and India 11 percent. Bangladesh's share was 7-8 percent.

The EU's data shows that its preferential import of textiles and clothing from Pakistan increased 82 percent year-on-year in 2014 (from 2 billion euros to 3.7 billion euros).

Bangladesh previously enjoyed 9.6 percent duty privilege over Pakistan as a least developed country in the EU, its main export destination, Hossain said.

With a trade advantage of nearly 15 percent, including 6 percent cash incentive, the sector in Bangladesh, especially terry towels, was performing well even amidst high yarn prices in the local markets, he said.

Yarn is the main ingredient in the production of home textiles, accounting for 70 percent of the cost, while the remaining 30 percent went behind chemicals, such as dyes, he said. Pakistan is faring fine as it also has its own cotton, machinery and comparatively better transport infrastructure, said Hossain.

Another factor behind the closure is the high price of yarn in the local market.

The widely consumed 16 carded yarn, which is used in manufacturing terry towels, is currently being traded at $2.25-$2.30 a kilogramme whereas it was around $1.80-$2 in June and July last year, shows the association data.

Furthermore, a 26 percent devaluation of the Pakistani rupee against the US dollar in the last three years also aided their performance. Bangladeshi taka devalued 8 percent.

Md Shahidullah Chowdhury, executive director of Noman Group, which caters to retail giants like IKEA, H&M, Kmart, Walmart and Carrefour, acknowledged that Bangladesh's home textile business was struggling for buyers' pressure to lower prices.

He said new buyers were placing fewer work orders here for home textiles and opting for Pakistan. However, China remains a preferred destination for long for sourcing home textiles as it has a lot of variety, he said.

The chief of the group, which alone exports home textiles worth $320 million per year, also blamed an upward trend in cotton prices, saying it led to higher prices for yarn in the local markets.

The price of cotton per pound in the international market rose to nearly 93 cents at present. It was selling at 65 cents even a year ago.

The global retail value of home textiles was estimated to be about $107.24 billion in 2014. Industry insiders expect it to reach $131.50 billion by 2020.