Backward Linkage

 

Backward Linkage:

 

For RMG sector, the backward linkages are spinning the yarn, weaving the fabric, and dyeing, printing and finishing operations. These operations can be combined into one composite mill or they can be established as separate units. In addition to fabrics, all other accessories like interlining, labels, buttons and sewing thread, all the packaging materials like neck boards, backboards, plastic collar stays, tissue papers, hangtags, pins and clips, hangers and poly bags, zippers and draw strings and export cartons used to be imported. Over the last decade, a large number of accessories industries have come up to fill in this gap to the extent of about 70% of the total requirement of the industry. While the country has more or less achieved self-reliance in supply of accessories, the progress is less noticeable in the fabric manufacturing, especially in the woven fabric.

Currently, Bangladeshi apparel exporters import fabrics at international prices using back-to-back letter of credit. While procuring through back-to-back L/C, the importers (Bangladeshi exporters of apparels) pay high interest and other charges, commissions, fees for the services of the middlemen involved. The establishment of composite mills or individual units of weaving, spinning and processing will reduce lead time and increase value addition and employment, in addition to improving the cost advantages.

The growth of accessories industries, coupled with a substantial growth in knit fabric manufacturing has helped to reduce dependence on imports and cut down lead-time for delivery. According to statistics, the share of back-to-back L/C in total export dropped from 68.33% in FY 1995 to 45.1% in the first eight months of FY 2001. This means that value addition in the country is steadily increasing. This is creating cushion in these sector to absorb pressure of competition. A better spread in the value addition chain is bringing more factors of production under national control and thus giving the industry better scope for increasing its competitive edge.

 

The government of Bangladesh has specified some goals in the latest national development plan for backward linkage industries. To achieve the goals set in the Fifth Five-Year Plan, Bangladesh offers attractive incentives to attract both local and foreign direct investment in RMG sector.

 

The knitting and hosiery sectors look brighter than weaving, and about 80 percent of garment accessories like cartons, threads, buttons, labels, poly bags, gum tapes, shirt boards and neck boards now are being produced within Bangladesh and contribute to the national gross domestic product. However, the textile industry is just budding.[1]

 

A fundamental constraint on the potential of the RMG industry is the general absence of backward linkages. In their absence, despite abundant cheap labour, the country’s local value addition has so far been only 25-30 percent of gross exports for woven and 85-90 percent for knit apparel export.

 

The RMG industry, specially woven apparel industry is currently heavily dependent on imported raw materials. Roughly 85 to 90 percent of the woven fabrics and 5 percent of the knitted fabrics are imported, despite some improvements in this regard since the mid-1990s, in terms of investments in backward linkage industries, especially with the announcement of the Textile Policy, 1995, and the granting of various incentives by the Government.

 

 

 

 

 

 

 

 

 

 

 

Backward Linkage Industries for RMG in Bangladesh

Sub Sector	No.s of Unit	Installed Machine capacity	Production Capacity  (In Mill.)
Yarn Manufacturing Mill (Spinning) (a) Private - BTMA (b) Public - BTMC Silk Manufacturing Mill: 01 Synthetic Yarn Manufacturing Mill: 12 Acrylic Yarn Manufacturing Mill: 09 Wool Manufacturing Mill: 02	301 23	6.32 Mill. Spindle 0.45 Mill. Spindle 0.218 Mill. Spindle	1,300 Kgs. 40 Kgs
Total	324		1340 Kg.
Weaving (Large Mill) Private Sector	420	25000 Shuttle less/Shuttle Loom	1,400 Mtr.
Spl. Textiles & Powerloom: Private Sector	1,065	23000 Shuttle less/Shuttle Loom	300 Mtr.
Total	1485	48000 Shuttle less/Shuttle Loom	1700 Mtr.
Handloom	148342	498000 Hand-looms	837.00 Mtr.
Knitting, Knit Dyeing (a) Export Oriented (b) Local Market	800 2000	12000 Knit / Knit Dyeing / Machine 5000 Knit / Knit Dyeing / Machine	3600  Mtr. 500 Mtr.
Total	2800	17000 Knit/Knit Dyeing Machine	4100 Mtr.
Dyeing & Finishing
a) Semi - Mechanized (b) Mechanized	180 130	N/A	1200 Mtr. 1600 Mtr.
Total	310		2800 Mtr.
Export Oriented RMG	4500	N/A	475 Dozens

 

Source: http://www.btmadhaka.com/Bangladesh Textile Industry.html

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[1] http://www.textileworldasia.com/News.htm?ID=10506