The document summarizes opportunities and challenges facing the textile industry in developing countries based on a presentation given by Dr. H.L. Vijayakumar. It notes rising market opportunities for developing countries as production shifts from Western countries to Asia. However, it also lists challenges such as currency stability, economic slowdowns, price fluctuations, and infrastructure issues. The document concludes that while opportunities exist, volatility in the global economy and rising costs pose major threats that countries must address to capitalize on opportunities in the textile industry.

1. Renewable Energy Webinar
09-11-2011

2. Textiles in 21st Century: Challenges
and Opportunities
Dr H.L Vijayakumar
Past Chairman ,
Textile association India
Karnataka unit

3. Opportunities
• Rising Market opportunities
• Shifting of production from western countries
to Asia
• Growth in the urban Population, Income and
Lowest median age.

4. Rising Market Opportunity For Developing Countries
• Most developed countries will see continued decline of their textile and
apparel industry and create fresh opportunity of up to US$ 140 Billion
for exports for developing countries by 2020
• In addition, an opportunity of approx US$ 360-370 Billion likely to be
created due to rise in demand
• Hence an additional market opportunity of ~US$ 500 Billion likely to be
created by 2020

5. And…Resulting In Continuing Shift Of Export Base
Towards Asia For Apparel ….
Declining Apparel Exports of Western / Growing Apparel Exports of Asian
Developed Countries Countries
Trade Value Trade Value
CAGR CAGR
Country in 2000 Country in 2000
since 2000 since 2000
(US$ mn) (US$ mn)
Korea Vietnam 1821 22%
5027 -12%
Republic
Cambodia 970 18%
Dominican China 36071 16%
2555 -10%
Republic
USA 8629 -8% Bangladesh 5067 10%
Mexico 8631 -7% India 5960 8%
Canada 328 -6% Pakistan 2144 8%

6. ..Leading To Increase In Global Textile & Apparel Trade
Source: WTO, UN Comtrade & Technopak Analysis

7. Challenges for Textile sector
• External
- Stability of currency
- Economical slowdown
- Price Fluctuation
- International polices
• Internal
- Impact of Globalisation
- Infrastructure
- Availability of trained man power
- Local Govt. polices
- Supply chain
- Brand and product mix

8. Disruptive Growth in Textile Industry…..
(Before 2005) (2005-2015) (2015 onwards)
FACTOR DRIVEN EFFICIENCY DRIVEN INNOVATION DRIVEN
Raw Material Availability Vertical / Virtual Integration Product
Manufacturing excellence Design / Brand
Labor availability
Supply Chain Efficiency Channels
Government policy influenced
Diversity in product mix Business Processes

9. Conclusion
• There are many favorable opportunities for
the growth of textile sector in the world.
• The global economical melt down and the
price fluctuation posing major threat to the
stability of the sector.
• WTO impact in shifting of production centres
from one region to other will have major
threat to the lively hood of common man.

11. Faruque Hassan
Vice President,
Bangladesh Garment Manufacturers & Exporters Association (BGMEA)
&
Managing Director,
Giant Group, Dhaka, Bangladesh

12. While the world economy just started to see the recovery from the worst
economic crisis since the 1930s, the sigh of relief could not last longer as the
US and EU economy are now preparing for the worst. The recession caused by
the financial crisis in late 2008 put us in an uphill struggle to survive. On top
of that, the historical rise of cotton and textile price and the inadequacy of
energy and infrastructure in the country had been some major challenges.
Dwelling in such a situation the industry attained an outstanding growth in the
2010-2011 fiscal year (FY), i.e. July 2010 - June 2011, which has been possible
for the all-out effort and resilience of our entrepreneurs and for the
unparallel supports by our proactive workforce, and for the supports from our
valued buyers who have been always with us in our good and bad times.
However a further slowdown in the world economy would not be that easy for
us to handle and we are yet to see how differently it could affect our industry
and economy. In addition to all these challenges, there as some new
opportunities as well like – reforms of GSP rules, preferential access to some
new and potential markets. The soaring production and labor costs in
competitor countries and their resulting impact on comparative advantage is
leading a change in global sourcing pattern of apparel, and certainly the name
of Bangladesh tops the list of preferred sourcing destinations. Now we need a
holistic approach by the government in reforming the infrastructure and
administrative machineries in order to enable Bangladesh to tap most of its
opportunities.

13. Since the beginning in early 1980s, there have been numerous
challenges throughout the journey of the readymade garment (RMG)
industry till now, but the incredible achievement of garment exports
from Bangladesh has outshined the most optimistic expectations.
Bangladesh has been positioned as the second largest readymade
garment exporting country in the world in 2010 as per the statistics of
WTO (if EU is not considered as a country, rather an economic zone).
The global clothing market clearly recovered in the last year,
according to latest data from the World Trade Organization (WTO).
Total exports were up 11.4% in dollar terms, at US$351.5 billion, after
falling 13.2% in 2009. China remains the leading exporter in value
terms, EU as an economic zone ranking second after China, at
US$22.30 billion. During the period 2000-2010 China's exports gained
260% while Bangladeshi exports increased 210% over the same period.
The share of Bangladesh stood 4.6% in the said year.

14. As the world economy started recovering from the recession since early 2010,
the FY2010-2011 marked a turning point for our RMG industry. Exports
increased by 43.36% during this time in monetary value compared to previous
year reflecting a strong come back. However, this growth was not absolute, as
a significant portion of this growth has been caused by the cotton and textile
price hike in the international market. The real growth in volume term was
not more than 20%-25%. However, export prices stopped rising in My 2011 as
the cotton price started getting normal, meaning that there might be a dent
in monetary value-wise export growth in coming months.

15. Apparel imports started slowing down again amid the
crises in EU and US economies….
After a better-than-expected performance during the last fiscal year, the
global apparel market is signaling a clear slow-down ahead, which has already
been visible by a fall in US import volumes in July-September 2011. Import by
EU has also started decelerating in July 2011. There are now clear signs that
the global clothing market began shrinking again. The official statistics of
Bangladesh for the month of September 2011 shows a negative growth by
6.66% compared to the same month of previous year. A breakdown of the
figure by product category reveals that though woven exports managed to
keep a slightly positive growth by 0.50% during the said month, knitwear
export seen the real slowdown by -12.38%. The crisis in US and EU economy,
unemployment, debt crisis and poor economic forecast are all indicating a
tough time ahead. A clear dry-out in order position is already observed.
Moreover, the safeguard duty imposed by Turkey has also been another reason
as exports to Turkey has already started to shrink. The overwhelming
concentration on US and EU is one of the major reasons of the vulnerability.
The over dependence in two major markets (i.e. EU and USA) has been a
major reason behind such demand shock and there is no alternate to diversify
our export markets.

16. Availability of skilled workers and productivity….
Despite all the hurdles in global economy the world clothing market grew at
a good pace. However, lack of adequate workers has been one of the major
challenges for a supplier giant like China which is eventually leading to a
shift to populous countries like Bangladesh. But the lack of enough skilled
workers is a concern for our industry. The level of productivity is also
another major concern for us. Therefore, particular focus is needed on skills
development and productivity enhancement. Focus has to be given on
knowledge sharing in the area of fashion designing and innovation in order
to enable the industry to graduate to next higher level. An enhanced
productivity level and optimizing the cost of labor and inputs could
substantially help the industries to tackle the wave of inflation and other
emerging pressures.

17. The rising inflation in emerging economies, an
opportunity in disguise for Bangladesh………
Inflation remains a major issue in low cost countries. The inflation rate has a
major impact on the level in wages which increase cost of production. The
rising inflation in Bangladesh and other competitors including China, Vietnam,
Cambodia, Myanmar, Pakistan, Indonesia and India is a threat to the
competitiveness. Consumer prices are still rising in India and Pakistan, while
China and Vietnam have been able to get a grip on it. Inflation in Bangladesh
has come down a bit from 11.97% in September 2011 to 11.42% in October
2011.
From industry perspective the concern remains that despite a number of
hurdles the minimum wages for the garment workers was increased by 80%
which came into effect from November 2010. The implementation of the new
minimum wage is highly satisfactory from the very first month. But the soaring
inflation, which is now a thirteen year record high, is just not axing the
income of marginalized group, but also limiting the competitiveness of
industries and fading out the benefit of the wage increase.

18. Resource efficiency through cleaner production &
technology up-gradation………………
The evolving pattern of global trade competitiveness is one of the most prior issues to plan our
future business. In context of Bangladesh, we have seen in the past two decades how the non-trade
factors have emerged as important as trade factors. The growing concern on environment and the
progress toward eco-friendly business in recent time is also encouraging. Nevertheless, greener and
cleaner production is going to be one of the most important pillars for our future business. Moreover,
energy efficient green and clean production is also a means to cost efficiency as well. Bangladesh
being a rising contender in the global apparel industry has a huge scope to enhance the efficiency of
water, gas and electricity usage. This becomes more important while addressing the truth that the
country itself has been facing some major resource challenges, and we have already gone beyond the
point of taking proactive steps. We have to adopt energy efficient and environment friendly
machineries and technology in our production plant, particularly low risk and energy saving boilers,
energy saving light, LED light, Servo motors and so on. To reduce emission of harmful chemicals we
have to use effluent treatment, to reduce the use of chemicals in the wet processing we should use
water treatment plant and low-liquor ratio dyeing machine. Initially these will incur some
investments, but if we can become energy efficient then the cost will come down. Besides, we
should also catch up with the technologies available like CAD-CAM, ERP, spreading machine, laying
machine, automatic cutting machine, folder, guide, attachment in sewing machine, etc to reduce
the cost of excessive human employment. There is also a growing regulatory as well as community
pressure on industries for environmental compliance. Buyers are also giving increasing priorities to
green producers. Therefore, it is a high time to prepare ourselves to take the lead.

19. Market Access and Nation Branding…………
As the multilateral trade negotiation of WTO is failing to see any progress,
frustrated on the slow pace of current multilateral trading system, many
countries are signing preferential trading agreements in the forms of regional
trading arrangements and bilateral trading arrangements. However, we have
barely seen any progress on this issue. Considering the dynamics of global
trade regime an immediate initiative is necessary to look into the prospect of
such trade arrangements with prospective trade partners.
Besides, Bangladesh has quite successfully able to satisfy the consumers with
compliance, quality, price, lead time and commitment. Bangladesh is not only
exporting basic clothing, but also producing apparels for renowned brands.
Here the country perception plays a big role when it comes to further market
penetration and targeting high end apparel segment, where nation Branding is
a precondition. Country branding has become vital for export marketing, for
further penetration in the existing markets and to develop new markets. A
positive country perception is also required to support industry’s progress to
high end fashion industry.

20. Growth in world apparel imports……………
Despite all the adversities in the global economic situation the
world apparel exports have grown by 11.39% in 2010 compared to
the previous year. The world apparel export was worth of 351.46
billion US dollar in the mentioned year. Such an increase reveals a
steady growth in world apparel consumption and showing an
opportunity for the manufacturing countries.

21. New market exploration……………
The overwhelming concentration of our exports to the European Union and
North America has been quite vulnerable for the future of the apparel
industry, particularly for Bangladesh. The United States, Canada and the
European Union countries (predominately Germany, United Kingdom, France,
Netherlands, Spain, Italy, Belgium, Denmark and Sweden) take more than 90%
of our apparel exports. Market diversification has always been limited; despite
we have tremendous opportunities to explore the Latin American, South
Africa, East European and even the Asian regions. The Latin American region
remains largely untapped, though the economies of those countries are
booming rapidly. The retail sale of clothing is increasingly quite impressively in
countries like Brazil, Mexico, Chile, Russia and Turkey. On the other hand, Asia
is the habitat of around 60% of world population. There is a tremendous
potential in the growing Asian economies like China, India, Indonesia, Korea,
Malaysia, Hong Kong and Singapore to develop our alternate markets. The
rising middle class and higher middle class groups and their spending power is
a clear indicator of the potential of these markets.

22. Market access……….
The simplification of GSP rules of origin adopted by 27 European countries from 1
January 2011; and the similar initiative adopted by Norway from 1 April 2011,
Switzerland 1 May 2011 and Japan 1 April 2011; preferential market access offered by a
number of countries, like South Korea, China and Malaysia have opened a huge
opportunities for garment export to these countries. Besides the Government of India
has granted duty free quota free (DFQF) access for 45 apparel items from 6 September
2011 under SAFTA which is another big opportunity for us. India has tremendous
potential for our apparel exports being one of the most emerging economies in the
world and our next door neighbor. Other advantages remain less lead time, price
competitiveness, less consumption of fabrics due to comparatively smaller size
specification and the growing middle class population in India. These 45 RMG items
secured 79.04% of our RMG exports to India in FY2010-2011. However, there are some
other items which were granted Duty Free Quota Free access by India from before,
which accounted 1.94% of our RMG exports to India in FY2010-2011. On top of it, the
decision taken by the Government of India on 24 November 2011 allowing 51% foreign
investment in the multi-brand retail segment (like Wal-Mart, Carrefour) and 100% FDI in
single brand retailing (like H&M, Zara) will facilitate global retail houses to open stores
in India. This would eventually create a unique opportunity for Bangladesh to supply our
quality and competitive apparel products to Indian market through these multinational
retailers most of which are already in business in Bangladesh and having their liaison
office here.

23. The China Plus move……
Important to note that China still remains the leader in world
apparel market with a 36.94% share in 2010 (WTO), but the rising
wages and production and inflation is eroding their
competitiveness. This is leading to a restructure in the sourcing
patterns as the retailers and importers are focusing on “China Plus”
countries; Bangladesh is the ultimate choice. Also we have noticed
a good number of brand buyers have come to Bangladesh and
sourcing higher value added items, which is also helping us to keep
the growth pace. We believe we could explore more opportunities
in both traditional and non-traditional markets for a wider range of
products.

24. The importance of the apparel industry to the economy of
Bangladesh cannot be overemphasized. This is not just about the
statistics, it is more about livelihoods. It is not just about export
earning and GDP, it is also about the millions of people producing
these goods to lead productive lives and providing opportunities
for future generations. The RMG industry has been playing a vital
role in accelerating economic growth through employment
generation, poverty alleviation and empowering women. A hunger
and poverty free Bangladesh is envisioned by the government by
2021, when Bangladesh will celebrate the golden jubilee of its
independence. So the entire nation needs to unite and act to
reach the potentials.

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