Bangladesh, the Next most Potencial Economic Giant: NY Times

The most cited newspaper of the world, The New York Times has reported on Apr 23 that Bangladesh has a huge prospect of becoming one of the emerging economies.It is running with a strong promise of growth despite various challenges the nation of 160 million people is facing.

Still, the report has said, Bangladesh is making progress as the nation's economy has managed "to grow more than 6 percent a year for much of the last decade".

Thanks to expanding middle class, growing manufacturing sector and steady inflow of remittances remain the driving forces for economic growth in Bangladesh.

The newspaper has quoted economists at Standard Chartered Bank to say that Bangladesh could join what have been called the '7 percent club' of economies that expand at least 7 percent annually for an extended period, allowing their economies to double every decade.

Current members of the "club" include China, Cambodia, India, Mozambique and Uganda, the influential newspaper said.

The report said HSBC has included Bangladesh in a group of 26 economies — along with China, India and several Latin American and African countries — where it expects particularly strong growth.

The United States and much of Europe, by contrast, are likely to remain merely stable, according to HSBC's projections, the report said.

Expansion of the nation's middle class is a good news for Bangladesh, the report observed, quoting an official of the Asian Development Bank.

It quoted principal economist at the Asian Development Bank in Dhaka, Zahid Hossain, as saying that the growth in the country "mirrors the developments in other emerging economies".

"Domestic demand is growing and becoming an important driver of economic activity," Hossain was quoted as saying.

Bangladesh's economic prospect lies on China's fate, especially in the manufacturing sector amid stiff global competition, it said.

The report maintained that the gradual shift in global production to low-cost countries, from developed economies in Europe and North America, is driving much of Bangladesh's growth. The trend, which began turning parts of Asia — notably China — into manufacturing hubs in the 1980s and 1990s, has started to take root in Bangladesh.

For now, Bangladesh's manufacturing prowess is primarily focused on the garment sector, which has grown into a multibillion-dollar industry that employs 3.6 million people and accounts for 78 percent of the country's exports, it said.

Bangladesh has seen particularly strong growth in the last few years, partly because of rising labour costs in China, where manufacturing is moving into higher-margin activities like product design, it observed.

"For many years, China was almost always the hands-down answer to all buyers' needs," the newspaper quoted a recent report of the consulting firm McKinsey.

Now, Western wholesale buyers of garments are looking for the "next China," and Bangladesh "is clearly the preferred next stop for the sourcing caravan."

McKinsey forecast that Bangladesh's garment industry would grow by as much as 9 percent a year over the next decade, the report said.

Quoting BGMEA (Bangladesh apparel manufacturers' and exporters' association) statistics, the report said Bangladesh exported nearly $18 billion worth of garments in the 12 months through June 2011, $10.5 billion of that to the European Union and $4.6 billion to the United States.

Referring to sourcing company Li & Fung, a giant Hong Kong trading company that supplies retailers including Walmart with clothing mostly purchased from Asia, it said last year the company bought $1 billion worth of apparel from manufacturers in Bangladesh, 41 percent more than in 2010.

Bangladesh overtook Vietnam and Indonesia in 2011 to become the second-largest source of such products for Li & Fung, after China, it said.

About Bangladesh's prospect in garment sector, the newspaper quoted Li & Fung chief executive Bruce Rockowitz as saying that despite bottlenecks the company intends to increase the business it does in Bangladesh.

"The prognosis is good," Rockowitz was quoted as saying by the newspaper.

The report said the annual inflow of remittance is also expected to rise to $20 billion in five years' time while more than $11 billion worth of remittances flowed into Bangladesh last year.

Last year's figure is more than 10 times the amount the country got from foreign investment, it said.

Attracting foreign direct investment still remains a big challenge, the report observed.

Foreign direct investment in Bangladesh has languished at about $1 billion a year — less than what Albania or Belarus each receive, and about one-tenth of foreign investments in Thailand or Malaysia, the report said.
Inadequate power and transportation infrastructures, political infighting, bureaucracy, corruption and a shortage of skilled labourers contribute to a challenging investment climate, the report said.

News: BDNews24, Wed, 25/04/2012

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Apparel makers start receiving hefty orders from India

Indian apparel companies and retailers are placing orders in Dhaka to buy Bangladeshi garments in a large volume taking advantage of the duty-free access and low prices, exporters said on Friday.

Many apparel companies of India’s famous brands including Arvind, Aditya Birla, Madura Garments, Provogue Zodiac Clothing, Raymonds, Vimal, Lews Philips, Van Heusen, Arrow, Lee, Levis, Wrangler and Dockers and others are intensely communicating with the Bangladeshi apparel manufacturers.

During the historic trip to Dhaka in September, Indian Prime Minister Manmohan Singh announced the duty-free access of Bangladeshi apparels to Indian market in an effort to address the long-standing multi-billion-dollar trade imbalance that goes in India’s favour.

Talking to BSS, Abdus Salam Murshedy, president of the Exporters Association of Bangladesh (EAB), said his company received export orders of two lakh pieces of shirts worth two million US dollars from a reputed Indian brand ‘Pantaloons.’

“We have already sent the consignments to India,” said Murshedy, also former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

He said Indian top apparel brands and retailers are even ready to shift their manufacturing units to Bangladesh to route garments back to India encouraged by the Delhi’s zero tariff facilities to Dhaka.

Bangladeshi apparel entrepreneurs could give competitive price and ensure timely supply to Indian retailers, he said and favoured organising single country fair in India to give fillip to Bangladesh and Indian apparel makers.

M Shafiul Islam Mohiuddin, president of BGMEA, said Bangladesh can easily penetrate the US$30b Indian apparel market.

Mohiuddin, who led a business delegation of apparel exporters to India last week, said the BGMEA leaders discussed with Indian apparel associations, manufacturers, entrepreneurs and leaders of the Confederation of Indian Industry.

On providing zero tariff facilities to the Bangladeshi apparels in the Indian market he said, “Some Indian businessmen consider the tariff treatment as risky and others as opportunities. But Indian government stance on the market access is firm.”

Dhaka’s exports are valued just one-ninth of the $4.5 billion worth of goods India shipped to Bangladesh in the 2010-11 fiscal.

The garment deal is the best Dhaka secured for the sector from India since the 1990s, when similar duty-free access to the EU transformed Bangladesh’s apparel trade into a multi-billion dollar industry, say insiders.

Bangladesh is the world’s third largest garment manufacturer, exporting apparels worth 19 billion US dollars last fiscal.

The garment industry, which accounts for 80 per cent of the country’s total exports, relies heavily on orders from European and North America retailers such as Sweden’s H&M, America’s Gap and British supermarket Tesco, industry insiders say.

Source: BSS, Sat, 03/12/2011

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Apparel makers plan to set up production base in Bangladesh

After failing to convince the government against allowing duty-free imports from Bangladesh, textile manufacturers are looking to set up a base in that country. The government recently allowed duty-free imports of 48 textile items.

“Currently, many manufacturers and retailers are exploring the opportunity and are now studying the market there,” said Rahul Mehta, president of The Clothing Manufacturers Association of India. Labour in Bangladesh is also cheaper, compared to India. This will help manufacturers cut their cost of production.

Retailers like Creative Group are looking at setting up a base in Bangladesh, Mehta said. Globus, Reliance, Arvind Mills and Madura Fashions & Lifestyles are also looking at doing the same, according to sources familiar with the matter.

Textile manufacturers had initially pleaded with the government to refrain from allowing duty-free imports, as it would result in imports of $2.5 billion a year, in addition to a loss of 1.25 million jobs.

The apparel industry is the largest employment generator with six million people employed. Bangladesh is a cheaper destination to manufacture apparel and other textile products as the cost of production is around 20 per cent lower compared to India.

Exports from Bangladesh are higher compared to India. India has been losing out to Bangladesh since 2009. Bangladesh exports grew at 16 per cent in 2010-11, while India's exports grew at four per cent.

“Manufacturers will not cut their production in India, but, will set up a base to manufacture basic textile items in Bangladesh. India is good at producing value added textile products,” said the director of the Apparel Export Promotion Council.

Source: Business Standard, September 27, 2011

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Cotton Prices Expected to Decline Next Year

Cotton prices are expected to decline in 2011/12 marketing season effective August 1st, 2011. According to United States of Department Agriculture Economic Research Service, price decline is attributed to tempered growth in global cotton consumption.

Cotton prices are forecast to fall but are expected to 70% higher than the prices two years back, according to May 12th report from USDA.

Global cotton consumption is expected to rise only by 2.6% from the previous year although this higher than the long term annual growth of 1.9%. Global use is expected to be 119.5 million bales (480 lbs each).

India's consumption in 2011/12 is forecast at 21.5 million bales of 480 lbs each which is 2.4% higher than the previous year. India's share in the global consumption will be 18%. Pakistan's consumption is expected to rise by 5% and is pegged at 10.75 million bales, which is 9% of global consumption.

Although the global economy is recovering, cotton consumption is tempered by its higher prices and relative price with competing synthetics, according to the USDA report.

Seshadri Ramkumar, Texas Tech University, USA

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Cotton prices on the Decline

Cotton prices started declining globally on the prospect of a higher yield next year, and a reduction in consumption by China, textile industry insiders said.

Cotton was traded between $1.44 and $1.48 per pound at the New York Futures on Friday, down from its previous rates at $1.52 and $1.54 per pound last week.

The prices hit a historic high in March -- $2.04 per pound on March 25 and $2.19 on March 7 this year.

But the market calmed down at end-March and early-April with a forecast of better output next year as cotton producing countries such as US, China, India, Pakistan and the Commonwealth of Independent States increased acreage for cotton cultivation this year.

The initial world cotton projections for 2011-12 show a sharp increase in production to a record 124.7 million bales, with India, China, and Pakistan accounting for 70 percent of the total output, said a report by the United States Department of Agriculture.

World trade is projected at 40 million bales, mainly reflecting higher import demand by China, the report said, adding that world ending stocks are projected to rise to nearly 48 million bales, a 13-percent increase from the beginning level.

"World consumption of cotton is reduced, due mainly to reductions for India and Pakistan," the report said. China's imports are lowered 1.5 million bales due to a recent fall-off in demand, which is partially offset by increased imports for Pakistan and Turkey. World ending stocks are raised nearly one million bales, the report added.

The cotton cultivation area is projected to rise by 7 percent in 2011-12 to 36 million hectares globally, the largest in 17 years, in response to record prices in 2010-11, said a report of the International Cotton Advisory Committee (ICAC).

Farmers are expected to expand cotton area in 2011-12 in all producing countries, the ICAC report said, adding that world cotton production is projected to increase by 9 percent to a record exceeding 27 million tones.

Cotton traders in Bangladesh said they reduced the import for higher prices of the item worldwide.

The higher prices of cotton have also trimmed the demand for yarn and fabrics as garment manufacturers say they can hardly make profit although the international buyers have raised the prices for apparel items to offset the rising prices of raw materials.

The cotton prices started to come down because of a decline in sales of clothing items and slow orders by international buyers, said an official of a textile firm.

"Buyers are now in a wait and see mood as the cotton prices started to ease," the official of Paramount Textile Ltd said, asking not to be named.

He said the scheduled order of April is yet to be placed due to the decline in the prices of cotton.

Sales of yarn and finished woven fabrics also marked a fall due to a cut in demand from the garment manufacturers, said Jahangir Alamin, president of Bangladesh Textile Mills Association (BTMA).

He attributed low sales of yarn and woven fabrics mainly to a rise in import of fabrics from China and sales of yarn by India at a dumping price in Bangladesh.

From January this year, garment manufacturers have been getting duty facility for EU markets even for imported fabrics. As a result, they feel encouraged to import the fabrics.

Alamin said another cause for stockpiling of yarn and fabrics is that the traders imported cotton at higher prices earlier, but they cannot sell those at lower prices now.

The import of fabrics increased by 88 percent in January-March period this year compared with the same period last year, he added. "The spinning sub-sector is now in a dire strait," he said.

News Source: The Daily Star, Wed, 18/05/2011

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Cotton Price on the Rise

Surging demand, stockpiling by China and a ban on exports by major growers have fuelled the cotton prices on the international market.

Cotton was traded between $2.10 and $2.15 per pound last week, the importers said. Though the price came down to $1.78 at the New York Futures trading yesterday, it is on an upward curve, they said.

The cotton prices started spiralling since 2008. Before 2008, the cotton prices ranged between 60 cents and 70 cents per pound for a period of more than 15 years.

"Just one year ago, cotton was trading at 70 cents a pound," said Money Morning, an investment research organisation based in the US. Now it is trading at roughly $2 a pound, said the organisation.

"China imported 390,720 tonnes of cotton last month. That's 31 percent more than a year earlier," Money Morning said. "Global cotton supplies are not keeping pace with China's growing appetite."

A senior official of the local DBL Group, one of the major importers, said even last Thursday cotton was quoted at $1.95 per pound.

The official said traders of West African countries, a major hub of cotton, are either delaying shipment or cancelling the contracts for civil wars in that region.

"Moreover, India, the second largest cotton producer worldwide, has again slapped a ban on cotton export since January," the official said, requesting not to be named.

All these factors contributed to the rise in prices on the international market, the official said.

"I don't see any price improvement in the next four to five months," said Abdullah Al Mahmud, managing director of Mahin Group.

A Matin Chowdhury, a leading cotton importer, also said the production shortfall following natural calamities in cotton growing countries such as Pakistan and Australia, speculative buying by China and a surge in demand in garment producing countries are responsible for the price hike of cotton worldwide.

Probir Kumar Saha, another cotton importer, said India is a major source of cotton for Bangladesh. "But we are not getting cotton from India following the government ban on export of the commodity there," he said.

"We can hardly predict the future prices of cotton until the next crop is harvested in the November-December period. The prices are declining slightly, but it is difficult to predict to what extent the price will fall," said Jahangir Alamin, president of Bangladesh Textile Mills Association.

He said the internal consumption of cotton in India also increased significantly due to the rising demand of the item from the garment makers and primary textile markers there. The ultimate sufferers would be the consumers, he said.

"There is no possibility of the cotton prices getting any more stable this year as its demand has increased worldwide," said Mohammad Ayub, president of Bangladesh Cotton Association.

News Source: The Daily Star, Sun, 17/04/2011

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Cotton Price Hike Hits Local Exporters Hard

The country's largest export earning apparel sector has been hit hard by a record high price of cotton in the international market resulting in financial losses for many, yarn and clothing manufacturers said.

They also said their profit margin will drop significantly as most of buyers remained reluctant to compensate for the increased prices of cotton.

Cotton prices have shot to US$ 2.0 a pound for the first time and it is up by 171 per cent from a year back, prompting sharp rises in the prices of denims and other everyday clothing.

Many local spinning mills are facing severe working capital crunch due to the record surge in prices of raw cotton. The cotton prices rarely traded higher than $ 1.0 dollar a pound over the past three decades.

Ashraful Hassan, managing director of Grameen Knit at Dhaka EPZ said the leading knitting factory will lose on the deals signed one or two months back.

Since January the cotton prices have risen more than 40 per cent because of soaring demand from China, poor cotton harvest in Pakistan and export restriction in India, leading to an acute supply shortages.

Mr Ashraf said: "The prices of 30-single combed yarn was $ 6.0 a kilogramme during letter of credit period, but it is now over $7.0."

"The buyers are not compensating for the deals signed in December and January period at lower prices," Mr Ashraf added.

He said they have incurred losses between 5.0 and 20 per cent for the orders taken in January or earlier, adding: "Now we are signing contracts carefully."

Sweater and denim manufacturers said their profit margins are dropping fast amid the soaring prices of yarns.

Hemayet Hossain, deputy managing director of Pioneer Sweaters, a subsidiary of Badsha Group, told the FE: "Rise in the prices of yarns and wage hikes of workers has led to the poor profitability of apparel exporters."

Hemayet said the prices of 22/2 yarn rose by nearly 85 per cent over the past one month.

Mr Hemayet claimed that the buy-orders remained the same but prices for finished products are reducing, due to buyer's strong bargaining capacity.

Mustafizur Rahman, managing director of Chittagong Denims, a leading jeans producing company, said the prices of denim products rose nearly 40 per cent over the past one month.

Jahangir Alamin, president of Bangladesh Textile Mills Association (BTMA) said: "More or less, all spinning mills' owners are passing through their crisis period.

Bangladesh is the world's second largest cotton importing country followed by China. It imports more than 5.0 million bales for its 7.6 million spindles.

Salim Osman, president of BKMEA, however, urged the government to take measures so that the spinners could not raise the prices of yarns abnormally.

"Price rise of yarn should be proportionate. But many local spin mills cash in on price rise of cotton in the international market."

FE, Sun, 20/02/2011

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Clothing Prices to rise 10 pct starting in Spring in the USA

NEW YORK - The era of falling clothing prices is ending.

Clothing prices have dropped for a decade as tame inflation and cheap overseas labor helped hold down costs. Retailers and clothing makers cut frills and experimented with fabric blends to cut prices during the recession.

But as the world economy recovers and demand for goods rises, a surge in labor and raw materials costs is squeezing retailers and manufacturers who have run out of ways to pare costs.

Cotton has more than doubled in price over the past year, hitting all-time highs. The price of other synthetic fabrics has jumped roughly 50 percent as demand for alternatives and blends has risen.

Clothing prices are expected to rise about 10 percent in coming months, with the biggest increases coming in the second half of the year, said Burt Flickinger III president of Strategic Resource Group.

Brooks Brothers' wrinkle-free men's dress shirts now cost $88, up from $79.50. Levi Strauss & Co., Wrangler jeans maker VF Corp., J.C. Penney Co., Nike and designer shoe seller Steve Madden also plan increases.

More specifics on price increases are expected when clothing retailers such as J.C. Penney Co. and Abercrombie & Fitch Co. report financial results this month.

"All of our brands, every single brand, will take some price increases," said Eric Wiseman, chairman and CEO of VF Corp., whose brands include The North Face, Nautica, Wrangler and Lee. Cotton accounts for half the production cost of jeans, which make up about one-third of VF's sales, he told investors in November.

Higher costs also will affect how clothes are made. Clothing makers are blending more synthetic fabrics like rayon and designing jeans with fewer beads and other embellishments. Shoppers also will have fewer color choices.

Original article has published on www.cnbc.com, to read the full article please follow the link below -

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Furnace oil price spike will hurt economy, specially Apparel Industry

The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) yesterday urged the government to reverse its decision to increase the furnace oil prices.

The government last Monday raised the price of furnace oil, widely used in industrial units, by 34 percent or Tk 9 per litre, to Tk 35.

In a statement, BKMEA said the sudden rise in furnace oil prices will greatly hamper knitwear manufacturing and exports as production costs will go up and hurt the competitiveness of the local products in the global market.

“During the economic re

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cession knit manufacturers maintained the stronghold of their products by providing competitive price and quality and that's why Bangladesh did not feel the pinch of the worldwide downturn,” said BKMEA.

The international buyers are continually leaning towards Bangladesh for export orders now-a-days because of China's increased labour wages, Pakistan's political instability and Japan's China plus-1 policy, the statement said.

The manufacturers increased their dependency on furnace oil and continued production according to the previous orders to ensure smooth exports and retain the buyers, amid nagging power and gas crisis, which is already a threat to the export-oriented industries, the association said.

“If the industries have to buy furnace oil at a higher price to finish the production, the cost will shoot up and we will incur huge losses. Many industry owners will even be forced to shut down their factories,” BKMEA said.

“Production will have to be stopped and existing export orders will be hampered, which will, in turn, hurt Bangladesh's economy. We fear of losing the world market share that was built by many years of hardship.”

Bangladesh exported $4,311.92 million, posting 43.37 percent growth, in the first six month of this fiscal year, which is the highest among all the export sectors and 42.01 percent of the total national export.

“To meet the national export target and develop the knitwear industry we strongly demand the government review its decision of increasing the furnace oil price,” BKMEA said.

-The Daily Star, Sun, 30/01/2011

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