The number of spinning mills in Bangladesh is on the rise. These mills are
contributing remarkably to the growth of the ready-made garment (RMG)
industry of the country. Spinning industry of Bangladesh can be discussed
from two perspectives: a) government policy regime, and b) individual mill
management.
GOVERNMENT POLICY REGIME: In order to ensure smooth growth of
spinning industry, the following government policy support is crucial.
DELISTING SPECIFIC HS CODES FROM BONDED
WAREHOUSE LICENCES, INCREASING CASH INCENTIVE AND
BANNING IMPORT OF RAW MATERIALS THROUGH LAND
PORTS: Bangladeshi knit and denim RMG has already developed a very
strong backward linkage industry -- spinning-knitting/weaving-dyeing and
finishing -- which are mostly made with cotton and cotton blends of different
kinds.
The spinning industry of Bangladesh with 12.50 million spindles is capable
to meet 95 per cent demand of yarn of the RMG sector. Woven, sweater and
home textile are mostly based on imported fabric and yarn where spinning
industry can meet 40 per cent of their yarn requirement.
Therefore, the government in collaboration with Bangladesh Textile Mills
Association (BTMA) may design a policy to exclude the HS (harmonised
system) codes of import of yarn (cotton and cotton blends) and fabric (denim
fabric) from the existing bonded warehouses licences of RMG exporters. In
addition to that, to encourage use of local yarn and fabric in export oriented
RMG, cash incentive can be raised.
Alternative to it is to impose ''Anti-dumping Duty'' that creates a negative
country image, even if the country does not consider the difficulty in
executing it. It is important to ban import of any raw material (cotton, yarn
and fabric) through any land port and allow imports only through sea ports
(i.e. Chattogram and Mongla). However, to accommodate for emergency
shipments, a sample quantity of maximum 500 kilograms can be allowed to
be imported through airports.
HEDGING OPPORTUNITY AGAINST COTTON IMPORT: The cost
of cotton is 60-70 per cent of the total cost of a spinning mill. Last year
Bangladesh, the biggest importer of cotton in the world, imported 7.20
million bales of cotton. In the 1990s cotton had little fluctuations (cotton
index had a breath of maximum 5-10 cents in a year).
Over the period, the cotton index has become two to three times riskier than
it was earlier. So, in such a risky market, the only way to protect risk is
hedging which is not permitted as per the existing guidelines of Bangladesh
Bank. Beximco wanted to do it in around 1999 and it was way complicated to
get the permission and the market Beta was quite low to exercise it in
comparison with cost and benefit. Number one reason why the country could
not compete with imported yarn is not having hedging opportunity.
However, the spinners of Bangladesh are also quite reluctant to hedge the
risk.
GAS AND POWER SUPPLY: Spinning is a power hungry industry that
mostly depends on captive gas generators. It is not certain what is going to
be the cost of power for next decades. Earlier, different locations had
different levels of availability of gas which has improved a bit in recent times.
However, this is very important for the industry to be assured of
uninterrupted power at reasonable cost in the long run and government
should work out ways to assure it.
''NO'' TO MONEY LAUNDERING: Spinning is a capital intensive
industry and it needs to be free from activities that encourage unscrupulous
funding. A level playing professional financing ground is required for the
spinning as well as for the banking industry.
CONTROLLING RECRUITMENT OF FOREIGN EXPERTS: Home
grown solutions work well. Spinning industry of the country is more than
four decades old and there are enough human resources -- both professional
and technical -- to run the spinning industry. At best, they may need some
local and foreign training.
Rampant presence of top foreign officials in spinning mills is found. The
government needs to validate thoroughly before any foreign national is
appointed in a spinning mill. Employing overseas persons is not only
draining out huge foreign currency but also resulting in unemployment and
frustration of local professionals and technicians. Eventually, the spinning
industry is losing grounds for sustenance.
REVIEW OF PAY SCALE: Employees are the best resources to assure
productivity and quality. The government in collaboration with BTMA
should ensure systematic review of wages and salaries for the workers and
executives. The working conditions need to be reviewed and updated. A
benchmark of compensation package for the spinning industry employees
needs to be set. This would improve working condition, reduce grievances
and act as a boost to improve productivity, quality and harmonious
employee-employer relationship.
INDIVIDUAL MILL MANAGEMENT: Management of most of the mills
in Bangladesh is still owner-centric and not managed by professionals. This
is a major disadvantage for the industry. Beximco showed the path of
professional management and a few mills -- Square, Ha-meem, Envoy,
Pahartoli,Viyellatex, etc. -- followed its footsteps that resulted in much better
performance than the industry average.
The size and capacity of the entrepreneurs have scaled up significantly due
to professional management. This not only gives them a solid footing on their
investments but also create +opportunities for professionals and
management consultants to have mutually beneficial scope and growth to
sustain.
The owners need to validate their vision, mission and core values to business
professionals to set strategic goals. Connecting the dots needs to be left with
business professionals as done by top business houses throughout the world.
Current challenging situation of spinning industry in Bangladesh is a result
of ''under management'' (where cost management and risk management are
not in optimum condition) as well as unscrupulous import of yarn. Every
spinning mill should have its unique strategic plans in order to face the battle
in the short run, and win the war in the long run.
Source: The Financial Express, Bangladesh Friday, 22 March 2019