Nearly 67% garment export receipts retained
Thanks to the increasing use of local raw materials, Bangladesh's retention value from the shipment of apparel items is rising, highlighting the development of a strong backward linkage industry and less reliance on imported yarn and fabrics.
The retention value of the exported apparel surged 36.36 per cent to $28.5 billion in the financial year of 2021-22 from $20.9 billion a year earlier, data from the Export Promotion Bureau and the Bangladesh Textile Mills Association (BTMA) showed.
It means the country was able to retain $28.5 billion in FY22, accounting for 66.88 per cent of the total garment export receipts of $42.61 billion in the financial year.
Of the sum, $13 billion was made in the knitwear segment, $6.11 billion in the woven segment, and $908.25 million in the home textile sector.
The remaining $14.11 billion could not be retained since Bangladesh has to import raw materials and intermediate goods to manufacture export-oriented garment items.
The retention value in the garment sector was $18 billion in 2019-20 out of the total shipment of $28.7 billion.
A high retention value means local garment suppliers used more local yarn and fabrics to make apparel items for international consumers, cutting their dependence on imported raw materials such as yarn, fabrics and dying chemicals.
In fact, from the very beginning of the garment industry in Bangladesh, the knitwear sector has created more retention value than the woven sector thanks to the higher use of locally made yarn by the former.
Currently, local spinners can supply nearly 90 per cent of raw materials needed by export-oriented knitwear factories as entrepreneurs have invested heavily in the primary textile sector.
For instance, entrepreneurs have invested nearly $15 billion in the spinning sector. Today, 450 large spinning mills are almost sufficient to meet the demand for raw materials such as yarn.
The investment in the woven sector did not match that of the knitwear sector. So, woven garment makers rely on the countries such as China, India and Pakistan to source raw materials like woven fabrics.
Local weavers can supply 45 per cent of raw materials to woven garment exporters.
In the home textile sector, the retention value is also high as entrepreneurs have invested a lot for the production of fabrics.
Ha-Meem Group, one of the leading garment exporters in Bangladesh, purchases 60 per cent of fabrics for denim products, 50 per cent of fabrics for woven products, and 70 per cent of accessories from the domestic markets.
"The higher use of local yarn and fabrics is the main factor for the growing retention value in garment export," said AK Azad, chairman of Ha-Meem Group.
The consumption of locally made yarn and fabrics has increased since China can't meet the demand amid a fall in production in the world's second-largest economy in recent years, according to Kutubuddin Ahmed, chairman of Envoy Textiles, another large garment exporter.
He said a shorter lead time is a major factor in the garment sector because of the rapid changes in fashion and styles.
"International retailers and brands want a quick delivery of goods. So, exporters purchase yarn and fabrics from the local market that allows them to manufacture quickly and maintain a stricter lead time."
It takes at least 30 days more if garments are made from imported fabrics and yarn from China and then ship them to western markets.
Bangladesh is a major producer of denim fabrics and local millers can meet 60 per cent of the demand for the textile item.
Md Fazlul Hoque, managing director of Plummy Fashions Ltd, thinks the retention value will continue to grow as exporters are using more local raw materials.
The Narayanganj-based manufacturer uses 90 per cent local raw materials to produce knitwear products for the export markets.
"The higher retention value proves the strength of the country and the sector," said Mohammad Ali Khokon, president of the BTMA.
The retention in the future will depend on the energy sector, he said, adding that many mills are failing to run at full capacity owing to the ongoing energy crunch.