Pak textile industry turns to Bangladesh
MASHIUR RAHAMAN, back from Karachi
DHAKA, SEPT 23: Pakistan’s once-thriving textiles industry now faces hard time. In a country plagued by political violence and longstanding energy crisis, investment drain-out has forced the textile business to move to other countries, most notably, Bangladesh. Industry experts said conditions in Bangladesh are favourable and this is luring Pakistani businessmen to relocate or expand their business to Dhaka. They cited certain advantages for Pakistani businessmen in Bangladesh, such as having a common history and culture, more investor-friendly policies, cheap labour and tax-free access to 37 countries, including the European Union, Canada and Australia.
Rafiq Habib Godil, chief executive officer of Pakistan’s leading apparel-maker, Unicon International (Pvt) Ltd, is all set to relocate the company’s machineries, worth Rs 8 million, to Bangladesh as part of its desperate survival strategy.
“Our country can’t even ensure a minimum supply of power to the factories. So, we have no alternative but to shift our business centres,” he said. Bangladesh has become the most likely choice for investors. In Karachi alone, owners of textile factories, worth USD 600 million, had gone bankrupt last year.
“We can only remain operational on 235 days a year at the most, owing to irratic power supply. Lack of supportive policies and abrupt hike in power tariff has also contributed to our decision to relocate our business,” he added. He, however, declined to comment on Pakistan’s internal security concerns.
“Bangladesh too has its share of energy problems. But they seem to manage it well,” said Tauseef Salamat, owner of Tauseef Enterprises. Like Unicon International, Salamat opened two factories in Dhaka about three years ago, and he is now contemplating opening a third unit in Bangladesh. “The energy crisis in Pakistan has increased the cost of doing business,” he added.
Although such relocation of the textile business does not feature in any official data, interviews with a string of Pakistani businessmen revealed that at least a dozen companies have set up factories in Bangladesh.
“Our decision to expand operation in Bangladesh is, of course, aided by a thriving business there. We are overbooked,” said Salamat, whose firm produces products for brands like Adidas and Nike. Masood Textile Mills, a large knitwear exporting company, is going to set up a sewing plant in Bangladesh.
“In Pakistan, we can’t work three days a week because of power cuts. There the industry works at only 30-40 per cent of its full capacity,” said Wasim Latif, chairman of the Pakistan Textile Exporters Association (PTEA). He rued the fact that foreign buyers are reluctant to place orders in Pakistan owing to security concerns. Last year, Bangladesh nearly doubled its minimum monthly wage to Tk. 3,000 for workers in the garments industry. However, the pay is still low compared to China, India, Vietnam, Thailand and Cambodia. At a government-set Rs 7,000 (USD 80.55), Pakistan’s minimum monthly wage is much higher than that in Bangladesh, said Latif.
While Bangladesh has its own power problems, facing up to 2,000 MW of shortage, it is taking firm steps to address the energy crisis. The government is aiming to triple power generation to 15,000 MW over the next five years, and plans to build 89 power plants on a fast-track basis.
Pakistan – beset by crises on multiple fronts – is struggling to tackle its energy problems. The country is facing a gas shortfall of nearly 2 billion cubic feet per day. The total electricity demand in summer months outstrips the supply by 22 per cent – or about 6,000 MW – during peak hours.
“Textile manufacturers of Pakistan are looking for new homes, and Bangladesh could provide them with a better choice,” said Abdus Salam Murshedy, president of the Exporters’ Association of Bangladesh. Bangladesh is also offering tax holidays up to 10 years to foreign investors, as well as duty-free import of raw materials and repatriation of capital and profits, he added.
Classified as a least-developed country, Bangladesh enjoys duty-free export facility to 27 European Union countries, and 10 other developed countries, including Japan, Canada and Australia, under bilateral agreements. Pakistan, on the other hand, faces higher tariffs in the EU and US markets, putting its exporters at a disadvantage.
Easy availability of cheap labour has enabled Bangladesh to join the global supply chain for low-end textiles and clothing. It has also helped the country to manufacture garments for international brands, such as JC Penney, Wal-Mart, H&M, Kohl’s, Marks & Spencer and Carrefour.
“Obviously, the investment climate in Bangladesh is positive owing to a number of reasons like attractive incentive packages earmarked for foreign investors, better political condition and relative social stability. Besides, promises to ensure required infrastructure has also been instrumental in luring Pakistani investment,” said Mr Godil, former chairman of the Pakistan Knitwear and Sweater Exporters Association (PKSEA).
Pakistan’s textile industry accounts for 38 per cent of workers in the country’s manufacturing sector and more than half of its exports, which stood at nearly USD 25 billion in 2010-11. Textile exports rose by 35 per cent to USD 13.80 billion in the fiscal year owing to high cotton prices. However, it came down by 15 per cent in July.