23rd April, 2007

Presentation on

Growth of Textile and Clothing Industry in Bangladesh

A. Matin ChowdhuryManaging DirectorMalek Spinning Mills Ltd.

Hotel Dhaka Sheraton 23rd April, 2007

Bangladesh Cotton & Textile Convention 2006

Opportunities for Increased Trade In Cotton Textiles

23rd April, 2007

Background

Traditionally a textile country. Jute exports supported economy. Declined in 80’s due to technology and nationalization; had to look for alternative.

Textile & Clothing (T & C) replaced jute as the major export :

(a) East Asian wages were going up

(b) Problems in Sri Lanka

(c) Labour intensive industry

(d) Favorable quotas and GSP Policy from EU and USA

23rd April, 2007

T & C Export Journey

Initially garments produced with imported yarn & fabric.

Growth could net be sustained with imported inputs :

Cost too high Smaller margins.

Inconsistent quality leading to claims / rejections.

Undependable deliveries Extended lead times.

Unable to respond to fashion changes.

23rd April, 2007

Post MFA Policy Statement• In a quota free world, all textile manufacturers will have free access and

hence will be competing against Bangladesh for garment export. • Competing countries are trying to reduce export of basic and intermediary raw materials / products and pushing for finished goods.

• As these countries opt for value added products, supply of yarn and fabric will be reduced. Bangladesh, relying on these countries for raw material, will be at a disadvantage. • All buyers give preference to countries / companies with vertical operation

to meet lead time and fashion changes, local fabric availability is necessary.

Therefore, in order to maintain its competitive advantage in garment exports, Bangladesh supported local textile industry.

23rd April, 2007

Policy Result :Domestic Market

Growth in population & per capita consumption, multifold increase in demand

BTMA members & handloom weavers met market needs & kept foreign competition out. In spite of lowering import duties and lifting all import bans/restrictions.

Year Yarn (in mil kgs) Fabric (in mil mtrs)

Demand in 1995 172.91 1,265.22

Demand in 2006 358.00 2,010.32

Projected 2010 425.00 2,600.00

23rd April, 2007

Description 1994 2006Spinning Capacity

Ring - Spindle

Open end - Rotor

1.40 million 5.72 million

3,000 7,876

Looms 3,314 17,814

Export using local fabric

Negligible US$ 4.78 bill.

Foreign Exchange retention using local fabric

Negligible US$ 3.58 bill.

Value addition on Knit and Woven

25 % 75 %

Lead time 16 weeks 6 weeks

T & C Growth

23rd April, 2007

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

Mil

lio

n U

S$

020406080100120140160180

Mil

lio

n D

oze

ns

Pcs

.

Knit mil $ 264 1,035 2,148 3,817 4,725

Woven mil $ 1,292 2,984 3,538 4,083 4,736

Knit mil dozens 11 44 92 165

Woven mil dozens 34 78 92 108

1993-001999-2000

2003-04 2005-062007-08

Est.

Knit garment export fueled by the supply of indigenous yarn has

overtaken woven garment export

Positive Impact of Using Local Inputs

23rd April, 2007

World T&C market growing at 5% annually.

Buyers moving to targeted countries. Large volumes and economies of scale needed. Bangladesh is strong in sweater, knit, denim and home textiles.

Bangladesh only nation excelling in dual supply chain management for export using

Local Inputs

Imported inputs

Growth potential very large. Can aim at $20 billion export by 2011 with 65% local inputs.

Challenges

23rd April, 2007

EU Growth

Results:• Export under GSP to the EU increased eleven fold. • 1998 - Euro 329 mil• 2005 - Euro 3.625 mil • Huge local inputs & foreign exchange retention.

Massive domestic investment in T & C.

USA Market

Total T & C import

Year Import % Change2004 64,767 mill. $ -

2005 68,713 mill. $ 6.09

2006 71,629 mill. $ 4.24

23rd April, 2007

Country 2004 2005 2006 % change2005 - 2006

China 8,927.86 15,142.87 18,517.52 22.29

Indonesia 2,402.83 2,875.42 3,670.48 27.65

Vietnam 2,562.46 2,724.66 3,222.12 18.26

India 2,217.11 2,976.18 3,186.9 7.08

Bangladesh 1,977.56 2,371.73 2,914.16 22.87

Cambodia 1,428.99 1,712.84 2,135.71 24.69

Sri Lanka 1,549.39 1,650.21 1,682.43 1.95

Pakistan 1,137.67 1,258.87 1,411.97 12.16

Thailand 1,799.37 1,807.79 1,839.67 1.76

Nicaragua 594.71 715.59 879.33 22.88

Total 24,597.95 33,236.16 39,460.29 18.73

Top Ten Gainers in USA Market 2004 - 2006

Source : OTEXA. USA

23rd April, 2007

Top Ten Losers in USA Market 2004 - 2006

Country 2004 2005 2006 % change 2005 - 2006

Mexico 6,684.84 6,078.33 5,296.52 -12.86

Hong Kong 3,848.98 3,510.57 2,810.96 -19.93

Honduras 2,673.35 2,622.31 2,440.25 -6.94

Guatemala 1,946.69 1,816.24 1,666.25 -8.26

Domical Republic

2,058.80 1,849.16 1,547.68 -16.30

Salvador 1,720.26 1,619.19 1,407.73 -13.06

Canada 1,504.41 1,273.40 1,166.73 -8.38

Taiwan 1,548.92 1,134.43 1,004.81 -11.43

Korea Republic 1,808.82 1,154.62 912.73 -20.95

Turkey 1,168.60 943.77 726.07 -23.07

Total 24,963.67 24,002.02 18,979.73 -13.74Source : OTEXA. USA

23rd April, 2007

USA Market

Gainer* China * Indonesia * Vietnam * India * Bangladesh

Looser* Mexico * Canada * Central America * Korea * Taiwan *Hong Kong

Bangladesh has taken steps to fill the space created by the above countries.

Article 2005 2006 Growth %

T & C 2,371 2,914 22.87

Cotton Shirts 105 180 70.99

Cotton Trousers 308 545 76.83

Opportunities

Post-MFA US Market Growth In Million $

23rd April, 2007

2006 Bangladesh T & C business & FE retention:

(all figures in mil US $)

Items Total Export

Export using local inputs

Export using foreign inputs

Value Retention

Value Retention

Woven Garments

4,545 1,136 852 3,409 852

Knit Garments

4,388 3,510 2,632 878 220

Home Textile

213 138 104 75 19

Total 9,146 4,784 3,588 4,362 1,091

Value Retention Using Local Fabric

23rd April, 2007

Home Textile – Bangladesh in the EU market

Bangladesh fastest growing exporter.

Grew from €49 mil 2004 to €98 mil in 2005.

Country 2000 2003 2004

Turkey 484,392 601,944 662,376

Pakistan 381,694 533,203 567,470

Portugal 394,085 332,122 322,354

India 254,863 242,025 298,544

China 244,763 238,562 265,600

Bangladesh 45,344 49,642 98,515

Source : EUROSTAT

23rd April, 2007

DENIM

Local availability of yarn stimulated growth in Denim fabric manufacturing :

Denim fabric manufacturing capacity – per day

2005 85,000 yrd

2006 550,000 yrd

2007 (Estimated) 700,000 yrd

This results in :

Bangladesh top denim supplier to EU 2006 – 26.76% market share

- Growth- 26.15% for Man denim- 91.00% for Woman & Girl’s denim

Export to USA 2005 - 850,000 doz.Growth - 160.00%

23rd April, 2007

Yarn Requirement

Ring spinning meeting demands for knit.

Open End yarn required for woven especially denim.

Yarn for sweater.

FUTURE

Raw cotton requirement will continue to grow Bangladesh domestic & export market based on cotton

products.

All types of cotton demand is developing.

23rd April, 2007

Bangladesh Textile & Clothing Export in Post MFA – Era Strengths Aggressive investors Efficient and trainable labour force Duel Supply Chain Management :

Export with local inputs Export with imported

inputs Backward linkage Market access

Areas for Growth1. Knitting2. Sweater3. Denim4. Bed sheet5. Woven Garments

23rd April, 2007

THANK YOU FOR YOUR KIND ATTENTION