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Bangladesh RMG Industry- striving for Excellence

Vertical production chains in Textile and Apparel Sector between India & Bangladesh

Presentation By

by

Arshad Jamal (Dipu)

Director-BGMEA & Chairman-Tusuka Group

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Leading Bangladesh to Prosperity

Competitive Advantages

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STRENGTHS OF BANGLADESH'S APPAREL INDUSTRY

Competitive Price International standard Quality Control process Bangladesh has 30 years of experience in garment

manufacturing Superiority in the lower end niche, as well as handful of suppliers doing brand items Rapidly developing backward linkage industry Increase in direct sourcing by the Brands through local offices at Dhaka. Bangladesh is the 3rd largest apparel exporting country in the world (WTO, 2008)

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Comparative Price

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PRICE COMPETITIVENESS ­ in US Market

US IMPORT PRICE FOR SELECT APPAREL ITEMS US$/DOZEN

160 140 120 100 80 60 40 20 0 China India Vietnam Bangldsh

M/B KNIT SHIRT 50.25 39.71 41.25 20.99

SWEATER MMF 68.18 85.36 145.5 31.71

M/B TROUSER 70.96 77.95 64.85 54.52

M/B SHIRT 78.29 85.44 59.98 48.92

W/G BLOUSE 58.4 62.63 42.65 39.2

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Source: OTEXA

PRICE COMPETITIVENESS ­ in EU Markets

EU IMPORT PRICE FOR SELECT APPAREL ITEMS US$/KG

40 35 30 25 20 15 10 5 0 CHINA INDIA VIETNAM BANGLADESH T-SHIRTS 14.92 18.96 11.13 10.3 SWEATER 21.76 19.62 14.25 15.64 M/B TROUSERS 16.95 20.16 17.77 13.58 M/B SHIRTS 18.92 21.97 24.88 14.18 W/G BLOUSES 33.7 33.35 23.22 20.71 6

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Source: EUROSTAT

Quality Assurance

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VERTICAL PRODUCTION FACILITY

Patternmaking Prototype Samples Salesmen Samples

Design Support Services

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· In house quality inspection · Most of the factories have received quality certificate from buyers · Certifications like ISO, WRAP, OEKO-TEX, SA 8000 etc. · Most of the factories have their own Quality Control department where highly skilled professionals are employed to increase efficiency and reduce reject. · International Consulting companies train the employees to provide International standard requirements.

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Presence of Global Brands

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INCREASING SOURCING BY WORLD'S TOP FASHION RETAILERS

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Country Risk Assessment

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Low Country Risk: Bangladesh Snap-shot

Largest Democracy with independent Judiciary Continuous GDP growth of 5%-7% Stable currency and no major fluctuations over the last

three years Bangladesh has always fulfilled its debt obligations 57.3% of the population is under 25 years of age. Highly flexible workforce Both JP Morgan and Goldman Sachs have included Bangladesh among their shortlists of "transitional states likely to succeed.

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Sovereign Credit Rating for Bangladesh

Standard & Poor's (S&P's): For the 1st time Long term international credit: BB-. Short term credit: B Moody's Investors Service: Ba3

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CHINA PLUS ONE STRATEGY

China moving to high-end and secondary industries Rising production costs in China Labor shortages causing wage increases Revaluation of Yuan Largest impact on labor intensive industries Bangladesh represents a clear alternative to China in some

particular product and market segment

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SNAPSHOT: The Apparel Industry

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HISTORICAL RMG EXPORT TREND OF BANGLADESH In Billion Us Dollar

18.00 16.00 14.00 12.18 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 5.99 4.58 7.60 6.55 4.91 5.69 6.42 8.65 10.53 9.21 7.90 10.70 RMG Total 14.11 12.35 15.57

Source: EPB 17

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BANGLADESH'S APPAREL MARKET SHARE% (FY 2008-09) Market Concentration

Approx. 35% to USA and Canada Approx. 58.5% to European Union

0.60% to Japan

0.40% to Australia

% Share of Global Exports

EU, 58.46% USA, 29.91% Canada, 4.75% Others, 5.88% Australia, 0.40% Japan, 0.60%

%Growth in Exports between 2004-05 and 2008-09 Apparel USA European Union Canada 82.94% 82.29% 90.64%

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Source: EPB

BANGLADESH'S APPAREL MARKET SHARE% (FY 2008-09)

USA

16.65%

Germany

29.91% 2.05% 4.23% 4.75%

U.K. France Netherlands Canada

7.35%

Italy Belgium

7.85% 9.90% 17.30%

Others

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STATE-OF-THE-ART FACTORIES

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Sub-Sector

No. of Mills

Sub-Sector

Installed Machine Capacity

Unit

Production Capacity/Year (in million)

Public Sector Spinning Private Sector Spinning (Cotton) Spinning (Synthetic Yarn) Total (Public & Private) Weaving Mill (large, medium & small) Handloom Terry Towel Sub-Total Dyeing & Finishing Sweater Ready-made Garments Woven Knitwear Sub-Total Knitting & Knit Dyeing 24 312 27 363 1131 148342 72 149545 359 607 1382 462 1844 822 Spindle Spindle Spindle Spindle Shuttle/Shuttle-less Loom Handloom Terry/Power Loom Finished Fabric Flat & Jachard Sewing Machine Over Lock Knitting & Dyeing 460000 8230104 673276 9363380 48659 498000 1896 548555 6755 306848 391723 148448 540171 12891 Kg Kg Kg Kg Meter Meter Meter Meter Eqv. Meter Pcs Pcs Pcs Eqv. Meter 40 1495 180 1714 2011 837 34 2882 6084 6568 3508 5378 8886 7414 21

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Bangladesh is the second largest cotton importing country in the world

Source: BTMA, Ministry of Jute & Textiles

Vertical production chains in Textile and Apparel Sector between India & Bangladesh

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Win-Win situation

1. Bangladesh is a Big Market for Woven Textile.

2. Potential to Enhance the EU GSP Utilization Rate. 3. India Could Contain its Textile GSP Graduation Loss. 4. China Plus Sourcing Strategy of Buyers.

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Win-Win situation

Other reasons to Support the Vertical Supply Chain

concept As Bangladesh occupies about 3% of world apparel market share, and we have a very strong prospect to grow in apparel trade (15% average annual growth), and as India being a cotton growing country has a very strong primary textile base; the idea of vertically integrated supply chain should work well between these two countries.

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Bottle Necks

Bi-lateral Trade Issues to be Taken Care of: Bangladesh India Trade Gap. The 8 Million Pieces Garment Experience:

Utilization 2009: 52.77%(CVD+Eu+ others) Non-Tariff Barriers. Sensitive list. Currency Exchange Rate. Complicated Visa System. Trust Issue. stoppage)

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Snapshot: Bi-lateral trade

Product code India's exports to Bangladesh Product label Value in US$ million 2006

52 54 55 60 Cotton Manmade filaments Manmade staple fibres Knitted or crocheted fabric 271.06 16.78 47.89 0.43

Bangladesh's imports from world Value in US$ million 2006

1218.02 211.74 947.46 29.24

India's exports to world Value in US$ million 2006

3916.82 1025.81 1046.98 76.15

2007

288.99 16.02 39.79 0.56

2008

711.37 44.64 44.63 9.26

2007

1595.98 242.88 417.64 36.67

2008

2410.88 365.46 622.45 319.67

2007

4408.54 1234.31 1295.19 80.10

2008

4548.48 1587.63 1396.06 112.26

Source: ITC

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(Bangladesh's import from India 2008)

Bangladesh's Textile and Apparel Trade Prospect with India:

Product code

Product label

Value US$ million

% of BD Import 29.51% 12.22% 7.17 2.90%

Indian export to BD is % of Indian export to world

52 54 55 60

Cotton Manmade filaments Manmade staple fibres Kmitted or crocheted fabric

21.06 44.64 44.63 9.26

15.64% 2.81% 3.20 8.24%

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BGMEA

BGMEA is one of the largest apparel

exporters' trade bodies in Bangladesh. BGMEA started its journey in Dhaka in 1983 with only 134 members and now the number of members of BGMEA is 4925.

BGMEA set up its regional office in

Chittagong in 1985 considering its strategic importance of being the port city and the gateway for all RMG exports.

BGMEA Complex, Dhaka

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SHARE (%) OF BANGLADESH'S RMG EXPORT SUBSECTORS (IN US DOLLAR VALUE)

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Woven: 100%, Knit:50%, Sweater: 99% BGMEA members

Source: EPB

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Social Sustainability

EFFORTS TOWARDS BETTER SOCIAL ENVIRONMENT

BGMEA has its own compliance cell with 39 officials trained by brand buyers like Wal-Mart, SEARS, Carrefour, Hennes & Mauritz (H&M) and ILO Health Center & Hospital: BGMEA runs 12 health centers with its own resources in Dhaka and Chittagong. Through these centers garment free treatment and medicine for garment workers. Mandatory Group Insurance: BGMEA made Group Insurance scheme mandatory for the garment workers working in the Member factories in May 2002. Labor Arbitration: BGMEA started free labor arbitration facilities for garment workers in 1998 under the chairmanship of a retired judge Mandatory Building Code: BGMEA made mandatory for all its Member factories to follow the Building Code to set up factories.

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EFFORTS TOWARDS BETTER ENVIRONMENT

Fire and Safety Cell: BGMEA has established a fire and safety cell in 1997 to tackle the fire related emergency problems BGMEA Institute of Fashion & Technology (BIFT): Offers degrees in fashion and Merchandizing. Human Resource Skill Development: Provides training to unskilled people and place them in the industry. Till now 15,000 people were placed Promotion of Reproductive Health Awareness, program on Gender equity & women empowerment is run in collaboration with UNFPA Scholarship and Stipend Program: To encourage primary education for the workers' children BGMEA has been providing stipends to the meritorious children of workers Free Schooling: BGMEA is running three free schools for the workers' children and spouse of the RMG sector. Free Eye Camp: To mark the World Sight Day-2009 BGMEA in association with Grameen phone, Islamia Eye Hospital and Sightsavers International organized free eye camps for the garment workers

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BANGLADESH'S GARMENT: FREE OF CHILD LABOR & FORCED LABOR

Bangladesh's garment sector is free of child labor and forced labor according to USDOL Report (Sep, 2009) 122 goods were identified produced with forced labor, child labor, or both, in 58 countries. The most common goods listed are cotton, sugarcane, tobacco, coffee, rice, and cocoa in agriculture; bricks, garments, carpets, and footwear in manufacturing; and gold and coal in mined or quarried goods.

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Environmental sustainability

ENVIRONMENTAL SUSTAINABILITY

Respect for nature ­ Effluent Treatment Plants has been made mandatory for effluent discharging factories above ph 8.5 level. Greenbuilding, water recycling and using renewable energy has been getting increased attention among the entrepreneurs. BGMEA has been running several projects to promote energy efficiency in garment factories. Sustainable use of resources ­ The garment industry in Bangladesh have already gained significant progress in lean production. In order to bring all factories under this practice BGMEA runs projects like waste recycling with IFC-SEDF. Healthy products ­ Most factories run their own textile testing labs which are accredited by large fashion retailers like H&M, M&S, Puma, JC Penny, etc. Tests are done as per various international standards like ISO/AATCC/BS/OEKO-TEX. Most of the companies have awards from big fashion retailers for good product & Quality.

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Leading Bangladesh to Prosperity

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