Govt asks RMG exporters to source 50pc yarn locally

Move comes as textile millers seek import curbs while apparel makers warn of higher production costs

The government has directed the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Bangladesh Textile Mills Association (BTMA) to take steps to ensure that 50 per cent of yarn used by the apparel industry is procured from local spinning mills, while the remaining 50 per cent can be imported.

The three trade bodies have been asked to discuss among themselves how the importable portion would be allocated and inform the commerce ministry of the steps taken.

The commerce ministry issued the directive in a letter dated September 10, following a decision at a meeting of an inter-ministerial committee formed to review and resolve problems facing the textile sector.

The meeting was held on August 20 under the chairmanship of the commerce minister to review the implementation of decisions taken at the committee’s first meeting.

The directive comes amid a prolonged dispute between local textile millers and apparel manufacturers over yarn imports, particularly 10-30 count cotton yarn, which has been excluded from the bonded warehouse facility and allowed to be imported against bank guarantees.

The textile millers have been demanding restrictions on imported yarn to protect domestic spinning mills, while apparel manufacturers have warned that such curbs could raise production costs and weaken the competitiveness of Bangladesh’s export-oriented garment industry.

The government recently suspended implementation of a proposed restriction on 10-30 count yarn imports for further review following confusion over the issue.

The matter was discussed at a meeting on September 20, where representatives of the BGMEA and BKMEA reportedly said no decision had been taken to impose such import restrictions.

The commerce ministry later requested the National Board of Revenue (NBR) to halt its earlier decision to curb imports of 10-30 count yarn under the bonded warehouse facility.

Earlier this month, the NBR had tightened rules on duty-free yarn imports under the bonded warehouse facility used by export-oriented garment factories, suspending the facility for imports of 10-30 count cotton yarn.

Talking to the FE, BTMA President Showkat Aziz Russell said the association had received the ministry’s letter by email, with other relevant trade bodies copied.

“Following the government directive, we will take the initiative to hold a meeting shortly for the betterment of the industry. The textile sector is struggling for survival,” he said.

He said the move would also help the RMG industry improve its competitiveness in the global market, as Bangladesh would have to meet two-stage transformation requirements after graduating from the LDC category.

“In some cases, a number of countries require up to 60 per cent local value addition for Bangladesh’s RMG exports to continue accessing their markets,” he said.

“Without using locally produced yarn, it will not be possible to meet such value-addition requirements,” he added.

BKMEA President Mohammad Hatem, however, said the proposal to make 50 per cent local yarn procurement mandatory, along with restrictions on certain yarn imports, had not been finalised at the last meeting as the issue was raised towards the end of the discussion.

He said the commerce minister had asked stakeholders to discuss the matter among themselves and reach a consensus that would benefit both garment exporters and textile millers.

“The textile sector cannot survive without the RMG industry. We can find a solution through consensus that benefits everyone,” he said.

Hatem said the BKMEA had not yet received any letter from the commerce ministry.

He also said the commerce ministry had recently requested the NBR to halt its earlier decision to curb imports of 10-30 count yarn under the bonded warehouse facility. The NBR has not yet responded to the request.

Source: The Business Standard