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Sewing Success?
domestic apparel industry’s demand for apparel accessories such as thread, buttons, labels, bags, tapes, shirt board, and cartons (Saheed 2008). But Bangladesh’s apparel sector relies on imported fabric and yarn inputs because the local textile industry is unable to supply its requirement in terms of quality, quantity, and variety. Important developments have, however, taken place in the local textile sector, and there are differences between the woven and knit segments. Bangladesh has a well-established supply chain for knitted apparel. Domestic suppliers can fulfill 85–90 percent of the fabrics required and 75 percent of the yarn required for knit exports (Knowles, Reyes, and Jackson 2008; DOT 2009). A dyeing and finishing sector has also emerged to support the knit industry. However, despite the fact that the woven apparel industry emerged nearly a decade before the knit industry, the domestic woven fabric industry is not as developed as the knit fabric industry. Woven fabric manufacturers can only supply about 25 percent of the requirement needs for the woven apparel sector (DOT 2009); however, this percentage has increased since 2007, when the local industry could only supply 15 percent (Saheed 2008). Both knit and woven fabric mills are nearly exclusively involved in cotton-based fabrics; the production of man-made fabrics is very limited in Bangladesh. Cotton is almost completely imported because there is no local cotton industry. As a result of increasing backward linkages, particularly in knit, the value of cotton imports has increased more rapidly than the value of textile imports (Arnold 2010). The different situation with regard to local linkages in the knit and woven fabric industries can be explained by different investment requirements. A knit fabric mill, including a dyeing and finishing unit of a viable minimum economic size, requires an investment of at least $3.5 million, while the investment required for a similar factory for woven fabric production amounts to at least $35.0 million (World Bank 2005b; Ahmed 2009). The government granted cash incentives in 1994 for exports of apparel made from locally produced yarn and fabric, which encouraged investments in composite knitting mills and spinning (World Bank 2005b). Other incentives that encouraged investment in the knit textile industry included low (subsidized) interest rates and government support in terms of investment in land development, power, and infrastructure. Because of the larger costs of investments in woven mills, a similar development did not happen in the woven segment. However, more recently, investment in the woven textile industry has also increased, in particular through FDI and in integrated spinning and weaving mills, but the remaining demand-and-supply gap is still large.