Terry towel sector in big crisis

As many as 45 export-oriented terry towel factories in the country have shut down in the last five years, most of them in the last one year.  

The entrepreneurs blame the closures on the inability to compete in the international market and on the traditional mode of production that was used at the factories. 

Data from the Export Promotion Bureau (EPB) for the last five years is also not optimistic.

Bangladesh's export earnings from this sector from July to November this fiscal year was $16.77 million, down from $26 million during the same period in the last fiscal year, a fall of 35.5 percent. 

The Bangladesh Terry Towel and Linen Manufacturers & Exporters Association (BTTLMEA) said the terry towel sector makes the highest value addition to the country's export, but small factories of the sector are in an existential crisis. 

The association leaders said terry towels used to be exported at $3 to $4 per kg in the global market, but now the price has come down to $2.2 to $2.3 per kg.

Production costs soared as wages of workers and price of power went up significantly in the last one year.  As a result, many Bangladeshi entrepreneurs were compelled to close their factories because they were unable to survive the competition.

"The production cost could have been reduced had the factories been made completely automated, but an additional investment is required for this.  After receiving orders at the lower price, it became difficult to make a profit after paying the interest on bank loans," said SM Motiur Rahman, managing director of the now closed Mark Terry Ltd.

The association, which was formed in 1990, now has 110 members. Most of its members manufacture terry towels, but 10 to 12 firms only produce home textiles.

No new firms registered with this association in the last five years, which means that no new export-oriented factories were set up in this period.  

Sources at the Bangladesh Terry Towel and Linen Manufacturers & Exporters Association said one factory after another was shut down during this period because they could not survive the global competition.

Industry insiders claimed competing countries like Pakistan, India and Cambodia have been doing better than Bangladesh.

Bangladesh exports low to high quality towels.

Bangladesh's biggest competitor in the international market is now Pakistan.  They enjoyed a GSP Plus facility in the US market after 2014.

Pakistan has made a big devaluation of its currency, the Rupee, against the US dollar. Therefore, their exporters are in a more advantageous position than before.

BTTMLEA president Mohammad Shahadat Hossain said, "In this context, the cash incentive on export should be raised to 16 percent from the existing four percent to save the industry".

He also said that the exchange rate of the Taka has to be brought down to 90 against the US dollar for export only. 

Analysis of the information over the last five years shows that the amount of export has been fluctuating. 

In the 2018-19 fiscal year, the export earnings from terry towels were more than $50.76 million.  

During the same period, Pakistan's export of terry towels was worth $786.1 million. The amount was $660 million in 2015-16 fiscal year. 

India's export earnings in the sector in 2018-19 fiscal year increased from $0.98 billion to $1.07 billion. 

This item's value addition among the readymade garments sector is the highest. The yarn for terry towels comes from waste cotton. The coarse yarn used for this item comes from the leftover cotton after manufacturing high quality cotton yarn.

Some fresh cotton has to be mixed with waste cotton to make high quality towels. However, Bangladesh exports very small amounts of such towels.

As a result, there is no need to import extra raw material to produce export-quality terry towels, and the value addition in the item's export is 80 to 90 percent, said BTTLMEA leaders.

However, the sector is going the wrong way.  Small towel factories that use traditional technology have been facing the most problems. The productivity of these machines is low and their production cost is high because these are dependent on old technology. As a result most of these factories have been shut down.

However, in the big composite towel factories, spinning, dyeing, weaving and finishing are done under the same roof. As a result their production cost is comparatively low.  Furthermore, most of these factories export medium quality products that are sold for $5 to $8 per kg in the international market. Though they have survived, they are now struggling to cope with the situation.

Khandaker Abdul Muktadir, managing director of Shabab Fabrics Ltd, said, "We have no crisis of buyers.  We can survive in the competition with our rival countries if we were provided bank loans at low interest and an uninterrupted supply of gas."

The demand for terry towels and home textiles in the international market was $110 billion in 2015. It can soar to $130 billion by 2021. 

A BTTLMEA review last year showed that the annual market for towels and home textiles is $26 billion in the USA only. A major portion of this is supplied by China. But China has started withdrawing gradually from the business of low and medium quality ready-made textiles while continuing a trade war with the USA.

Entrepreneurs in this sector say that if they get the policy support of the government, the export of Bangladeshi terry towels and home textiles can be increased several fold in the international market in the next five years.