The emerging economy and stable political environment of Bangladesh has enabled the country’s RMG industry to grow. Bangladesh has set an ambitious $50 billion RMG target by 2021. However, to achieve this goal, substantial changes need to be made in terms of electricity, infrastructure, productivity, value addition and skill development. It’s also imperative to strike the right balance between the workers’ demand of wage increases and what the industry can sustain.
After 30 years in the RMG sector, Bangladesh is now the 2nd largest exporter in the world. However, other than a few select brands, the country is yet to create a significant difference in the international market.
The price of garments is falling due to global economic conditions. The US and Europe, too, are facing a significant economic slowdown. In 2015, prices of apparels went down by 3.81% and 0.76% respectively in the US and EU countries. In 2016, the prices of Bangladeshi RMG items came down by more than 1% in the US market and 3.19% in the EU countries. The retail giant Macy’s is closing 68 stores in USA in 2017 and laying off 6200 workers whereas JC Penny is closing down 138 stores in USA which will eventually have a direct effect on the Bangladeshi market.
Asian countries are also growing at a tremendous pace and consumer markets have shifted towards Asia. The predicament is that Bangladesh relies heavily on the US and the European market and its stake in the Asian subcontinent is relatively low. After 30 years in the RMG sector, Bangladesh is now the 2nd largest exporter in the world. However, other than a few select brands, the country is yet to create a significant difference in the international market.
(Source: CNN, CNBC)
The average efficiency level in most RMG factories is around 45% however, some of the major factories have achieved 60%-80% which is in line with the best global standards. However, more factories need to start reaching these standards. If Bangladesh can boost its productivity, it can easily increase RMG export even further. A mere 20% increase in productivity will literally mean a $5.6 billion increase of our current $28 billion RMG export resulting in $33.6 billion.
Why is this important?
To reach $50 billion export revenue by 2021 we need a 12.5% yearly grow rate. The current status till February 2017 is not very promising:
There are so many factors involved; while some can be tackled, others however, are here for the long run. But the fact still remains that there are issues that the private sector can look into which are in dire need for attention.
So by focusing on the improvement of productivity, they can easily turn things around and it has little to do with government incentive or the global scenario. The factories can do a lot and it is time to focus on that.
Bangladesh is seeing a surge in green factories and it is something that makes Bangladesh different from others. Currently Bangladesh has 67 LEED certified factories out of which 13 are Platinum and 20 are Gold. More than 220 factories are in the LEED certification pipeline.
In Conversation With:
Taking this information into account, I went out to look for trendsetters in the industry who are changing the environment and are leading by example. During this time, I met with Sayed Naved Husain, CEO and Group Director of BEXIMCO. Through our conversation he shared the management’s vision and his role in leading the BEXIMCO Textile Division.
Adnan: What steps have you taken to ensure the company is profitable and competitive?
Naved: BEXIMCO follows a triple bottom line approach which involves the people, the planet and profits. The three go hand in hand. If you focus only on profits, the gains will not be sustainable for the long run; as a result, you’ll have to shut down your business. We look at the planet and take different steps like reducing green gas emissions, moving towards waterless washing, ETPs and etc.
The company generates its own 30-35 MW of energy. We have also setup waste heat recovery boilers through which we saved 15-20 tons of steam and the payback is $300,000 per month. Greenhouse emissions have also drastically reduced because the efficiency of the turbines increased from 38% to 70%. By converting to LED lighting we saved 1 megawatt of power. We have state of a state of the art ETP and are also using less hazardous chemicals, alongside working towards zero discharges eventually.
Our vision for our factory was to build it like a garden like the Central Park in New York or the Hyde Park in London. We wanted to become one of the support systems of Gazipur. We intended on establishing a building and factory where around 40,000 workers (or more) can work and enjoy the surroundings. We created an environment where the workers will be motivated and the moral will be high which will result in higher productivity. We do not see this as an investment, rather as a necessity as you get the payback.
Bangladesh’s work force is the youngest and they are dynamic and fast learners. By investing in human resource and technology, BEXIMCO has achieved productivity of 70-80% which is in line with the top players in the world. It has reduced wastage and rejection rates so the efficiency has drastically improved.
Adnan: What innovative techniques have you introduced that haven’t been done by other companies as of yet?
Naved: Investment in technologies like pre-cutting, post-cutting and fabric optimization saves a lot like consumption of fabrics by 2-4% and reducing rejection by 1-2%. This is the general outcome. Seeing the results, BEXIMCO focused more on this and came up with Recycled Fashion.
When you approach spinning or go for shipments, it will lead to wastage. You can only avoid this by upcycling or recycling your material. BEXIMCO uses a software to plan and track it all. Then we use the go-cost labor to make the garments. The designers use aesthetics to make it fashionable. Upcycling is a process that enables us to circulate the leftover materials back to the production with the help of design and by doing so significantly, we reduce environmental hazards.
The company was the first manufacturer to receive UPMADE® Certification for their woven and jersey production lines. Mountains of leftover textiles that usually got dumped into a landfill are now partly upcycled into additional fashion collections. This has improved effectiveness and reduced environmental impacts – each item produced in this way uses on average 70% less water and 88% less energy compared to regular product.
In addition to that, we are working with Aus Design, from Estonia. The researcher and designer Reet Aus is leading the concept.
“WE CREATED AN ENVIRONMENT WHERE THE WORKERS WILL BE MOTIVATED AND THE MORAL WILL BE HIGH WHICH WILL RESULT IN HIGHER PRODUCTIVITY”
Adnan: Europe and USA market dynamics is changing, Asia as a market is getting lucrative so what plans do you have for Asian markets?
Naved: In the last 10 years the socio-economic scenario has been changing. The middle class is becoming more affluent and thus seeing the rise of international franchises entering Bangladesh such as KFC, Pizza Hut, Gloria Jeans, Burger King, Krispy Krème, as well as Apollo Hospital etc. Considering this aspect, BEXIMCO went for forward integration by opening Yellow. The success of Yellow surprised BEXIMCO. Yellow now has 15 outlets in Bangladesh and Pakistan. In the coming years, Yellow plans to expand internationally in the Asian hubs as well as USA and Canada.
Adnan: Since you’re already working with top tier brands, do you have any plans to enter the leather sector?
Naved: BEXIMCO is the industry leader for RMG being the first mover in most segments. Since leather is not our forte, we will refrain from entering it. Instead, we will expand in areas which we are skilled in. I feel that Bangladesh has so much to achieve given its young and dynamic labor force. Investing in them and technology will give our country the boost it needs to be number one in the world.
The writer is a management consultant and can be reached at email@example.com