Small factories fighting losing battle with large ones

A large number of readymade garments accessories manufacturing factories were closed in the recent years mainly due to lack of access to bank loans, short-supply of electricity and low technology-base, according to industry insiders.

Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) recorded the names of a total of 579 ill-fated units that were closed down in five years between 2012 and 2016.

"Most of those are small in size and the rest are medium-sized," Abdul Kader Khan, president of BGAPMEA, told the FE.

The industry insiders also identified failure in installing modern machinery, production of fewer items, complexities among partners and failure to meet compliance issues, among others, as the reasons behind the closure of the accessories manufacturing units.

Meanwhile, the BGAPMEA president said, 432 new accessories manufacturing units, mostly large ones with modern technology, were added to the sub-sector during the five-year period - which would be enough to meet the demand for accessories by the RMG industry.

The sub-sector saves foreign currency by supplying accessories and helps local apparel makers to meet the lead time, he added.

Mr Khan explained that the big entrepreneurs have the access to bank loans at single-digit rate of interest, which goes beyond 12 per cent in cases of small and medium enterprises.

The small entrepreneurs do not easily get bank loans though their repayment rate is better than the big ones, he added. He said many of the units, after installation of necessary machinery, could not even start production as the banks did not support those to import raw materials.

Md Moazzem Hossain Moti, vice president of the association, said one of the main reasons was that many units did not get necessary supply of gas. Many of them failed to compete due to producing only one or two items, and forced to close the factories, he added. In the last fiscal year, the sector earned $6.7 billion as 'deemed' exports to local apparel makers, which was $6.12 billion in the fiscal year 2015-16, he said. The earnings were $2.75 billion in the fiscal year 2010-11.

According to the association, until recently, some 1,587 member units were registered with the trade body and Tk 320 billion have so far been invested in the sector, creating employment for more than 0.4 million workers.

Some 30-35 types of accessories like zippers, buttons, labels, hooks, hangers, elastic bands, thread, backboards, butterfly pins, clips, collar stays, collarbones and cartons are the major garment accessories produced in the country, industry people said.

The backward linkage industry is now capable of meeting the demand for accessories by nearly 90-95 per cent, helping the country reduce largely its dependence on imports. The accessories makers also meet the demands for pharmaceuticals, leather, frozen-fish and agro-based industries, especially the packaging products.

When contacted, Khondaker Golam Moazzem, research director at Centre for Policy Dialogue (CPD), said that a sort of consolidation was taking place in the sub-sector, which is positive.

The demands for accessories were there with the growth of RMG industry, he said, explaining that the closure of the units might be a matter of concern, but the new units were set up with modern technology and large capacity.

The direct export also indicated that the factories were maintaining global standards and they have linkages with the foreign buyers, he said and suggested looking into the employment issue if the workers are being displaced or not.

He also recommended focusing on both the social and labour compliances for long term sustainability of the sub-sector as the western retailers' platform Accord might extend their safety activities to the backward linkage industry.

It would also help increase the volume of direct export, he added.

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