One does not give much thought to Bangladesh's exports of home textiles and terry towels. Yet this US$ 1.2 billion a year export subsector in the readymade garments (RMG) industry occupies a special place. The raw material used in making home textiles is local yarn made from cotton waste. Currently, there are some 110 factories (about 97 in operation) employing 65,000 workers. Unfortunately for the Bangladesh Terry Towel and Linen Manufacturers and Exporters Association (BTTLMEA), the industry has been in a state of decline since 2011 for a multitude of reasons, with the bulk of cotton waste being exported or smuggled out to India or China.
According to media reports, on October 23, industry insiders have alleged that cotton waste is being exported to other countries, by misrepresenting it as garment "jhute" (cutting waste) since there is no export duty on garment waste. The managing director of Towel Tex Limited was quoted as saying that "despite offering high prices, we are not getting the required raw materials." We find that the export of cotton waste, nes (H.S. Code 5202.99.10) has jumped from US$ 1,059,777 in 2013-2014 to US$ 4,468,830 in 2016-2017, and hence the raw material crunch.
Other raw materials used by the industry include used or new rags of textile materials – white and sorted (H.S. Code 631010) also witnessed a rise in "export" from US$ 8,946,803 in fiscal year 2013-2014 to US$ 10,374,017 in 2016-2017. The coloured version of this material (H.S. Code 631090) posted an increase by about a third (US$ 3,085,9324 to US$ 4,197,0444) over the same period.
The government set the minimum export price for cotton waste at US$ 4.50 per kg (25% export duty applicable), encouraging misrepresentation of these waste materials. In effect, the export duty is bypassed depriving local spinners of its raw material and the government of duty earnings.
The shortage of both cotton waste and garment "jhute" hampers production of local yarn, adversely affecting the home textile and terry towel sector in Bangladesh. So, what is to be done? The industry, for one, has highlighted the problem in a letter to the National Board of Revenue (NBR) on October 11 that unless steps are taken by NBR to halt export of cotton waste/garment jhute/cotton clipping, the industry faces closure in the foreseeable future.
EPB data of the usage pattern for cotton waste (H.S. Code 5202.99.10) in other countries, we find that during fiscal year 2016-2017, the total value of export stands at US$ 4,468,830 with Hong Kong, India and Nepal topping the list having consumed US$ 377,646, US$ 2,984,953, US$ 906,796 respectively. These three countries constituted nearly 96% of total export value for this raw material. For used or new rags of textile materials (not sorted), China and India are nearly at par with the former importing US$ 14,770,106 (35% of total export) and the latter importing US$ 15,257,740 (36% of total export). The 2014-2015 data show that India's consumption remained largely stagnant while China has recorded nearly a 32% rise in consumption of this raw material.
According to industry sources, the price of yarn produced by these waste materials has increased by 20% largely due to this chronic shortage of waste. There is a need for NBR intervention here because it is being deprived of revenue and halting illicit activity could stall the decline of Bangladesh's textile industry.
Rotor spinning mills in the country use cotton waste to produce the yarn. Similarly, modern recycling mills utilise the "jhute" waste from RMGs to make another type of yarn – and both these yarns allow for making terry towels, home textiles, denim and other types of clothing that end up in foreign markets earning the country precious foreign exchange. So, when the combined workforce of all these different factories is taken into account, the number is no longer 65,000-it is much higher. "The NBR should seriously take a look at the proposal for putting into place barriers to export (for a year) of such raw material that is now taking place by misquoting them as something else. If there is no improvement in the industry after an year, the NBR is perfectly at liberty to change its decision regarding export of the items in question," says the industry.