Spinning sub-sector plays a crucial role in stabilizing the supply chain of country’s highest export revenue earning sector – RMG. Furthermore, the private sector spinning mills can now meet around 100% demand of yarn at the domestic level as well as 95% of the demand for yarn for export oriented knit fabrics mills.

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Market Insight: Bangladesh Spinning Industry
RMG sector in Bangladesh started its modest journey as a small non-traditional sector of export
in late 1970s and transformed itself as the country’s highest revenue generating sector within
three decades, contributing 81% (USD 24.49 billion FY 13-14) of country’s total export. During
Jul 14 - Feb 15 period, garments export clocked USD 14.44 billion, a 1.91% hike from
comparable period last year.
Recent political turmoil has significantly disrupted production supply chain and international
buyers are increasingly getting jittery with placing new orders. In the international front,
competitors like Pakistan and Vietnam are surging ahead with access to preferential trade
agreements. Although favorable labor costs provide competitive strength to Bangladesh,
problems remain with inadequate infrastructure and sporadic utility supply.
Spinning Sector
Spinning sub-sector remains crucial to RMG value chain helping to stabilize supply chain, while
controlling costs. The products of the spinning sub-sector are cotton yarn, polyester, synthetic
yarn, woolen yarn and blended yarn mixed of cotton and polyester of different counts (mostly
up to 80 count). Yarns are being used by the weaving sub-sectors like specialized textiles,
handlooms and knitting and hosiery. The growth in the export of clothing with the phasing out
of MFA in 2005 has led to the setting up of 350 spinning mills and there has been a boost in
investment since 2001. The private sector spinning mills can now meet around 100% demand of
yarn at the domestic level as well as 95% of the demand for yarn for export oriented knit fabrics
mills. In addition, almost 85% of cotton yarns and 50% demand for synthetic and blended yarn
of export-oriented fabric producing mills are being met by the private sector spinning mills.

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(Source: Bangladesh Textile Mills Association) The rest of the import is being met from China
and India.
Although Bangladesh has production capabilities in manufacture of thread and fabric, the
country has to import almost all raw materials, primarily cotton and other man-made fiber e.g.
polyester, Viscose and Staple Fiber. The country spends substantial foreign exchange every year
to import raw materials and accessories to feed the RMG sector. In the FY 2012-13, the country
spent about USD 5.27 billion only to import cotton, cotton yarn and fabrics as well as knit
fabrics.
Since cotton is the key imported raw material, international price volatility has a direct impact
on the spinning sub-sector.
Since the middle of 2011, cotton prices have declined which eventually started stabilizing from
the middle of 2013 onwards. In the latest United States Department of Agriculture (USDA)
report, the forecast for 2014/15 world cotton harvest was revised slightly higher (+206,000
bales to 119.4 million) while the forecast for world cotton mill-use was revised lower (- 985,000

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bales to 111.3 million). An effect of higher production and lower consumption estimates was a
1.2 million bale increase to the figure for global ending stocks (to 109.8 million bales). Given
rising production trend and slowing demand, prices are expected to either remain stable or
decrease in 2015.
In 2014-15, Bangladesh is projected to increase raw cotton import by 7.6% to 4.2 million bales
on sustained export demand for value-added products, particularly by the RMG sector. The
main raw cotton exporters include India (35% market Share) and Uzbekistan (25% market
share).
The global raw cotton producers are presented in the table below:
Policy Initiatives
Bangladesh has no import duties for polyester, viscose, acrylic, synthetic and mod acrylic staple
fiber. The duty for textile chemical dyes is 5 percent. Export-oriented RMG factories can import
yarn and fabric under a duty draw back incentive, which reimburses all customs duties paid on
imported yarn and fabrics (but not taxes such as the VAT and Advanced Income tax). Imports of
all textile raw materials, including fabrics, have no quotas.
Impact of Preferential Trade Agreement
Under the GSP ruling enacted a couple of years back, exporters are getting zero-duty facility
even if the products are made from imported fabrics. Previously, the exporters used to benefit
if only local fabrics were used. With the effect of the current one-stage rules of origin, the
country's 100 per cent apparel exports to EU, Norway, Switzerland and Turkey are now availing
the GSP benefit, earlier only 42.72 per cent of the woven-wear textiles could benefit from the

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GSP system. The Previous GSP Policy which required a two-stage transformation for clothing
export facilitated Bangladesh to build up and invest heavily (Euro 4.00 billion) into the
backward linkage textile industry. The change in ruling opened the door of RMG manufacturers
to directly import fabric from abroad which had negatively impacted local spinners.
Closing Remarks
Spinning sub-sector is largely dependent on the overall success of the RMG sector. With raw
materials largely imported, spinners have to rely on the price stability of cotton and other
imported raw materials. Some spinners at times have engaged in speculation resulting in
significant loss in 2011. However, the spinning sector can add value by providing significant cost
advantages to RMG sector through efficiency, provided proper infrastructural support is there.
The market insight has been prepared by Zahedul Amin and Tasmia Tabassum