Gokaldas export limited: A turnarround story

Abstract

The textile and apparel industry can broadly be classified into two segments: the production of fabric and textile from raw materials (textile industry) and the end transformation of these fabrics into the clothing (apparel industry). The textile industry involves converting the raw material (fibre) into yarn, which is then dyed and finished into fabric. The apparel industry produces clothes and accessories by cutting and sewing the fabrics (Exhibit 1). The apparel industry has been traditionally labour intensive and low wage industry. The competitive advantage in this industry is determined by the ability to produce trending designs while maintaining cost effectiveness. The apparel industry’s dependency on labour cost is evident from multiple shifts in base on a global level over the last 50 years to countries which offer cost advantage (Exhibit 2). The two primary reasons for this shift is the cheaper labour cost in developing countries. Also, the apparel industry is not capital intensive and hence, developing countries are able to enter and compete with the developed countries with minimal investing. On a global level, the leading players are China, European Union, Bangladesh and India (Exhibit 3). China leads both textile production as well as export in the world. The growth over last two decades in the textile industry has made it one of the most important driver of country’s economy. In 2018, China’s export was valued at $ 158 billion and captured around 35% of the global market share. Apart from cheap labour, reduced commercial barriers and material supply availability gives the country an added advantage to lead in this sector. The EU region holds 29% of global market share with exporting value of $130 billion making them the second largest textile exporter region in the world. Italy, Germany, Spain, and France are the leading countries with EU. Bangladesh holds the 3rd position in terms of apparel export with $29 billion in exports. Ready-made garments (RMG) contribute to 81% of Bangladesh’s exports and the textile and apparel sector contributes to 20% of the country’s GDP. Bangladesh has set an aggressive target of achieving apparel exports of $50 billion by 2021. The major factors contributing to this growth is Bangladesh’s cheap and vast workforce (Exhibit 4). Bangladesh has 37 private and public universities producing skilled graduates in the field of textile and apparel industry. This combined with government’s support such as bank facilities for purchase of raw materials and Bangladesh’s status of Least Developed Country (LDC) qualifies it for duty-free market access i.e. reduced tariff facilities to both developed and developing nations. Bangladesh currently