Energy shortage, lack of government support, high duty, and higher labour costs have forced many Pakistani value added textile entrepreneurs to locate their manufacturing facilities in Bangladesh. “The shift in investment towards Bangladesh started about two years back and only small and very few middle-sized manufacturers have relocated,” said Haji Salamat, a Faisalabad-based knitwear exporter. He established a knitwear factory in Bangladesh recently and is satisfied with the returns on investment. “I have not closed my knitwear unit in Pakistan to ensure the livelihood of the 2,000 workers employed there,” he said, adding that the unit is currently operating at a nominal loss.
According to his estimates, over 100 value added manufacturers from Pakistan have moved to Bangladesh — mostly knitwear exporters and home textiles manufacturers. A few readymade garment manufacturers have also shifted, he disclosed. Explaining the advantage of operating from Bangladesh he said that the gas rates in Bangladesh are a third of those in Pakistan, and every factory, small or big, is on self-generation. The electricity unit from gas-fired generators, he added, costs only two rupees compared with six rupees in Pakistan, subject to the availability of gas.
“Wages in Bangladesh are 30-40 per cent less than those in Pakistan and the labour force is better skilled and more efficient,” he said. Moreover, he said that the goods exported from Bangladesh are exempt from duty in the European Union that reduces the cost of the buyer by 10-17 per cent. He added that the government of Bangladesh provides a cash incentive of five per cent on clothing exports and 15 per cent on home textiles exports. “The textile raw material cost in Bangladesh is seven to eight per cent higher but other incentives outweigh this disadvantage,” he said.
Former Chairman of Pakistan Readymade Garments Exporters and Manufacturers Association Pervaiz Hanif said that readymade garment exporters had recently started shifting to Bangladesh. “The government should realise the gravity of the situation and take measures to reduce the cost of doing business. Bangladesh was not in the global market for home textiles, which was Pakistan’s strong base,” he said. “Now Bangladesh is competing with Pakistan in home textile because of technology transfer from Pakistani investors,” he added.
There is an upside of the flight of capital from Pakistan to Bangladesh as the export of fabric and cotton yarn from Pakistan to Bangladesh has appreciably increased in the last two years. Official data reveals that Pakistan exported cotton fabric worth $13.88 mn in 2007-8 to $19.76 mn in 2009-2010 and to $28.25 mn in 2010-11. Experts expect these exports to double when the figures for 2011-12 are released. Similarly, the export of cotton yarn to Bangladesh has increased from $8.2 mn in 2007-08 to $19.2 mn in 2010-11.
Former Chairman All Pakistan Textile Mills Association Gohar Ejaz said that the government needs to ensure a stable supply of gas and bring bank markup at reasonable rates to stop the flight of textile capital.