Pakistan's garment makers threaten Bangladesh relocation
Faced with energy shortages and power disruptions in their home market, not to mention an unskilled labour force, rising borrowing costs and anti-industry policies, Pakistan's apparel makers are looking at options to relocate their businesses to countries like Bangladesh, Dubai and China.
Ijaz Khokhar, chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), tells just-style that international garment buyers are becoming increasingly concerned about placing orders in Pakistan because so many shipments are delayed because of energy shortages.
A decision to scrap subsidies under the drawback on local taxes and levies (DLTL) scheme also means at least PKR21bn of garment exporters' money is stuck with the government, causing liquidity problems for small and medium-sized exporters.
The situation, Khokhar says, is pushing garment makers elsewhere. Bangladesh, with its similar culture and fewer language barriers, is the favourite business location for Pakistani businessmen, he explains.
Bangladesh's textile industry has uninterrupted energy supplies at cheaper rates; labour is not only cheaper but also 40% more efficient than Pakistani workers; and the country has duty-free access to the European Union under the Generalized System of Preferences (GSP) scheme.
These factors combine to provide 25-30% additional margins to garment exporters from Bangladesh as compared to Pakistan, he explains.
Added to this, international buyers have established offices and buying houses in Bangladesh and Pakistani exporters are travelling here to get orders.
Khokhar claims many knitted and woven garment manufacturers and exporters from Faisalabad and Karachi have already shifted their plants partially or totally to Bangladesh to maintain close liaison with the buying houses there.
And a delegation of garment exporters is set to visit Bangladesh after the holy month of Ramadan to look into the possibilities of joint ventures and partnerships with local garment producers.
In the first phase of the relocation, small and medium sized knitwear and woven garment producers from Pakistan plan to form manufacturing joint ventures and partnerships with Bangladesh entrepreneurs, he says.
In this the first phase, around 15-20% of Pakistan's garment capacity could shift to Bangladesh. While the second phase will focus on setting up yarn and fabric plants by importing raw materials from Pakistan.
"The relocation will allow us to produce diversified products as raw material availability in Bangladesh is not an issue compared to Pakistan where garment makers are only limited to denim categories," Khokhar says.
Bangladesh's textile industry has progressed rapidly in recent years. As the country's largest manufacturing sector it employs around 5m people, contributes more than 80% of the country's export earnings, and contributes about 13% to GDP.
It has also attracted US$1.74bn in foreign investment from over 30 countries in its Export Processing Zones (EPZ).
Mr Khokhar is managing director of Ashraf Industries, located at Sialkot, Pakistan, which produces martial art uniforms. The company employs 450 workers, has an installed capacity of 80,000 suits per month, and supplies garments to international brands around the world. Ijaz is also a life time member of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI)
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