Doing Business | Management

October 17, 2011

Bangladesh: low labor costs attracts textile manufactures

Many Indian garment makers have shifted base or opened new units in neighbouring Bangladesh to take advantage of low labour cost and duty concessions on exports to US and European markets.

“Labour cost in Bangladesh is almost one-third of that in India. Average monthly labour cost in India is over IRs 7,000 per person, while it is just around IRs 2,500 in Bangladesh,” said D K Nair, secretary general of the Confederation of Indian Textile Industry.

“More than 35 Indian textile firms have opened factories in Bangladesh so far, most of them in the recent months,” Nair, who oversees the apex industry body for the $55-billion Indian textile industry, said.

Some of the leading Indian garment exporters like Shahi Exports, House of Pearl Fashions, Jay Jay Mills and Ambattur Clothing are using Bangladesh as an important destination in their journey to the western markets. According to Bangladesh’s Board of Investment, Indian textile firms have invested nearly $80 million in 35 factories.

Bangladesh, which is categorised as a least developed country (LDC), enjoys duty-free access to European markets, while Indian firms have to pay 9.6 per cent duty. “If you take duty concessions, labour and other costs into account, garments produced in Bangladesh is almost 20 per cent cheaper,” said Nair, alluding that it thus becomes difficult for Indian firms to compete globally.

This apart, the aggressive monetary tightening policies of the Reserve Bank of India (RBI) in recent months has also made cost of capital expensive and further added to the woes of Indian textile makers.

O P Lohia, chairman of Indo-Rama Synthetics said Indian firms were attracted to Bangladesh despite relatively poor infrastructure and uncertain political situation.

Text by the Independent
 

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