From Tecoya NewsDesk
MUMBAI, JAN. 29
Marketing year (MY) 2019/2020 cotton production is forecasted to increase to 142,000 bales (30,916 tons), a 3 percent increase over MY 2018/2019. The annual production increase is the result of favorable weather, a greater use of high-yield cotton varieties (e.g., American Upland), and greater demand for cotton as a result of new government policies focused on increasing export of Bangladesh’s ready-made garments (RMG).
MY 2019/2020 imports are forecasted to be 7.0 million bales (1.5 million tons), a 2 percent increase over MY 2018/2019 import figure. The continued sluggish imports is the result of a drastic slowdown in the RMG industry in the first half of MY 2019/2020. COTTON PRODUCTION: In MY 2019/2020 (August-July), cotton cultivated area is estimated to be 45,000 hectares (HA), which is slight increase over MY 2018/2019.
Production is also expected to increase 3 percent over last year to 142,000 bales (480 pound bales) as a result of favorable varieties (e.g., American Upland hybrid) and good weather. Experts have revised MY 2018/2019 cotton production upward to 138,000 as a result of local production reports.
The Bangladeshi Cotton Development Board, which is a division within the Ministry of Agriculture, supported cotton farmers this year by supplying new seed varieties, providing technical training on production, and monitoring the quality of this year’s crop. The Development Board continues to introduce farmers to Bt cotton.
The importation of the Bt cotton seed samples is supported by a Material Transfer Agreement (MTA) that the Development Board has with an Indian biotechnology company. Bangladesh produces many varieties of cotton, including Gossypium hirsutum, Gossypium arboretum, Gossypium herbaceum, and Gossypium barbadense. American Upland cotton (i.e., gossypium hirsutum) is cultivated in the plane land in the July-August timeframe and harvested in December-January.
Other varieties are cultivated in Bangladesh’s hill tract region in the March-April timeframe and harvested in December-January. CONSUMPTION: In MY 2019/2020, raw cotton consumption is estimated to decrease to 7.1 million bales, which is a 4 percent decrease from MY 2018/2019. The decrease is the result of lower demand caused by a slow-down in Bangladesh’s ready-made garment (RMG) sector.
According to the Export Promotion Bureau, between July and November of 2019, the export of Bangladeshi RMG products fell by 7.59 percent to $15.77 billion due to decline in the global demand, increased competition from Vietnam, and increased production standards and costs in Bangladesh’s textile industry. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) reported on October 15th that at least 50 garment factories had closed and 25,000 workers had been laid off since February, 2019.
Rubana Huq, president of the BGMEA, reportedly stated that the garment sector was going through tough times and that Bangladesh would not be able to meet its goal of exporting $50 billion worth of apparel products by 2021.
Bangladesh exported approximately $34.13 billion of RMG products in 2018. MY 2018/2019 raw cotton consumption is unchanged from the previously released annual cotton report. According to Bangladesh Bank, which is Bangladesh’s central bank, in fiscal year (FY) 2019 (July-June) the value of RMG exports increased by 11.5 percent over FY2018.
Last year’s success allowed for Bangladesh importers to maintain a 7.4 million bale consumption level. This year’s drastic slow-down in the textile industry has since dampened expectations. VALUE ADDED COTTON: According to the Bangladesh Textile Mills Association (BTMA), in 2018, there were more than 430 textile spinning mills, with a capacity of yarn production at 2.9 million ton per year.
Experts estimates that Bangladesh yarn production is currently at approximately 40 percent of capacity. According to local reports, prices of yarn have dropped drastically in the last year. Currency exchange rates, as well as oversupply, have led to growing stocks of yarn in Bangladesh. Further, man-made fiber continues to grow in popularity. Bangladesh has import duties of 5 percent for man-made fiber, 25 percent for fabric, and 10 percent for yarn.
While seemingly high, 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 fabric (but not taxes such as the VAT and Advanced Income tax).
TRADE: MY 2019/20 raw cotton import forecast is decreased to 7.0 million bales (1.5 million tons) on expectations of decreased RMG exports and greater competition from other economies (e.g., Vietnam).
According to customs’ data, for the month of July 2019, Benin was the leading exporter to Bangladesh at 107,163 bales (23,332 tons). For the month of August 2019, Benin was again the leading exporter at 89,068 bales (19,392 tons), bringing its total exports of baled cotton to 196,231 (42,724 tons) for the first two months of MY2019/2020.
The United States exported approximately 151,730 bales (33,035 tons) during the first two months, accounting for 13.5 percent market share over the same period. Other major exporters include Mali (13 percent), Cameroon (10 percent), Burkina Faso (9 percent), Brazil (9 percent), and India (8 percent).
In MY 2018/19, imports are revised down to 6.8 million bales based on customs’ data. The decline is the result of increased demand for man-made fiber and growing competition from abroad. POLICY: In June 2019, the Government of Bangladesh (GOB) announced its budget for fiscal year (FY) 2019/2020 (July- June).
The budget could have an impact on the textile and apparel industry because of certain taxes and regulations, including the imposition of a 5 percent Value Added Tax (VAT) on locally sold yarn.
Exportoriented yarn producers are exempt from the VAT. To support textile producers and increase exports, the Bangladesh Textile Mills Association (BTMA) requested subsidy support from the Central Government. BTMA’s goal is to boost garment exports to the United States in order to take advantage of current US-China trade frictions. From the budget for FY2019/ 2020, garment exports to traditional markets will receive an incentive of 1 percent for the first time.
Exports to non-traditional markets will get a 5 percent incentive, which is an increase from 4 percent. In the next fiscal year, BGMEA has stated that they will attempt to negotiate for a 3 percent cash incentive for all destinations, irrespective of whether it is a traditional or a new market. As a way to encourage investment and job creation in the RMG and textile sectors, the GOB is lowering the corporate tax rate.
In the budget FY2019/20 it is proposed that, the knitwear and woven apparel exporters will enjoy a reduced corporate tax rate of 12 percent, and green building certified factory owners will pay an even lower rate of 10 percent. But the textile sector including industries for yarn production, dying, finishing, coning, fabrics production, fabrics dying, finishing, printing and other similar industries will pay corporate tax at rate 15% for another three years up to July 2022.
On the other hand, just like other non-listed companies, the corporate tax for the garment accessories sector remains at 35% though Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) has requested the Government to bring down corporate tax rate from 35% to 12%. (Source: Tecoya Trend)