Archive for the ‘Sourcing from Sri Lanka Bangladesh and India’ Category

Sourcing from Sri Lanka Bangladesh and India

Thursday, March 25th, 2010

 

How much sourcing is done by retailers from Sri Lanka and Bangladesh?

  • Which are the key commodities sourced from these countries?
  • Are there any specific sourcing hubs in these countries?
  • What are the benefits or in which aspects do these countries have a competitive edge over India?

Big retailers are procuring woven garments & knitwear from Bangladesh due to cost as fabric is cheap, the other important factor is labor which is very cheap and together it effects the overall cost of production, more than 60% of the export market of Bangladesh constitutes garments and knitwear,
Exports from Bangladesh: Approx 30% to U.S., 40% to European countries like UK, Germany, France, Italy etc. and 30% to rest of the world including India,

Apparel exports contributes around 8% of India’s overall exports and approx. 45% to textile exports

  1. Women cotton trouser US$430 million from Bangladesh & US$260 million from India
  2. Men cotton trouser US$750 million from Bangladesh & US$210 million from India
  3. Women shirts India’s growing 3.4% but Bangladesh by 11.50%
  4. Men knitted shirts India decline by 10% whereas Bangladesh increased by 20%

What are the benefits or in which aspects do these countries have a competitive edge over India?
Or to be more precise why India is losing here?

  1. India’s cost breakdown is $1.90 whereas Bangladesh is $1.85, in specialty wear (high value items) it is $6.49 as Bangladesh is $5.85, higher fabric cost is due to higher credit rates, higher make cost is due to higher labor and duties
  2. Moreover Bangladesh is duty free for EU & Canada, this way landed cost is much cheaper and for high end fabrics Bangladesh uses Chinese knit fabric which is cheaper than our vertical setup’s
  3. Govt. support to countries:
    1. China has increased refund of VAT from 11 to 17% on exports and addition of 2% of duty drawback
    2. Pakistan has introduced 6% of R&D assistance
    3. Bangladesh has export benefits:
      1. Income tax exemption
      2. Subsidy on electricity, water, gas
      3. Export loan – 90% amount with letter of credit
      4. Exemption from insurance premium
      5. Refund of VAT on services like C&F, service, telephone, telex, electricity, shipping agent commission.
      6.  Duty free import of machinery
      7. 80% exports of production considered as export orient industry for availing all export benefits.
  4. Labor Cost-  approx. 225% higher in India (70 US Cents) than Bangladesh (25 US Cents)
  5. Power Cost- India’s power cost is 250% higher than other countries like 10 US Cents/Kilo Watt in India, whereas Bangladesh 6.5 US Cents/Kilo Watt, Egypt 4, Pakistan 6 & china 8.5,
  6. Export Promotion Zones – (EPZ’S) -  Most Indian factories are not EPZ’S and domestic goods like threads, zippers, trimmings are purchased with domestic taxes like (service tax, vat, excise) etc.

 

Also in comparison to Bangladesh, India is lacking in the procedures like:
Shipment time less 3 day (India – 10 days)
Easy access to bank credit (India – access and procedural time a problem)
Excellent infrastructure support in Export processing zone

Sourcing hub: International Fabrics and Accessories Sourcing Fair – Dhaka, Jan 13 – Jan 16 2010, http://www.asktradex.com/FABRIC/index.html