Bangladesh Imports over 50% of Its Cotton from Africa

tendata blogTrade Trends News

ten data blog28-03-2024

Ready-Made Garments (RMG) account for a staggering 85% of Bangladesh's total exports. The country's textile sector serves as the supplier of all raw materials for export-oriented industries, with most materials produced by textile mills and factories being cotton-based products. Therefore, cotton is a major component of the extensive industrial activity. However, Bangladesh's domestic cotton production is minimal, necessitating significant reliance on imports for this crucial commodity.

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Currently, the annual demand for cotton is approximately 8.5 million bales (1 bale equals about 218 kilograms). While cotton has been sourced from various countries, Bangladesh's cotton imports have long been dependent on India. Over time, however, there has been a shift in the sources. Within four to five years, African countries have taken over from India. Currently, over 50% of Bangladesh's cotton demand is met by African countries.

According to sources, the Islamic Development Bank (IDB) headquartered in Jeddah, Saudi Arabia, plays a crucial role in the cotton trade in Africa. African cotton exporters utilize loans from the IDB to establish warehouses in Port Klang, Malaysia. Bangladeshi importers can import cotton from there within 7 days as needed. Leveraging warehouses in third-country ports has been a significant catalyst in changing Bangladesh's primary sources of cotton.

"The complexity of storing cotton in the country has led to a surge in storage rates. Therefore, using warehouses in third-country ports," said Mohammad Ali Khokon, Chairman of the Bangladesh Textile Mills Association (BTMA), to Bonik Barta.

"Many African cotton exporters have warehouses in Port Klang, Malaysia. They store cotton based on the needs of Bangladeshi importers. Additionally, the required cotton can be brought home within 7 days. The increasing import of cotton from Africa is mainly attributed to this facility," he said.

The United States Department of Agriculture (USDA) maintains annual accounts of Bangladesh's cotton imports (from August to July). According to information from the National Board of Revenue (NBR) of Bangladesh, the USDA states that in the fiscal year 2022-23, Bangladesh imported the largest quantity of cotton from West Africa. During this period, 39% of the total demand came from this region. Cameroon provided 9%, and Chad provided 3%. Therefore, a total of 51% was imported from African countries. Furthermore, 16% was imported from Brazil, 12% from neighboring India, and 10% from the United States.

Industry professionals state that the quality of African cotton is quite good. In addition to quality, the competitive pricing and shorter import times of African cotton are contributing factors to the increased import volume from Africa.

"In African countries, the quality of cotton, particularly from Cameroon, is very good, followed by Chad and Mali. However, one of the main reasons for the increase in cotton exports is the African Cotton Association. Members of this organization receive special financial assistance from the Inter-American Development Bank, allowing them to export high-quality cotton competitively in a short period. Bangladeshi factory owners can take advantage of this," said Khokon, President of the BTMA.

Africa has not always been the source of cotton for Bangladesh. Uzbekistan's cotton was popular in the past. However, Bangladesh had to leave this Central Asian country due to allegations of child labor. Considering price and transit time, India was a very important source for quite some time, despite issues with the quality of Indian cotton-related yarns and fabrics. Additionally, neighboring countries impose export bans and other non-tariff barriers to meet their own needs. Due to these bottlenecks, Bangladesh's demand for African cotton has gradually increased.

According to information from the BTMA, in 2010, Bangladesh exported 5.2 million bales of cotton, with over 1.1 million bales coming from India, accounting for 22% of the total imports. In 2015, a total of 6.1 million bales were imported, with 2.9 billion bales from India. The following year, India's cotton import volume approached 55%. Currently, the import volume of cotton from India has dropped to 12%.

Even before the Covid-19 pandemic, India was a significant source for Bangladesh's cotton imports. According to statistics from the Bangladesh Bank, during the 2019-20 sales year, the country imported only 25% of its cotton from India. Additionally, 10% came from the United States, and 9% from Australia. Furthermore, 8% was imported from the African countries of Benin, while Burkina Faso and Mali each accounted for 16%. Côte d'Ivoire and Cameroon each exported 5%. Overall, nearly one-third of Bangladesh's cotton imports that sales year came from Africa.

"Bangladesh produces yarns from quality cotton. That's why there's been a constant increase in imports of cotton from Africa and the United States," Mohammad Hatem, Executive Chairman of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told Bonik Barta.

"This also means that the country is producing yarns and fabrics from better cotton than India. Bangladesh exports clothing produced from these yarns and fabrics worldwide," he added.

Hatem also stated, "In addition to ensuring quality, uninterrupted supply is another important reason for changes in the sources of cotton imports. Most of the cotton produced in China and India is for local consumption. Therefore, India often prohibits cotton exports, leading to frequent trade disruptions. Bangladesh has to deal with these trade barriers frequently."

Bangladesh's yarn and fabric producers claim that the quality of Indian cotton has always been unsatisfactory. Considering standards, Australian cotton ranks first, followed by the United States and Africa, while Indian cotton ranks sixth or seventh. Currently, cotton imports are also made from Brazil, Australia, and the United States. The quality of yarn depends on the quality of cotton, and accordingly, clothing is made. High-end clothing requires cotton from the United States, Brazil, and Africa. If there is demand for Indian cotton, it is limited to the local market.

According to members of the Bangladesh Cotton Association (BCA) entities, there is little price difference between Indian and African cotton. Despite the distance, African cotton is more valued than Indian cotton when considering quality. Moreover, Indian companies often fail to fulfill their promises. Additionally, due to the low quality of cotton, yarns and fabrics made from Indian cotton also pose issues. To avoid these problems, reliance on Indian cotton has been reduced.

Mehdi Ali, Chairman of the BCA, said, "Twenty years ago, Bangladesh imported more cotton from the United States. Subsequently, considering transit time and cost, importers started sourcing from India. There was a demand for high-quality cotton produced in the states of Gujarat and Odisha. If quality is assured and commitments are met, India remains a major source of cotton for Bangladesh."

He also stated, "There are sometimes discrepancies in certificates between Bangladeshi apparel exporters and Indian cotton exporters. Dishonest practices by India in cotton trade have not occurred in other source countries."

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