Case study of echo cotton mills ltd

CASE STUDY OF ECHO COTTON MILLS LTD DYNAMIC PERFORMANCE AND INTERNATIONAL MARKETING OF TEXTILE MILLS IN BANGLADESH

INTRODUCTION 1.1 BACKGROUND OF THE REPORT. Textiles have been an extremely important part of Bangladesh's economy for a very long time for a number of reasons. The textile industry is concerned with meeting the demand for clothing, which is a basic necessity of life. It is an industry that is more labor intensive than any other in Bangladesh, and thus plays a critical role in providing employment for people. Currently, the textile industry accounts for 45% of all industrial employment in the country and contributes 5% of the total national income.

However, although the industry is one of the largest in Bangladesh and is still expanding, it faces serious problems, principally because the country does not produce enough of the raw materials necessary, unfavorable trade policies, and inadequate incentives for expansion. As a result, Bangladesh's textile industry relies heavily on imports, and the country does not earn as much foreign exchange from its textile industry as it should.

History of the Textile Industry in Bangladesh Traditionally, artisans working in small groups, in what are often referred to as cottage industries, produced most of the textile in the sub-continent. There were many such artisans in the area that was to become Bangladesh. In fact, from prehistoric times until the Industrial Revolution in the eighteenth century, East Bengal was self-sufficient in textiles. Its people produced Muslin, Jamdani, and various cotton and silk fabrics. These were all well regarded even beyond the region as they were manufactured by very skilled craftsmen.

The material produced by the artisans of Bengal started facing vigorous competition beginning in the eighteenth century after the growth of mechanized textile mills in the English Midlands. This eventually led to a great decline in the number of Bengali workers skilled enough to produce such

high quality fabrics. According to popularly held beliefs, as the region's spinners and weavers meant competition for their emerging textile industry, the British imperialists responded by trying to force the artisans to stop production. They were said to have sometimes used methods as harsh as cutting off the thumbs of the craftsmen so they would never be able to spin or weave again.

Not only were huge amounts of fabric produced in Bengal, the area was also a prime producer of the indigo plant, from which the indigo dye was extracted. This natural dye was widely used before the advent of chemical dyes in the nineteenth century. In fact, the rich blue color provided by the dye is still sometimes used for dyeing denim. Bengali dye masters had special recipes for producing the desired colors, just as chefs have recipes for achieving desired flavors. However, as was the case with the traditional handloom fabrics, indigo dye production also gradually declined.

The problems of the indigo industry were principally a result of two factors. First, because indigo was a cash crop, the British administrators in this part of the empire forced farmers to grow the indigo plant in order to increase the administrators' profits. Unfortunately, the indigo plant is nitrogen depleting and thus exhausted the soil very quickly. The farmers received little real income from the crop since the British kept most of the profits, and in times of economic hardship, such as when the indigo price fell, they were unable to survive by eating their produce, unlike farmers who grew staples such as rice or wheat.

Another reason for indigo's gradual disappearance as a dye stuff was the unpredictable nature of the plant. Sometimes one farmer would have a good harvest, while his neighbor would not be able to produce anything. The combination of poor yields and the unpredictability of the crop gradually led farmers to cease growing the plant and moving on to other, more profitable crops.

The fabric produced and dyed in British factories flooded the Indian markets. In time, its importation became one of the points of contention in the growing Independence Movement of the Sub-Continent.

As separation from Great Britain was becoming a foreseeable reality and local production again profitable, the textile industry was reorganized as new methods of production were adopted. Water, a necessity for the chemical processes involved in processing the modern dyes now used, was abundant in East Bengal. This contributed to the establishment of mechanized textile factories in the area.

However, after 1947 and the partition of East and West Pakistan from India, most of the capital and resources of Pakistan came under the control of West Pakistanis. The textile industry thus stagnated in East Pakistan as momentum for development shifted from the eastern part of the country to the west.

The west also grew more cotton than the east, which was used as a plea for developing the industry in the west instead of in the east. The majority of all industries in the east were also owned by West Pakistani industrialists.

When Bangladesh gained its independence from Pakistan in 1971, the new government nationalized the textile industry, as it did with many other businesses in which West Pakistanis had been the principal owners. Although there were some Bangladeshi industrialists, they did not form a large or politically powerful group and thus had to surrender control of their factories to the government as well. All of the country's textile factories were then nationalized and organized under the Bangladesh Textile Mills Corporation, or BTMC. The industry remained under the control of the BTMC until 1982-83. Bureaucratic obstacles combined with other problems such as low productivity in the labor force, lack of planning, indiscipline, lack of accountability, and poor machine maintenance and operation resulted in a lack of profits.

The government thus gradually denationalized the production of textiles. Factories were privatized, beginning with the dyeing and weaving units. Since that time, much of the industry has been privatized through auctions and other means.

The textile industry has been the catalyst for industrialization in numerous countries. For example, in England, the Industrial Revolution with the new development in coal and steel led to the establishment of a mass textile industry, which catalyzed the industrialization process in the eighteenth century. Similarly textiles played a major role in the industrialization of Japan, South Korea, Taiwan, Hong Kong, and Indonesia. The same has been true to a certain degree in this country.

After privatization, the quality of the fabrics produced improved significantly, leading to a great increase in the demand for Bangladeshi textiles in both the international market, as well as the export oriented garment industry of Bangladesh. This launched the industry into a period of rapid growth that is continuing at present.

The Production of Textiles The textile industry has seen the application of many new technologies over the centuries. However, the basic steps have remained the same. What is known as the textile industry includes all the steps necessary to transform fiber into fabric that is ready for stitching, sold either in the market or used in the RMG, or ready made garment, sector. These basic steps are spinning, weaving or knitting, and a combination of dyeing, printing and finishing.

Spinning

The principal materials used in the spinning sub-sector are raw cotton and synthetic fibers such as viscose and polyester staple fibers. None of these materials, however, are produced in Bangladesh on a large enough scale to supply a significant part of the demand. The reasons for this are complex.

Cotton needs to be grown in fields, and then ginned, which is the removal of seeds from cotton. At present, the cotton produced in Bangladesh is of an acceptable standard. However, the increased cultivation of cotton in this country is not feasible because the crop requires large amounts of land for a substantial yield. In overcrowded Bangladesh, farmers choose to grow rice over cotton. Locally grown cotton currently meets only 4-5% of the total requirement. The remaining 95% of the cotton needed must be imported at very high prices. The production of the synthetic/man-made fibers used in the textile industry requires fairly advanced technology and investment.

Once the raw materials have been obtained, spinning is the first step in textile production. This is the process by which natural or synthetic fibers are cleaned and twisted into yarn.

The raw materials first move through the blow room where all impurities are removed, for natural fibers only and the fibers are rolled into laps. The laps then go through a carding machine, where they are cleaned further and formed into slivers, thick and loosely spun yarn. In order to produce combed yarn, the fibers need to undergo further processing in the comber machine where the short strands are removed, and the remain processed into sliver. The sliver is then fed to the draw frame, and speed/roving frames where they are twisted to form what are called rovings. The rovings are finally placed in spinning frames where further twisting and drafting take place, and yarn is produced. The yarn is then spun around a bobbin or cone, using autoconers or cone winding/reeling machines, packed and marketed.

The cotton industry has been widely recognized as the 'leading sector' in the industrialization of several of the world's major economies, and more particularly of Great Britain, the country that first experienced an 'industrial revolution'. Its importance was recognized and widely discussed from the early years of the factory system in spinning. Modernization efforts have- brought major changes to the Bangladesh textile industry. Equipment has been streamlined and many operations have been fully automated with computers. Machine speeds have greatly increased. At most mills the opening of cotton bales is fully automated. Lint from several bales is mixed and blended together to provide a uniform blend of fiber properties. To ensure that the new high-speed automated feeding equipment performs at peak efficiency and that fiber properties are consistent, computers group the bales for production/feeding according to fiber properties.

The blended lint is blown by air from the feeder through chutes to cleaning and carding machines that separate and align the fibers into a thin web. Carding machines can process cotton in excess of 100 pounds per hour. The web of fibers at the front of the card is then drawn through a funnel-shaped device called a trumpet, providing a soft, rope-like strand called a sliver (pronounced SLY -ver). As many as eight strands of sliver are blended together in the drawing process. Drawing speeds have increased tremendously over the past few years and now can exceed 1,500 feet per minute.

Roving frames draw or draft the slivers out even more thinly and add a gentle twist as the first step in ring spinning of yarn. Ring spinning machines further draw the roving and add twist making it tighter and thinner until it reaches the yarn thickness or "count" needed for weaving or knitting fabric. The yarns can be twisted many times per inch.

Ring spinning frames continue to playa role in this country, but open-end spinning, with rotors that can spin five to six times as fast as a ring spinning machine, are becoming more widespread. In openend spinning, yarn is produced directly from sliver. The roving process is eliminated. Other spinning systems have also eliminated the need for roving, as well as addressing the key limitation of both ring and open-end spinning, which is mechanical twisting. These systems, air jet and Vortex use compressed air currents to stabilize the yarn. By removing the mechanical twisting methods, air jet and Vortex are faster and more productive than any other short-staple spinning system. After spinning, the yarns are tightly wound around bobbins or tubes and are ready for fabric forming. Ply yarns are two or more single yarns twisted together. Cord is plied yarn twisted together. With the initiative of the entrepreneurs of Echo Cotton Mills Limited came to existence in 1982 by incorporating as a public limited Company under the company's Law of Bangladesh.

The company is the first project that financed by the Consortium members headed by Bangladesh Shilpa Rin Songstha (BSRS) with the participation of the Sonali bank, Agrani Bank. The Company concerned erected in 1995. And started trial production in May 1996 and started commercial production in September 1996. Echo Cotton Mills Limited is a well-established company in Textile, Spinning Industries sector in Bangladesh and contributed on RMG by producing Export Quality Cotton, 65:35 Blended and 100% Polyester yam. The Current Position of the Textile industry in Bangladesh: Textiles have been an extremely important part of Bangladesh’s economy for a very long time for a number of reasons. The textile industry is concerned with meeting the demand for clothing, which is a basic necessity of the. It is an industry that is more labor intensive than any other in Bangladesh, and thus plays a critical role in providing employment for people. Currently, the textile industry accounts for 45% of all industrial employment in the country and contributes 5% of the total national income.

Today, the textile industry of Bangladesh can be divided into the three main categories: the public sector, handloom sector, and the organized private sector. Each of these sectors has its advantages and disadvantages. Currently, the organized private sector dominates, and is also expanding at the fastest rate. The public sector is that portion of the industry controlled by organizations that are part of the government. The factories in the public sector enjoy certain privileges such as government funding.

However, in Bangladesh, factories in the public sector are not well supervised. There are frequent changes in officers, and many of these officials do not have a personal interest in the factory for which they are responsible. In addition, the equipment in this sector is not well maintained, as much of the money allocated for this purpose is not spent as planned, but is wasted through corruption and poor accounting. Handloom Sector The rural group of textile producers includes operators of handlooms and a number of organizations, which employ rural women, such as BRAC, or the Bangladesh Rural Advancement Committee. The Handloom industry provides employment for a large segment of the population of Bangladesh. The industry also supplies a large portion of the fabric required by the local market. Factories in this sector are usually we well looked after by the owners and are quite productive, considering the equipment available. However, the inferiority of their machinery, mostly due to their narrow width, means that the fabric production is slow, and usually falls short of the quality needed for export. The most productive of the three categories is the private sector. This, as the term suggests, is made up of those factories owned by companies or entrepreneurs.

Since the owners of such factories are directly affected by their performance, they take an active part in planning, decision-making, and management. Most of these factories also have machinery that is superior to those in the two other sectors because the owners are well aware of the connection between their equipment and their profits. In the year 2005, some of the international policies regarding the export of textiles and garments will change, which may present the Bangladeshi textile industry the greatest challenges it has had to face so far. There is much speculation at present about the situation of the RMG (Ready Made Garment) exporters in the post-MFA (Multi-Fiber Arrangements) period, when the World Trade Organization, or WTO, instead of GATT (General Agreement on Tariff and Trade) will control the sector. Under the WTO all quotas will be removed, resulting in a free market worldwide. Bangladesh's garment and textile manufacturers will have to face steep competition from countries.

1.2 THE FUTURE OF THE TEXTILE INDUSTRY IN BANGLADESH The textile industry in Bangladesh has grown in an unplanned manner and a critical demand-supply gap has arisen for both yarn and fabric. The crisis will naturally deepen unless appropriate backward linkages, the incorporation of the fundamental steps in the textile industry all through to the RMG industry, can be built to meet the rapidly approaching challenges in the global textile market. As the population is growing and the standard of living is increasing in Bangladesh, the demand for textiles is increasing rapidly. This presents an urgent need to dramatically increase capacities in spinning,

weaving, knitting, and dyeing, printing, and finishing sub-sectors. This will require the adoption of the most modern and appropriate technology to ensure quality products at competitive prices.

The possibility of increased yarn production in Bangladesh is an issue that has been looked into extensively by many researchers. These investigations have revealed the country actually has a comparative advantage over all competitors in terms of the expense of yarn production. However, in regards to the total yarn cost, Bangladesh's advantage over India and Pakistan disappears, even though it remains competitive with other producers. This is essentially a result of the higher cost of raw materials in Bangladesh, as most need to be imported.

As can be seen in chart 2, Bangladesh has a lower waste percentage than all its competitors. Power along with Korea is the cheapest in Bangladesh amongst all the yarn producers. The country also has a very low depreciation rate and a fairly low interest rate as well, aided by a low conversion cost as well. However, the price of auxiliary materials in Bangladesh is the highest among all the yarn producers, as is the price of raw materials. Due to these two factors Bangladesh loses its comparative advantage over India and Pakistan.

Most of the raw cotton imported by Bangladesh comes from overseas. The country is not only handicapped by the import tariffs and shipping expenses, but India and Pakistan subsidize the raw cotton, which is sold locally, resulting in countries like Bangladesh paying more for the same cotton.

The outcome for the Bangladeshi spinning mills of such price differentials is that they obtain raw cotton of the same quality at prices, which are approximately 30% higher than the Indian mills, and Pakistani mills. In addition, Bangladesh's spinning mills have to pay another 6 to 7% for handling, freight, and commission charges which put them in a disadvantageous situation. The new infrastructure development surcharge, or IDS, on all imports, which was stipulated in the 1997/98 fiscal year, added another 2.5% to the price of imported raw cotton.

The weaving and knitting sub-sectors will also need to expand at a rapid rate, as there is a large demand-supply gap in the country. With increased investment in the sub-sectors and modernized machinery, Bangladesh could profit greatly from larger and more competitive weaving and knitting sectors.

As the current dyeing facilities are mostly dependent on imported fabrics, they are expanding at a rate which is not dependent on any of the other sectors. However, as local grey becomes more competitive, and its production is increased, the dyeing, printing, and finishing sub-sector will also need to expand to accommodate for the increased supply.

The leakage from bonded warehouse facilities and smuggling of materials across borders also need to be monitored closely in order to assure the competitiveness of the local industry. The reduction of such problems will automatically improve the market position resulting in improved opportunities for the expansion of the Bangladeshi textile industry.

The cotton industry has been widely recognized as the 'leading sector' in the industrialization of several of the world's major economies, and more particularly of Great Britain, the country that first experienced an 'industrial revolution'. Its importance was recognized and widely discussed from the early years of the factory system in spinning. Modernization efforts have- brought major changes to the Bangladesh textile industry. Equipment has been streamlined and many operations have been fully automated with computers. Machine speeds have greatly increased. At most mills the opening of cotton bales is fully automated. Lint from several bales is mixed and blended together to provide a uniform blend of fiber properties. To ensure that the new high-speed automated feeding equipment performs at peak efficiency and that fiber properties are consistent, computers group the bales for production/feeding according to fiber properties.

The blended lint is blown by air from the feeder through chutes to cleaning and carding machines that separate and align the fibers into a thin web. Carding machines can process cotton in excess of 100 pounds per hour. The web of fibers at the front of the card is then drawn through a funnel-shaped device called a trumpet, providing a soft, rope-like strand called a sliver (pronounced SLY -ver). As many as eight strands of sliver are blended together in the drawing process. Drawing speeds have increased tremendously over the past few years and now can exceed 1,500 feet per minute.

Roving frames draw or draft the slivers out even more thinly and add a gentle twist as the first step in ring spinning of yarn. Ring spinning machines further draw the roving and add twist making it tighter and thinner until it reaches the yarn thickness or "count" needed for weaving or knitting fabric. The yarns can be twisted many times per inch.

Ring spinning frames continue to playa role in this country, but open-end spinning, with rotors that can spin five to six times as fast as a ring spinning machine, are becoming more widespread. In openend spinning, yarn is produced directly from sliver. The roving process is eliminated. Other spinning systems have also eliminated the need for roving, as well as addressing the key limitation of both ring and open-end spinning, which is mechanical twisting. These systems, air jet and Vortex use compressed air currents to stabilize the yarn. By removing the mechanical twisting methods, air jet and Vortex are faster and more productive than any other short-staple spinning system. After spinning, the yarns are tightly wound around bobbins or tubes and are ready for fabric forming. Ply yarns are two or more single yarns twisted together.

1.3 OBJECTIVES OF THE REPORT: Performance dynamics of Textile mills in Bangladesh. A case study of Echo Cotton Mills Ltd. & Shabnam Textile Mills Ltd.

Objectives of the study : The Main objective of the study is to assess the performance dynamics of textile mill and backward linkage cotton mills. In the light of Broad objective specific objectives may be stalled as under: i)

To review the polices & program of the company,

ii)

To review Corporate governess of the organization

iii)

To assess the performance dynamics of the company. (Total production, total profit & productivity) productivity-total production/total employees.

iv)

To conduct SWOT analysis.

v)

To suggest possible majors to improve performance.

vi)

Finally International Marketing of Textile products.

The broad objective of the study is to sketch out an overall Activities of ECML & Shabnam

Textile Mills Ltd. The overall objective behind the report can be represented as: •

To present an overview of To appraise Activities of various Department in ECML.

•

To Identify the problems related to ECML

•

To recommend suggestions for the various department of ECML

The main objectives of preparing this Internship report is to develop our knowledge about, Overall activities of the Echo Cotton Mills Ltd. Management Structure, Production Process Analysis, marketing Strategy, Store Inventory management and Financial Management/Analysis Specially, develop our practical knowledge about, how to operate this type of manufacturing Industries, how to produce the finished yam, and how to marketing that finished goods, how to control the inventory and how to control the financial management fact as prepare the books of Accounts and other financial statement.

1.4 SCOPE OF THE REPORT: Scope of the Analysis of this Internship report of Echo Cotton Mills Ltd. are as follows : A. Analysis of Echo Cotton Mills Ltd., Management structure: i) Structure of the management ii) Different Departmental Activities.

B. Production Analysis: i) Material ii) Source of Raw Materials iii) Machineries of ECML

iv) Different Product v) Production Analysis vi) Quality Control vii) Packaging 1.5 METHODOLOGY OF THE REPORT: The report is prepared from my experience of Job. Even though I used both secondary and primary sources of data.

Sources of Methodology Both the primary as well as the secondary form of data was used to prepare the report. The details of these sources are highlighted below: The Major sources of primary data are: i) Interview with the officers and employees of various departments of Echo Cotton Mills Ltd) Observing marketing activities of the Echo Cotton Mills Ltd. The secondary sources of data are: i) Use of published books, articles, journals, daily newspaper, ECML annual report etc ii) Others secondary sources are Internet.

Uses tool: For preparing this report, I will use different model, Mathematical equation, software and modem technology etc.

Secondary data sources: •

Files document of the textile Mills & Cotton Mills

•

Annual Audit Report

•

Primary Data

Primary Data Sources •

Personal interview with Directors

•

Personal experience gained by visiting other departments.

1.6 LIMITATION OF THE REPORT: •

Time was main constraint of my report. Because in the short time, it is very impossible to know all about the company.

•

Could not present the recent data of the financial position of the company.

•

It was very difficult to collect data from other departments.

•

It is too much difficult to comment and suggest based on short time analysis.

It is obvious that every study has some limitations. While conducting the study, I had to face a number of problems. Those limiting factors that hampered the smooth going of the report are stated below: 

Unavailability of necessary data and information was one of the most important limiting factors.



To maintain confidentiality Echo Cotton Mills Ltd. officials did not provide that information.



Time limitation was a major problem. Duration of study was short.



It is not possible to evaluate the overall functions and activities of a big company like Echo Cotton Mills Ltd.



Due to time constrain it was not possible to collect some information from external sources.



Scope of study was so wide that analytical and comprehensive study needs time.

THE PERFORMANCE AND MARKETING SCENARIO OF TEXTILE MILLS IN BANGLADESH 2.1: TEXTILE INDUSTRY IN BANGLADESH The textile industry in Bangladesh is thriving. Bangladesh has relatively good access to EU and other markets for textile products, has availability of an industrious and low-wage work force, and has supportive government policies designed to increase investment in the industry. According to the Bangladesh Textile Mills Association, the sector provides direct employment to 2.75 million people, including 1.25 million women, and is the source of direct and indirect employment for 10 million people. According to the Ministry of Textiles (1995), employment in the industry accounts for 45 percent of the total employment of the industrial sector, and contributes about 65 percent of the total export earnings of the country. The textile industry is seen as an engine for the economic development of Bangladesh, where per capita income of about $200 is among the lowest in the world.

The demand for ready-made garments from Bangladesh is strong. The United States alone imports $1.7 billion per year of garments from Bangladesh, an amount which could be higher but for quota limitations. The Government of Bangladesh has requested that quota access to the U.S. textile market be increased by 30 percent, after it acceded to U.S. demands for an end to child labor in textile factories. Bangladesh's other major market, the EU, has provided a Generalized System of Preferences (GSP) facility to Bangladesh knit wear industries on the condition that the yarn used in the garments is manufactured in Bangladesh. This trade access has resulted in considerable growth in exportoriented yarn manufacturing. With additional mills currently being financed, the Bangladesh Textile Mills Association (BTMA) expects the country to be self sufficient in yarn production by 1999. Yarn demand for domestic use is expected to increase from 186 million kg in 1997/98 to 207 million kg in 1999/2000, and for the export oriented garment industry from 398 million kg in 1997/98 to 434 million kg in 1999/2000. Total domestic fabric production currently meets only 32 percent of the country's total fabric requirement, and only 10 percent of the woven requirement for the export

oriented garment industry. The government of Bangladesh has established a textile policy to attain self sufficiency in fabrics by the year 2005 by promoting linkages within the various components of the industry (spinning, weaving, knitting, dyeing, finishing and garment manufacture), providing loans to modernize the industry and liberalizing import restrictions on raw materials.

Local cotton production meets approximately 15 percent of domestic consumption. While the BTMA would like to see this increase to some 50 percent by the year 2005, it is very unlikely to occur due to the lack of suitable soil and growing conditions for cotton, and strong farmer preferences for rice.

Annual population growth is forecast by the government at 1.8 percent, and GDP growth at 7 percent, which will increase cotton consumption for domestic needs. The United States has significant potential to increase cotton exports to Bangladesh and increase market share as well. In 1996/97, U.S. cotton exports to Bangladesh were 124,000 bales, representing 23 percent of Bangladesh's cotton imports. To date, commitments of U.S. cotton in 1997/98 have reached 210,000 bales, which if shipped this marketing year, would result in a U.S. market share of over 30 percent. Bangladesh also imports cotton from Australia, Africa, Fig: 2.1

- Bangladesh Cotton Import from World and U.S Source: International Textile

Journal the

Commonwealth of Independent States, and Pakistan, often due to attractive prices. Bangladesh is an important market for high-quality cotton, and is one of the top markets for U.S. exports of Pima (extra-long staple) cotton. In 1997/98 the United States is likely to export about 70,000 bales of Pima to Bangladesh, which would represent a market share of 90 percent. Bangladesh spinning mill managers laud U.S. cotton for its regular and reliable shipment, known quality, and low contamination. The United States is likely to be able to count on Bangladesh as a good cotton export market for many years to come.

2.2: THE MILESTONES OF TEXTILE SECTOR IN BANGLADESH UNDER DIFFERENT POLITICAL ERA ANCIENT BENGAL: Handloom had been in operation in the territory now comprising Bangladesh before the inception of the Christian era, believe many. The history and literature contain some

piecemeal abstract information about handloom weaving of Sulatni era in between 1000 BC to 1600 BC. MUGHAL ERA: The word muslin reminds the glorious days of Bengal textiles, particularly of Dhaka, during the Mughal era and the early colonial period. Muslin is an exceptionally high quality fabric of plain construction, woven in handloom with finest yarn measuring up to 250 Ne. The modern cotton spinning is able to spin cotton yarn only up to 120 Ne. Muslin and other textiles were exported in mass scale to different parts of India, Europe, and Central & West Asia. At that time Bengal also became the world famous silk producers because of huge sericulture concentration in Rajshahi & Murshidabad regions. Indigenous technology based (but high accuracy oriented) manual cotton spinning, quality katgahi silk-reeling and decorative handloom weaving were the causes of Bengali's in textiles advantage over any Asian & European nations of the time. Bengal muslin and other textiles boomed at that time because of the business friendly environment created by the Mughal regime.

Under the umbrella of the social security and political blessing to business, Bengalis felt convenience to make investment in the sector and applied their inherited talent.

BRITISH ERA: In the middle of the British colonial era, the muslin technology was lost from the Bengal due to the tyrannies of the colonial rulers and marketing agents of UK based textile industries, and also the uneven competition with the low cost products of the mechanized textiles. Lack of political support, state's non-cooperation and lack of social initiatives (at least for lack of documentation through literature) have deprived Bangladesh and the world from muslin. The Singer's sewing machines created new era of mechanized tailoring in the land by the end of 19th century. The colonial regime also introduced Bengal with the mechanized textile industry since 1930s. But the participation of local investors in establishing mechanized textile industry was constrained due to break out of the World War-II and the division of India in 1947.

PAKISTAN ERA: The supply of raw cotton from the then West Pakistan to Bangladesh opened new avenue for developing cotton spinning industry in the then East Pakistan, where handloom weaving was again on the verge of revival. Mostly the non-Bengali entrepreneurs availed the scope of establishing mechanized textile industry, which was blessed by the liberal business policies issued by the then Pakistan government and technical cooperation extended by East Pakistan Industrial Development Corporation (EPIDC). As a result, prior to 1971, Bangladesh had 858,000 spindles and 7,400 power looms and 375,00 operable handlooms, registering a good growth as compared to 1947 situation when the country had only 110,000 spindles and 2,700 power looms comprising 11 Textile Mills. Early 1960s was the beginning of ready-made garments manufacturing, which was then simply an initial venture of the local investors aiming to capture a share of the domestic market that remained under the custody of West Pakistani apparel manufacturers.

BANGLADESH ERA: As compared to 1972-73, today's capacity of Bangladesh Textile, Composite Textile & RMG industry is mammoth. The landscape changed largely in the last 22 years. The export

oriented RMG started its journey only since 1977-78 with 6 manufacturing units. As a matter of fact, the Bangladesh Primary Textile (PT) & RMG industry started to be a little dynamic since 1983-84 when the country started earning some significant proceed (116.203 US $) through exporting RMG. At that time, the country's spinning sub-sector manufactured only 60.13 million kg of yarn and the power loom weaving produced 109.63 million meters of fabrics and handloom in excess of 600 million meters of finished textiles (national assortments like sari, lungi, towel/gamcha, wrapper/chador, etc.). Contrasting to that scenario, Bangladesh RMG industry exported in excess of US$ 8 billion in 2005-06; the primary textile as a partner of export oriented RMGs and domestic apparel industries produced 538 million kg yarn and 6,515 million meters of fabrics. However, the handloom production has declined from 630 million to 480 million meters in this period of time.

2.3: PERFORMANCE OF COMPOSITE TEXTILE MILLS IN BANGLADESH Composite Textiles and clothing account for about 85% of total export earnings of Bangladesh. The share of clothing has increased dramatically from .2% of total exports in 1980 to about 74.8% in 1997-98. Exports of clothing from Bangladesh are characterized by (1) high concentration on low value-added products; (2) heavy dependence on imported intermediate inputs; and (3) high regional concentration of exports. Liberalization of trade following the Uruguay Round agreement presents opportunities as well as challenges for a developing country such as Bangladesh. In the Post-Uruguay Round period, traditional instruments of trade policy such as tariffs, quotas, and subsidies will become less feasible and less relevant. In a liberalized trade regime, competition among textiles and clothing exporting countries is likely to become intense. For a developing country such as Bangladesh, low relative labour costs may not be sufficient for improving the competitive position of the clothing industry. The patterns of comparative advantage and hence the structure of exports and imports depend on stage of economic development (Balassa, 1979). A country's comparative advantage is expected to change as a result of changes in factor endowments, accumulation of human capital, and technological innovations. Countries move along a ladder of comparative advantage as development proceeds: relatively advanced countries will lose competitive advantages in product groups intensive in unskilled labour and will shift to products and processes intensive in capital, skilled labour, and innovations. Bangladesh, being a labour-abundant country, started the process of industrialization by concentrating on labour-intensive products such as textiles and clothing. Since clothing is more labour intensive than textiles, it is logical for Bangladesh to demonstrate its comparative advantage in clothing. Over the last decade or so Bangladesh has substantially liberalized its trade regime, moving away from costly protectionist policy toward a more export-friendly trade regime. The Uruguay Round presents opportunities for Bangladesh by liberalizing trade in textiles and clothing over a ten-year transition period. Several factors however, generate uncertainty and present challenges for Bangladesh: trade diversion induced by regional trade blocs, special trade

relationships between trade blocs and some non-member countries, safeguard mechanisms and stringent “rules of origin” introduced by developed countries, China’s accession to the World Trade Organization in the near future, greater competition from major developing countries such as China and India which have a well-integrated textiles and clothing industry The phenomenal growth in RMG, a part of Composite Textile Industry was experienced in the last decade. In 1984-85, No. of Garment factories was 800 RMG jointly with knitwear accounted for more than 70% of total investments in the manufacturing sector during the first half of the 1990’s. At present with about 4000 factories and a workforce of two million, 80% of which are women, employing over 50% of the industrial workforce and having 75% of the total exports earning of the country.

GDP growth of broad Industry like Composite Textile sector was 8.43% in the last year compared to 7.10% in the preceding year. The performance of the industrial sector was mainly based on the growth in textile and wearing apparel. In the last year the contribution of this sector in national income is 28.44%. During 2004-05 export performance of Bangladesh raised up to US$ 8654.52 million (13.83% growth).

Most contributors to the exportable items are RMG (Woven Garments and

Knitwear) The Ready Made Garment industry in Bangladesh accounts for more than 75% of total exports.

Bangladesh is best placed in the region for textiles and garments because of low-cost labor, preferential trade status and advantageous global market access. Government incentives for the spinning and weaving industries include a 15% cash subsidy of the fabric cost to exporters sourcing fabrics locally. There is a huge fabric demand supply gap in the RMG industry which is being met by imports. Thus, the potential for backward linkage industry is enormous. The phenomenal growth in RMG was experienced in the last decade. With about 2,600 factories and a workforce of 1.4 million, RMG jointly with knitwear accounted for more than 70% of total investments in the manufacturing sector during the first half of the 1990’s. At present, number of RMG factories exceeded 3,000, employing over 50% of the industrial workforce and having 75% of the total exports earning of the country.

The textile industry in Bangladesh is thriving. Bangladesh has relatively good access to EU and other markets for textile products, has availability of an industrious and low-wage work force, and has supportive government policies designed to increase investment in the industry. The textile industry is seen as an engine for the economic development of Bangladesh, where per capita income of about $200 is among the lowest in the world. The demand for ready-made garments from Bangladesh is strong. The United States alone imports $1.7 billion per year of garments from Bangladesh, an amount which could be higher but for quota limitations.

The extent of the impact of the removal of the MultiFiber Agreement (MFA) quotas on world textile and apparel trade patterns is likely to depend on a number of factors including the degree of restraint imposed by the quotas. This reviews analytical studies that have looked at the direct impact of quota

elimination on the global pattern of textile and apparel trade and production. Second, it discusses the different competitiveness factors identified in the literature as potentially affecting post- trade patterns Fig 2.2: Performance and Growth of RMG Exports from Bangladesh (1981-82 to 2005-06)

7000 6418 6000 5787 5000

In Milli

4912

on

4860

US$

4584 4352 4020

4000 3783 3001 3000 2547 2000 1064 131 1000 0

7 1981

1985

1991

1995

1996

1997

1998

1999

2000

2002

2003

2004

2005

-82

-86

-92

-96

-97

-98

-99

-

-01

-03

-04

-05

-

2000 Prepared By BRIG GEN MD. ZAKIR HOSSAIN psc, G (Retd) Executive Chairman Bangladesh EPZ Authority, BEPZA Multi-Fiber Agreement (MFA) and Generalized System of Preference (GSP) of the EU are the main actors behind acquainting Bangladesh RMG products to global market ensuring assured market access. Bangladesh is now a significant RMG supplier to North America and Europe. Due to phasing out of MFA, many are doubtful about Bangladesh’s ability to maintain the fast growth of the recent years in this sector. However, on a more positive note, Bangladesh is expected to maintain its tarifffree access to EU under the European GSP, since the GSP is not covered by the Uruguay Round

06

Agreement. Recently, Canada has also provided tariff-free access of all the items from Bangladesh.

Meantime, Bangladesh RMG industry has earned strong competitiveness as a global standard RMG source. Marketing network has been spread over the economics of the continents. End users could well recognize and differentiate the products confidently.

2.4: COMPOSITE TEXTILE & CLOTHING INDUSTRY IN BANGLADESH ECONOMY Textiles and clothing sector is the largest manufacturing sector in Bangladesh contributing to nearly 5% of its GDP and 50% of the industrial employment. Bangladesh’s economy is largely driven by exports of readymade garments; almost 75% of Bangladesh’s foreign exchange earnings are by way of readymade garments’ exports. Although historically, Bangladesh has not been a major exporter of T&C products, the preferential access for LDCs in the EU and the US market paved way for an explosive growth of T&C industry in Bangladesh with a strong support from the Bangladeshi Government.

Bangladesh import market for cotton textiles: Bangladesh’s textile industry is highly dependent on imports of yarns and fabrics, which are processed for export purposes. Bangladesh’s imports of cotton textiles were worth US$ 883.1 mn in 2003, registering a CAGR of about 13% since 1998. In terms of volumes, cotton textiles imports of Bangladesh have increased multiple times during the period 19982003. India is the second largest exporter of cotton textiles to Bangladesh, catering to 19% of its total imports in 2003. In relative terms, however, India’s share in this market has gone down (from 24% in 1998) owing to China’s growing dominance in this market.

Cotton yarns and fabrics comprise almost the entire portfolio of Bangladesh’s cotton textiles imports basket, with made-ups imports being almost negligible. Cotton fabrics form the largest import segment, accounting for 77% of total cotton textiles imports in 2003. It is followed by imports of cotton yarn, representing almost 23% of the total cotton textiles import basket.

India has been the leading supplier of cotton yarns to Bangladesh. However, India’s share in cotton yarn import market of Bangladesh has dropped to 46% in 2003 from as high as 93% in 1998. During this period, Pakistan and Hong Kong have emerged as major competitors for India in this market.

Amongst the cotton fabric imports of Bangladesh, dyed fabrics constitute the single largest import category, representing 75% of total cotton fabrics imports in 2003. India’s market share in the cotton fabrics’ import market of Bangladesh is around 12%.

2.5: COMPOSITE TEXTILE INDUSTRY BOOM IN BANGLADESH

It would be an unjust to give all the credits to any single part (e.g., global market, Bangladesh business community, or the government policy) for the boom of Bangladesh textile & RMG industry.

In fact, a range of internal and global factors & issues combined has caused it to happen. Bengalis have century long history of mechanized tailoring and several thousand years of experience in hand stitching. The aptitude and art of sewing/stitching has genetically transmitted through the females of this land. Even today, one can hardly find a rural female adult who does not know hand stitching or embroidery work. From long since the textile industry and garmenting have been in this very land that has past export experience too. By exploiting the demand of the global apparel market, the local manufacturers/exporters backed by the responsive state polices have successfully utilized the skilled but cheap manpower resource to recover the land's lost Table2.1: Growth rate of Textile industry in Sector wise

Source: Bangladesh Textile mills owners association pride, once again. Bangladesh Era: As compared to 1972-73, today's capacity of Bangladesh Composite Textile & RMG industry.

The landscape changed largely in the last 22 years. The export oriented RMG started its journey only since 1977-78 with 6 manufacturing units. As a matter of fact, the Bangladesh Primary Textile (PT) & RMG industry starteto be a little dynamic since 1983-84 when the country started earning some significant proceed (116.203 US $) through exporting RMG. At that time, the country's spinning subsector manufactured only 60.13 million kg of yarn and the power loom weaving produced 109.63 million meters of fabrics and handloom in excess of 600 million meters of finished textiles (national assortments like sari, lungi, towel/gamcha, wrapper/chador, etc.).

Contrasting to that scenario, Bangladesh RMG industry exported in excess of US$ 8 billion in 200506; the primary textile as a partner of export oriented RMGs and domestic apparel industries produced 538 million kg yarn and 6,515 million meters of fabrics. However, the handloom production has declined from 630 million to 480 million meters in this period of time.

Bangladesh RMG, Textile & Accessories Industries together now; •

Account for 77% of the total national export earning.

•

Contribute 38% value addition of the industrial sector.

•

Provide some 63% employment in the whole industrial sector of the country.

Fig: 2.3 : Trend of Yarn Production Prepared by Dr. Md.Ali Nesar Khan, Ex Principal, Textile Industry Development Centre. Published January, 2007 in a Global Textile Magazine.

The production growth of the first decade Bangladesh Textiles could not be characterized as any thing closer to impressive, not to speak of booming. The public sector endeavor for development of textile industry in the first decade of Bangladesh was an aftermath of the political philosophy of production imposed by the first government of the country. Inefficiency, corruption and strong trade unionism were the other real barriers to the potential growth of production. Female participation was not significant in this decade

Fig:2.4: RMG Export from Bangladesh Prepared by Dr. Md.Ali Nesar Khan, Ex Principal, Textile Industry Development Centre. Published January, 2007 in a Global Textile Magazine

Fig:2.5: Fabrics Production in Million Meter Prepared by Dr. Md.Ali Nesar Khan, Ex Principal, Textile Industry Development Centre. Published January, 2007 in a Global Textile Magazine 2.6: GROWTH RATE OF TEXTILE INDUSTRY IN BANGLADESH The Textile and Clothing Sector in Bangladesh, predominantly consisting of the Readymade Garments (RMG) industries is currently the largest contributor to the national export earnings.

Starting in the late seventies as a minor non-traditional Sector with as negligible export base, the Sector has growth over the years in geometric progression mans presently accounts for about 75% of the total exports of the country. In FY 2001 the Sector earned US$ 5.2 billion in which the contribution of RMG alone was US$ 4.9 billion. The Sector consisting of 3700 enterprises has a contribution of 5% to the GDP of the country. The Sector represents 24% of all manufacturing production and employs 1.6 million people including 150,000 in backward linkage industries. In the initial years the RMG Sector was heavily dependent upon imports. Imports were as much as 80% of the export value. In addition to fabrics all other accessories like interlining, labels, buttons and sewing threads, all the packaging materials like neck boards, backboards, plastic collar stays, tissue papers, hangtags, pins and clips, hangers and polybags, zippers and draw strings and export cartons used to be imported. Over the last decade, a large number of accessories industries have come up to fill in these gap to the extent of about 70% of the total requirement of the industry. While the country has more or less achieved self-reliance in supply of accessories, the progress is less noticeable in the fabric manufacturing, especially the woven fabric. While the RMG Sector as a whole grew from US$ 867 million in 1989-90 to US$ 4.35 billion in 1999-2000, the knit sub-Sector grew at a faster rate than the rest of the sub-sectors. During the period under reviews, the share of knit sub-sector grew from 15.14% of the total RMG export to 29.16% whereas that of the woven sub-Sector fell from 84.86% to 70.84%.

Bangladesh achieved a phenomenal growth in Readymade Garments exports, which is evident from the table below.

(Value in Mn. US$) Year

Total Export

RMG Export

% of RMG to total export

1995-96

3882.00

2547.13

65.61

1996-97

4418.28

3001.25

64.93

1997-98

5161.20

3781.94

73.28

1998-99

5312.86

4019.98

75.67

1999-00

5752.19

4352.39

75.66

2000-01

6467.30

4860.12

75.15

2001-02

5986.09

4583.80

76.57

2002-03

6548.44

4912.10

75.01

2003-04

7602.99

5686.08

74.79

2004-05

6097.12

4734.14

77.65

The table below shows the product categories of our apparels export to major markets (200304) Total Export Earnings Market

(In MnUS$)

U.S.A

1628.59

85.46%

14.54%

EU

3651.81

51.24%

48.76%

256.40

72.44%

27.56%

62.22%

37.78%

Canada

Overall to all Markets 5686.09 2.7:

Share of Woven Products Share of Knitted Products

MAJOR PROBLEMS CONFRONTING TEXTILE SECTOR IN

BANGLADESH.

The government’s efforts to aid the textile and clothing industry are undermined by “delays in customs clearance, hassles in accessing duty drawbacks, port congestions and various rent-seeking activities.” Both the restrictions and the multiplicity of incentive programmed create serious problems with corruption and illicit activities. In Transparency International’s 2003 Corruption Perceptions Index, this is based on surveys from independent institutions. Bangladesh had the highest perceived level of corruption among 133 countries. “There is a general consensus,” according to one analysis, “that a lot of wealth made by garment entrepreneurs in Bangladesh was government’s own Textile Policy ― 1995 explicitly recognized that “illegal imports of yarn and fabrics earned through illegal means.” in the country is a serious constraint,” and proposed a series of steps to address the problem.

While corruption is among the more intractable problems facing Bangladesh, efforts are underway to address it. Working with outside donors, the Government of Bangladesh is promulgating a new law to

establish and Independent Anti-Corruption Commission. The problems stemming from the bonded warehouse system may also be reduced by reforms of that system, which was revamped at the end of 2003. Under those reforms, all imports for domestic consumption and most of the export-oriented are subject to bank guarantees for import duties (100 percent) and the value-added tax 25 % Complementary reforms are also underway in the government procurement system, as well as the withdrawal of tax holidays for the expansion of existing units and the elimination of certain tax exemptions.

Besides this the following problem also arising in to the Textile Sector.

•

Heavy dependence on imported fabrics.

•

Long lead time.

•

Difficulties in compliance of various standard without increasing costs.

•

Low Labor productivity.

•

Shortage of Working Capital.

•

Large scale production of low value added products.

•

Passive marketing approach.

•

Lack of direct contact with buyers.

•

Inefficient functioning of ports.

•

Poor infrastructure.

•

Regular interruption in our power supply

•

Lack of product and market diversification.

•

Negative impact of FTA/RTA. (TDA/2000)

•

Government inefficiency and corruption

TO REVIEW THE POLICIES & PROGRAM OF THE COMPANY 3.1 C OMPANY P ROFILE A ND H ISTORICAL B ACK G ROUND OF E CHO C OTTON M ILLS L TD .

ECHO COTTON MILLS LTD is one of the largest textile mills in Bangladesh. ECHO COTTON MILLS is the spinners of quality polyester, TC, Viscose's, Cotton yearn, Semi synthetic yearn in Bangladesh. This textile mills is establish 1996. So considering their time period this is the oldest textile mills are in private sector in Bangladesh. The location of ECHO COTTON MILLS is Sreepur Gazipur. The company head office is in Dhaka, the address is 67, Motijheel C/A, Dhaka-1000. The distance of this renowned mill is only 25 minutes drive away from the heart of the capital city Dhaka.

The land area of the mill is 12.36 acre of high developed land.

This projects enjoys excellent infrastructure facilities like electricity, gas, water, land telephone and mobile or radio phone link up it is also connected by high way. This one of the biggest Textile Spinning Mills of the country is as well as very nearer to the biggest Cotton yarn market of Narshindi, Madhobdi Baburhat and also Narayangonj.

This Project has been installed with world class technology from Europe Origin with SKF Germany drafting Zone. Which is capable to produce excellent quality yarn both for domestic consumption to feed local garments industrial as well as the export market.

The project has started its commercial production in 1996. Its products by this long time have created a good name in the domestic market. The quality of yarn produced by this is comparable with any well reputed spinning mill of the country. This good quality also enables the company to sell at a higher price. All of the name and fame of the ECHO COTTON MILLS does not gather in one day. This is the fruit of the staffs hard working and long term vision of the board of directors.

Products: The company is producing yarn mainly consumed by the local weavers and indigenous manufacturers. Though there is a little thrust for the products diversification but differentiation is a major Criterion of the business. In addition to the clients requirement seasonally pushed the company to innovate new item category. The lower count category yarns spring seasons and the higher count categorized are for the winter season. Some of the differentiated products and names of the capacitors are listed below.84 counts, 14 counts, 60 counts, 50 counts, 40 counts, 30 counts 20 counts, yarn.

Yarn is an essential commodity and there are various Classifications cauterization in core products. The company is able to make the following kinds of yarn and by related cotton for which there is demand situation in the local and international Garments and textile markets. The products however emphasize on local weavers because of the relatively higher rate of return and better market ability since the sector grows very fast and requires successive demand, which made it a lucrative segment for many successful spinning industries. ECHO COTTON MILLS manufactures various kind of yarn in 3 shift operation (each shift of 8 hours) Production schedule on the basis of different counts for the period 2007-2008.

Type of Yarn

% of Production

84/1 Count

40%

74/1 Count

10%

60/1 Count

10%

50/1 Count

10%

40/1 Count

10%

30/1 Count

10%

20/1 Count

10%

Total pounds of yarn

100%

The total installed capacity of manufacturing yarn in this project is 2.00 million kgs. During the year 2006-2007 it has produced around 1.90 million kgs of the above mentioned counts.

From the very beginning ECHO COTTON MILLS always seeking for quality production. They is their motto. The company has experienced procurement & merchandizing team working side by side with the clients. In addition to that the company has farmed a reserved for the souring of the raw material in time. Further the company enjoys a reason credit line for importation of the raw material form foreign countries.

The principal suppliers of raw materials: *

California Cotton Company USA.

*

Cotexco Overseas Corporation UK

*

Plexus cotton limited UK

*

Allied cotton mills lahore, Pakistan

*

S.S international karachi Pakistan.

Numbers of Spindles installed: 25,000 spindles The company is now enjoying all the infrastructures facilities such as power, gas, road etc.

GAS: The factory has well connected with gas line facilities that provides sufficient gas supply to the production and also uses for other purpose.

POWER: Failure of power supply is a common phenomenon in our country that caused loss of working hours of production. To ensure uninterrupted and instant power supply to the production, the project has the following facilities. *

Electric substation (REB connected) of 1250 KVA capacity.

*

Gas based generator of 863 (DAEWOO)

*

Diesel generator of 550 KVA (CATERPILLAR)

WATER: The Project has a water treatment plant that provides soft water facilities to the gas generator as well as the production process.

3.2 CORPORATE MISSION: •

Each of activities must benefit

•

Add value to the common wealth of society

•

Accountable to each of the constituents with whom they interact: namely. employees, valued customers, fellow citizens.

3.3 CORPORATE VISION: Their vision is not only to meet the contemporary customer satisfaction, but also those challenges that may arise in the future.

3.4 COMPANY’S WORKING ENVIRONMENT: From the day of production run, they took the necessary steps for the preservation of the local environment. Their continued commitment towards the preventing of environmental degradation and the necessary technological investments has enable to continue and grow their exports day by day in strict co firmly with the environmental guidelines.

The company offers an attainable clean, safe and sound congenial work place to its employees.

Probable hazardous and risky workplaces are properly marked with sings, means, and measures for easy access and safety. The workers are rationally trained for fire safely, emergency evacuation and first aid etc.

3.5 SOCIAL RESPONSIBILITY: Social responsibilities get importance at ECML as they try relentlessly to contribute to the social development. ECML is one of the leading textile processing mills in Narsingdi for producing house textile and long cloth. As a leading textile in that locality, they are also providing job opportunity for both skilled and fresh qualified people.

Their responsibility to the society encourages them to go beyond the sphere of common practices in creating better working environment. All the workers use safety procedures for minimizing health hazards. Saline water is also supplied to the workers is not summer season. Sufficient medical support is always available with highly qualified doctors, nurses and medicines. The company also provides transportation and housing facilities for some employees. They also contribute donation to the local poor meritorious students for higher study. Their employees are also given training facilities at home to enhance their skills and knowledge.

TO REVIEW CORPORATE GOVERNANCE OF THE ORGANIZATION Corporate Governance:

The maintenance of effective corporate Governance remains a key priority to the Board of Echo Cotton Mills Ltd. Even though it is a family concern Textile Mills. Recognizing the importance of it, the Board and management remained committed to high standards of corporate governance. For focusing to the business objectives, there are clear structure and accountabilities supported by well understood policies and procedures to guide the activates of company’s management, both in its dayto-day business.

4.1: Internal Financial control: The directors are responsible for the company’s system of internal financial control.

4.2: Organizational Structure: Mr. M. A. Mannan is the Managing Director of ECML and his wife Mrs. Nur Mohol became the Chairman of ECML. Her three sons are Director of Echo Cotton Mills Ltd. The following chart shows the organizational structure of ECML4.3: Board of Directors: •

Establishing overall policies and procedures for approving and reviewing investment.

•

Delegating authority to approve and review investment.

•

Approving investment for which authority is not delegated.

4.4: Directors’ Responsibilities: The companies Act. 1994 requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company as the end of the financial year and of the project for the year to that date. In preparing those financial statement the directors are required: •

To select suitable accounting policies and then apply in a consistent manner.

•

To make reasonable and prudent judgments and estimates where necessary.

•

To safe whether all applicable accounting standards have been followed, subject to any material departures disclosed and explained in the notes to the financial statements.

•

To take such steps as are reasonable open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

•

To ensure that company keeps accounting records which disclose with reasonable accuracy the financial position of the company which enable them to ensure that the

financial statements comply with the companies Act 1994 and the securities and Exchange Rules 1987.

•

To prepare the financial statements on a going concern basis unless if is inappropriate to presume that the company will continue in business.

4.5: Role of the Board: The Board is the highest level of authority of the company to oversee its operation through appropriate delegation and control.

4.6: Reporting and Communication: The Managing Director reviews and approves the strategic plans of the Business. He also reviews monthly reports of the financial performance of the Business.

TO ACCESS THE DYNAMICS PERFORMANCE OF THE COMPANY 5.1 Production Department: There are mainly five department of Echo Cotton Mills Ltd. They are•

Production Department

•

Marketing Department

•

Accounts Department

•

Commercial Department

•

Merchandising Department

As discuss Earlier, ECML exports 60% of its production. So commercial department and Merchandising department helps for exporting goods. For operating smoothly, ECML opened a branch office at Dhaka in 2002.

Product: The company is producing yarn mainly consumed by the local weavers and indigenous manufacturers. Though there is a little thrust for the products diversification but differentiation is a major Criterion of the business. In addition to the clients requirement seasonally pushed the company to innovate new item category. The lower count category yarns spring seasons and the higher count categorized are for the winter season.

Some of the differentiated products and names of the capacitors are listed below.

84 counts, 14 counts, 60 counts, 50 counts, 40 counts, 30 counts 20 counts, yarn.

The products and production capacity: Yarn is an essential commodity and there are various Classifications cauterization in core products. The company is able to make the following kinds of yarn and by related cotton for which there is demand situation in the local and international Garments and textile markets. The products however emphasize on local weavers because of the relatively higher rate of return and better market ability since the sector grows very fast and requires successive demand, which made it a lucrative segment for many successful spinning industries. ECHO COTTON MILLS manufactures various kind of yarn in 3 shift operation (each shift of 8 hours) Production schedule on the basis of different counts for the period 2007-2008.

Type of Yarn

% of Production

84/1 Count

40%

74/1 Count

10%

60/1 Count

10%

50/1 Count

10%

40/1 Count

10%

30/1 Count

10%

20/1 Count

10%

Total pounds of yarn

100%

The total installed capacity of manufacturing yarn in this project is 2.00 million kgs. During the year it has produced around 1.90 million kgs of the above mentioned counts.

From the very beginning ECHO COTTON MILLS always seeks for quality production. They are their motto. The company has experienced procurement & merchandizing team working side by side with the clients. In addition to that the company has farmed a reserved for the souring of the raw material in time. Further the company enjoys a reason credit line for importation of the raw material form foreign countries.

5.2 Quality Policy: The quality policy of the textile Mill is, “We strive to surpass the minimum quality requirements defined in the purchaser’s contracts.”

5.3. Production sequence: The sequential process of yarn manufacture may be described as follows: RING SPINNING: OPENING, MIXING AND CLEARING (BLOW ROOM): Bales are manually transferred to blow room, strip are cut, packing materials removed and bales are opened, mixed and placed in Bale Breaker manually.. Opening, Cleaning and mixing of fibers take place in Blow Room. The cleaning lines include a metal extractor and a central dust filter limit. The cleaning line opens the tufts of fibers and removes dirt, foreign impurities. Ultimately this opened and cleaned cotton is delivered in lap dorm. Depending on the different grades of raw cotton, their trashcontent and degree of cleaning desired, cleaning points are used.

CARDING: The objectives of carding are to individualize the fibers, re move re maining dirts, neps short & dead fibers and to for m unifor m weight per unit length sliver. After further opening and cleaning at the taker-in region, the fibers are transferred to the c ylinder region where the main carding takes place in between c ylinder and flats.

Fibers are then transferred to doffer and produce a thin web by the stripping action.

The web is then formed into sliver and coiled into sliver cans for transfer to the next process.

DRAWING: The slivers from the carding machine are fed to the feed end of the draw fra me. At draw frame by doubling and drafting, parallelization of fibers takes place. The end product is a regular sliver, which is again coiled into sliver cans. Cans are re moved by auto can changing device. For processing carded cotton ya rn the sliver again passes through 2 n d draw fra me having auto leveler. The main function of auto leveler is to minimize weight per unit length.

Lap Former & Comber: For combed ya rn sliver from pre-drawing passes through lap former to form a sliver lap. Sliver lap is feed to comber to remove short fibers which separate from long staple fiber and delivered in sliver for m. Which again passes through 2nd draw frame with auto leveler?

SIMPLEX FLY FRAME: The slivers processed at draw fra mes in the above ma nner are then fed to si mplex fl y frame, where drafting takes place together with application of some amount of twist to reduce the bulk. The end product roving is then wound on the bobbins in package form.

RING SPINNING: The packaged roving bobbins are fed to ring spinning frames, where considerable drafting takes place together with application of twist. The end product yarn is then wound on ring cops (bobbins). It is a conventional spinning system in which twists are inserted in a yarn by using a revolving traveller. The yarn is wound-on bobbin since the rotational speed of the package is greater than that of the traveler.

WINDING: The yar n rings (bobbins) are fed to automatic winding machine, where yar ns are wound on to larger package (cones or Cheese for ms) at high speed. i mperfections like neps and slubs are re moved and broken ends are spliced at the winding head automaticall y. The yar n finall y wrapped and packed in carton/hessian bag for marketing.

The production flow diagram of conventional ring spinning is shown on the following page:

PROCESS FLOW DIAGRAM (For Ring Spinning) Cotton in Bale form Opening & Mixing Cleaning & Deliver y Carding 1 s t Drawing 2 n d Drawing Si mplex

5.4 M A R K E T I N G P O L I C E S OF E C H O C O T T O N M I L L S L T D .: Although ECML, export 40% & rest of 60% sale in local market, they have no strong marketing Department. For local marketing, at first they collect order from different clients and garments, and according to their requirements they produce the product and then supply to them. Only few persons / agents are related with the marketing.

ECHO COTTON MILLS MARKETING MIX ACTIVITIES: ECHO COTTON MILLS is one of the most important, biggest and renowned textile mills. ECHO COTTON MILLS always follow. Some different strategy of their of their own to maintain their business operation. Marketing is the most major part of any business. With out proper marketing a business can not success or achieve the goal proper marketing can only assure the highest profit of any business.

There are 4 important elements in marketing mix. These are price, products, places and promotions. If any company can maintain these 4 elements properly they can meet the goal or hold the success. A company must need close observation to the price products, place and promotions. ECHO COTTON MILLS is one of the most oldest and renowned textile mills of Bangladesh. For preparing a report on ECHO COTTON MILLS, arranged some questionnaires. From the management and employees of this mills to get answer about how they have consider place price products and promotional activities of their business operations.

When we analysis their all activities we saw that ECHO COTTON MILLS are now hold the maturity stage of their products life cycles. Now our textile market is very competitive but ECHO COTTON MILLS hold a good position, these company follow the product specialization theory.

Again we analysis their present market operational activities and saw that ECHO COTTON MILLS market attractiveness is high and growth stage is low. There is so many textile mills in Bangladesh but at present most of the textile mills units have their own spinning units. So all the textile mills are not depends on the specialized spinning units like ECHO COTTON MILLS .

1.

Products: ECHO COTTON MILLS manufactures different types of yarn such as cotton yarn, viscos,

acrostic yarn, T/C, cotton combed yarn and so on. This mills was established at 1996. At that time our countries textile mills were depends on imported yarn from foreign countries. Then they established this mills. It that time long experience and vast good will. At that time they setup spinning units because then there was a great demand of yarn beside this they have long time experience in yarn

business and raw cotton. From 1942- 1660 they were the wholesaler of India yarn. So they choose to manufacture this products. They have strong back grounds identified and bonafied consumer so at that time they started this business. Beside this our country con not produce sufficient yarn. There is always a deficiency of yarn. The amount of the deficiency yarn is about 1.75 cror kgs. To fulfill the in creasing demand of our cotton market. ECHO COTTON MILLS are still producing the yarn. This mills always produce quality yarn so that though there is enough composite textile mills in Bangladesh they manufacture yarn but still ECHO COTTON MILLS hold their market. There products has a good demand in textile mills, local power looms, local weavers and garments manufacturers. The main customers of their cotton yarn is our country's textile mills and local power looms owners. And he local weavers and garments manufacturers are the customers of T/C and cotton combed. T/C yarn. Beside this some synthetic cotton manufacturers are the main buyers of their viscos and their acreaylic yarns. They are always modifying their products quality. Before present any products to the market they analysis the market demand and their competitors and then their experience motivate them to produce these types of yarn.

2.

PRICE: Price is very much related with the products. This is one of the most important strength for

the company. ECHO COTTON MILLS always produce quality products. They con not negotiate with their quality. So they always use imported raw materials to hold their products quality. They mainly import raw materials from USA, CANDA. CHINA, and Pakistan. They never import any bad quality raw materials, ECHO COTTON MILLS need to pay some extra money to import raw materials, from those countries. So the manufacturing price increase a little bit. But considering the above quality the price is not very high. Besides this ECHO COTTON MILLS always believes in fair competitive markets. So they don't reduce their products price unnecessary or increase it. The Price of ECHO COTTON MILLS is always stagnant but it is true that there price is mainly cost based. The ECHO COTTON MILLS sells their products at a very nominal profits.

3.

Place (Distribution Channels) Place is very much important for any business. It has a great effects on business. ECHO

COTTON MILLS established at 1962. at Sreepur, Ashrafabad. Few years later this are a is goes under Sreepur Industrial area. The corporate head office is at old DOHGS at Banani, Dhaka. Sreepur Industrial are a is very much important for any kinds of industry , on the other hand old DOHS is one of the most important , secured and posh are a of Dhaka city . There is already many textile mills head office established. So the mill authority can get enough chance to communicate with their clients, and they can easily fulfill their clients requirement. On the other hand Sreepur Industrial Area is one of the most important area in Bangladesh. This area is connected by high way and got all the in fracture facilities, like national greed line of electricity, high pressure of gas and water supply the get all the

facilities to operate their business Soundly. On the other hand Sreepurs very near and well collected with one of the biggest cotton Yarn market of the country named Madhobdi, and Baburhat at Nashingdi. We can se that this organization on enjoy lots of facilities, they can easily contact and reach their goods to the local weaker and they can maintain liason with their industrial clients from their head office. ECHO COTTON MILLS has a proper distribution channels. They have 165 main distributors and lots of enlisted brokers and commission agents. Here the channels are between the nations. ECHO COTTON MILLS has 10, Showrooms at Narshingdi, Kustia, Narayangonj. Beside this they sell their products at their Mill gate. They distribute their products and yarns to their benefited dealers at a definite amount. So that the delar can not black marketing their products.

They always pay close observation to the market. ECHO COTTON MILLS provide their own transports to send their products place to place.

4.

Promotion: Promotion is very much important for any company’s product marketing. Proper promotional

activities can help a company to meet their goal. Every company must allocate the promotion budget over the five promotional tools.

These are as follows: 1.

Advertising

2.

Sales Promotion

3.

Public Relations & Publicity

4.

Sales Force

5.

Direct Marketing

a)

ECHO COTTON MILLS also follows different Promotional Activities.

Advertising: Advertising is very much important, for any products sales advertising can be used to build up a long term image for a product. ECHO COTTON MILLS is a renowned textile mills. It has a large name and fame. This mills does not fore cast their advertising in electric media or any printed media regularly. Actually they always depends on their good wills.

They have some billhoard at Dhaka, Sreepur High way. They believes that their good wills and quality products can drage customer’s attraction. b)

Sales Promotion:

Sales promotions is very much important there is some different tools for sales – promotion like. Coupons Contests premiums. ECHO COTTON MILLS always gives their interest at sales promotion. They have 165 main distribution. their product is mainly sell through them. They gain alternation and usually provide information that may lead the consumer to the product. ECHO COTTON MILLS incorporate some concession Inducement or contribution that gives value to the consumer. ECHO COTTON MILLS give good amount of commission. Beside they give them a portion of the company’s profit to motivate them. The company follows different types of activities to increase the sales promotions and motivate their sales persons. c) Public Relations and publicity: ECHO COTTON MILLS always pay close attention to the public relations to hold their good wills and introduce public with their products. It also help them to drag customers attention. The public relations activities have a ability to catch buyers off guard. Public relations can reach prospects who prefer to avoid sales people and advertising. Public relations has the potential for dramatizing a company or products. ECHO COTTON MILLS often donate different charity Programs. Beside this they maintain a School, College, Doctors corner from the own fund. Now a day they are doing a great job. It is tree plantations on the both side of Dhaka, Narsingdi High way. d)

Direct Marketing: ECHO COTTON MILLS sometimes operate direct marketing to increase their promotion,

some times they sells their yarn and cotton products from their mill gate, with good amount of discounts. Beside this sometime they take order from the big Textile Mills and from weaving associations by their efficient manpower and follow direct marketing.

By following All these activities of ECHO COTTON MILLS increase their name, fame, good wills and productivity ECHO COTTON MILLS . believes in smooth completions. The productivity and activity of this renowned organization is some time motivated and some time stagnated but they do not left their main destination. ECHO COTTON MILLS started its business with a heavy capital so this mills is all time financially solvent. And for this reasons they can take any kind of challenges if they face in future. They also hope a very prospective long life.

5.5. Commercial Department: Commercial Department is related for exporting. As 40% product of ECML is exported, so commercial Department plays a significant role for the company. The main tasks of commercial Department are as followsOpening a letter of credit.

Acceptance L/C Realize L/C Putting order shipment Doing everything related with customs.

5.6 Merchandizing Department: Merchandizing Dept. plays a vital role for export. When an order is taken from buyer, the merchandiser is doing is taken from buyer, the merchandiser is doing everything for completing order in such way that buyer has no complain about the product.

5.7: FINANCIAL STATEMENTS AND RATIO ANALYSIS TABLE-4.1: TEN YEARS FINANCIAL STATISTICS -ECHO COTTON MILLS LTD. * Figures in thousand Taka ** Figures in Taka 2008 Results Operations: Revenue*

2007

2006

2005

2004

2003

2002

2001

2,945,921

2,847,712

2,815,858

2,701,713

2,611,289

2,602,4

518,717 478,441 189,273 154,997 3.19

2,930,42 1 512,836 456,855 103,494 78,427 1.69

549,886 494,427 150,605 121,925 2.89

574,172 518,295 204,953 182,299 4.33

628,869 575,544 280,790 260,801 6.19

601,380 548,579 243,635 228,687 5.43

600,40 552,03 236,68 226,74 5.38

0.50

1.00

0.50

0.50

1.50

1.50

0.50

25 (144,457)

5 (22,484)

(54,346)

(328,467)

(497,25

6,087,239

5,144,57 6 3,886,55 9 1,965,20 1

of

2,570,59 7 Gross Profit * 499,931 Operating Profit* 449,975 Net Profit before tax* 156,569 Net Profit after tax * 123,599 Basic Earning per 2.03 share ** Cash Dividend per 0.50 share** Stock Dividend in % 10 Cash Inflow from (88,167) Operating Activities* Financial Position: Total Assets* 6,168,19 3 Fixed Assets-Gross* 4,107,05 7 Fixed Assets-Net* 1,661,65 8

4,061,812 1,880,976

10 (153,149)

(88,559)

4,881,843

4,576,578

3,711,972

3,443,905

3,295,189

3,085,141

3,007,6

2,049,669

2,031,436

2,114,650

2,126,395

2,256,1

Financial Assets* Reserve and Surplus* Gross Working Capital* Net Working Capital* Authorized Capital* Share Holder's Equity * Paid up Capital* Total Long Term Debt*

3,113,77 7 1,230,99 4 4,496,27 6 2,793,42 5 1,000,00 0 2,076,60 1 608,108 2,373,73 9

2,826,215 1,225,774 4,196,005 2,585,451 1,000,000 1,979,759 486,486 2,481,926

2,029,09 5 1,174,90 8 3,169,11 6 1,168,29 7 1,000,00 0 1,875,72 8 463,320 1,533,39 9

1,775,891

1,380,865

1,026,141

742,352

668,40

1,159,661

1,058,796

876,497

678,876

513,36

2,822,681

2535,758

2,180,006

1,684,503

1,495,2

893,037

770,094

471,611

266,906

87,988

1,000,000

1,000,000

1,000,000

1,000,000

1,000,0

1,818,361

1,717,496

1,535,197

1,337,576

1,172,0

421,200 1,396,624

421,200 1,330,961

421,200 1,312,188

421,200 1,378,674

421,20 1,446,0

TABLE-4.1

TEN

YEARS

FINANCIAL

* Figures in thousand Taka

STATISTICS

-

ECHO

COTTON

MILLS

LTD.

** Figures in Taka Key Financial Ratios, Figures and Market Data: Current Ratio Debt Equity Ratio Return on Investment Net Assets Value per share** Payout Ratio Market value of share (at DSE)** Market value of share (at CSE)** Price Earning Ratio (DSE price) Price Earning Ratio (CSE price) Others: Number of shares

2008

2007

2006

2005

2004

2003

2002

2001

2.64:1 1.14 2.00% 73.43

2.60:1 1.25 2.55% 73.62

1.58 0.67 1.52% 67.85

1.46 0.62 2.50% 70.09

1.44 0.63 3.98% 66.74

1.28 0.68 6.06% 61.59

1.19 0.78 5.99% 57.01

1.06 0.99 6.03% 55.85

73.89% 21.90

47.02% 39..50

59.17% 14.79

19.01% 17.52

11.55% 19.06

24.23% 23.26

27.63% 14.48

9.295% 21.40

22.10

40.40

14.88

17.50

19.35

24.90

13.53

21.50

10.79

12.38

8.75

6.66

4.40

3.76

2.67

3.98

10.89

12.66

8.80

6.65

4.47

4.02

2.49

3.99

48,648,600

42,120,000

42,120,000

42,120,000

5,003

4,726

42,120,0 00 4,796

42,120,000

5,905

46,332,0 00 5209

4,693

4,497

3,420

3,600

3,510

3,690

3,679

3,660

3,537

27,540

27,560

27,545

27,522

27,417

27,279

25,676

96.83%

96.90%

96.85

96.77%

96.40%

95.91%

90.28%

60,810,7 50 of 9,147

Number shareholders Number of 3,700 Employees Production (40's 27,254 Equivalent) in lbs Capacity Utilization 95.83%

RATIO ANALYSIS Liquidity dimension A firm's ability to pay its debts can be measured partly through the use of liquidity ratio. A firm should ensure that it does not suffer from lack of liquidity and also that it is not too much highly liquid. Short-term liquidity involves the relationship between current assets and current liabilities. If a firm has sufficient net working capital (the excess of current assets over current liabilities). It is deemed to have sufficient liquidity. There are some ratios that are commonly used to measure liquidity directly, they are I. Current ratio 2. Quick ratio. or acid test 3. Cash ratio Current Ratio The current ratio is a ratio of the firm's total current assets to its total current liabilities. The current ratio is computed by dividing current assets by current Liabilities. Current asset norma11y inc1udes cash, sundry debtors, inventory, marketable securities, and current liability consists of Sundry creditors, short term loans and advance current liabilities and provision for taxes and other accrued expenses. The ratio is Generally an acceptable measure of short term creditors are covered by assets that are likely to be converted into cash in a period corresponding to the maturity of the claims.

A low ratio is an indicator that a firm may not be able to pay its future bills on time, particularly if conditions change. causing a slowdown in cash collections. A high ratio may indicate an excessive amount of current assets and management's failure to utilize the firm's resources properly.

Analysis Here we see that current ration in 2004 is 2.6] time higher than quick ratio because in that year current asset consists more than 6] % of inventory For this reason quick ratio has declined compared to current ratio The quick ratio is gradually increasing year to year because the components of current asset except inventory are increasing at higher rate than that of current liability. By analyzing quick ratio we have realized that the company is reserving more inventory, which can't make any profit. The must follow just in tune process to increase quick ratio and as well as their actual liquidity position.

INTERNATIONAL MARKET SCENARIO FOR TEXTILE INDUSTRY The Ready-made Garments (RMG) industry of Bangladesh is now facing stiff competition in the International market. Since the implementation of total MFA (Multi-FibersAgreement) phase-out already one year have passed and available statistics shows that Bangladesh's woven RMG, the biggest component in its RMG export basket (above 60%), has been gradually experiencing a receded

growth trend. The ability of Bangladesh's RMG industry to take full advantage of the quota phase-out would depend upon mainly exporters' ability to enhance overall competitiveness by exploitation of labor productivity and also through improvement of a number of key factors. The present report is concentrating on identifying the prospects in this sector and to pin-point the key areas which should be addressed to face the challenges of post-MFA global competition. The report contains six sections. A chronological list of MFA phase-out is given in section 1 while in section 2 current trends of world RMG market are highlighted in a nutshell. Section 3 describes the contribution of Bangladesh's RMG industry. Section 4 applies the so-called SWOT (analysis) analysis to identify the problems and prospects of this sector. Section 5 deals with the possible steps and policies to be undertaken to enhance competitiveness of RMG sector. Finally, in the concluding remarks we have highlighted major progress in this sector. MFA (Multi-Fibers Agreement) phase-out refers to chronologically planned abolition of quantitative restrictions (quotas) on global exports of Textiles and Clothing products, T&C, under WTO's Agreement on Textile and Clothing (ATC) of which Ready-made garments (RMG) represents lion's share. Quotas on T&C products were basically imposed by the developed countries such as US and EU under so-called MFA on their imports which are exported from developing countries. The MFA phase-out has been implemented in 4 sub-periods over a 10-year period (Table-1). Bangladesh's RMG export was strongly facilitated by quota regime; 94% of RMG was under the quota restraint and also the quota utilization rate was very high; ranged from 70% to 97% for different categories of RMG items. In the post-MFA era Bangladeshi exporters face fierce competition from other ompetitors like China, India, Vietnam, Thailand, Sri Lanka and ifferent African and Caribbean countries due to the fact that the complete phase-out (abolition) of RMG quota on 1 January, 2005 removed the advantage of quota rents enjoyed by Bangladeshi exporters and forced them to participate in pure price competition in a quota free world market of RMG. phase-out (abolition) of RMG quota on 1 January, 2005 removed the advantage of quota rents enjoyed by Bangladeshi exporters and forced them to participate in pure price competition in a quota free world market of RMG.Bangladesh's RMG export was strongly facilitated by quota regime; 94% of RMG was under the quota restraint and also the quota utilization rate was very high; ranged from 70% to 97% for different categories of RMG items. In the post-MFA era Bangladeshi exporters face fierce competition from other competitors like China, India, Vietnam, Thailand, Sri Lanka and different African and Caribbean countries.In the international market of RMG price is becoming more competitive in the post-MFA quota free world and is gradually following a downward trend and therefore, only the cost-efficient producers like China, India etc. have been increasingly taking their market share in the global RMG export market. Since quota removal China's RMG exports has recorded tremendous performance which represents about 20 percent growth rate in value term during 2005 over the last year. Spectacular growth figure is achieved by China in term of its textile export growth to US in the post-MFA period. India also recorded a phenomenal growth in textile export to US in the post-MFA period. Where as, the export growth of Bangladesh to US has moderated during

the said period (Table -2). Previously, relative unit cost of Bangladesh's RMG was higher than China, India, Vietnam etc. and in the quota free world of RMG market our Bangladeshi exporters have already got another new round of pressure on their comparative cost advantage which was reflected in the recent decelerating growth of woven wear export earning since MFA phase-out. So, there is all reason to be fear that Bangladesh may lose substantial international market share of its woven export if she fails to reduce unit cost.

Export receipt from T&C (particularly RMG products which consist of woven wear and knitwear) is contributing lion's share (in recent years more than 75%) of Bangladesh's total export earning. Of the total RMG export woven wear represents the biggest share, say above 60 percent. About 2 million employment has been created since 1990s of which 90% are Women In the woven wear RMG sector the number of garment factories has registered a regular growth and reached to near about 4000 by the FY04 from 3595 in the FY02 (Table-3). Trend of period average simple rate of total export growth is almost similar in two periods; 1980-90 and 1991-2004 (Table-4a). For RMG export growth the rate is much higher during the first period. Of the RMG export the growth rate for Knitwear export is much higher during the last period as compared to woven wear. 3. Importance of the RMG sector and its performance in the post-MFA era Table-2: Growth of Textile Export to the US. Top 10 Countries.

Textiles Sector Highlights o

The Ready Made Garments industry experienced an export boom in the 1990s because of the excellent negotiation with the U.S in 1984-85.

o

The most beneficial public policy of introducing back to back LC and bonded ware house facility gave a tremendous impetus to the export scenario in Bangladesh.

o

Bangladesh is best placed in the region for textiles and garments because of low-cost labor, preferential trade status and advantageous global market access.

o

Government incentives for the spinning and weaving industries include a 15% cash subsidy of the fabric cost to exporters sourcing fabrics locally.

o

There is a huge fabric demand supply gap in the RMG industry which is being met by imports. Thus, the potential for backward linkage industry is enormous.

Industry Background and Status The phenomenal growth in RMG was experienced in the last decade. In 1984-85, no of Garment factories was 800 RMG jointly with knitwear accounted for more than 70% of total investments in the manufacturing sector during the first half of the 1990’s. At present with about 4,000 factories and a workforce of two million, 80% of which are women, employing over 50% of the industrial workforce and having 75% of the total exports earning of the country. Exhibit 6.1 shows the growth of RMG exports from Bangladesh since 1981-82.

Industry Outlook Multi-Fibre Agreement (MFA) and Generalised System of Preferences (GSP) of the EU are the main actors behind acquainting Bangladesh RMG products to global market ensuring assured market access. Bangladesh is now a significant RMG supplier to North America and Europe. Due to phasing out of MFA, many are doubtful about Bangladesh’s ability to maintain the fast growth of the recent years in this sector but Bangladesh has taken a better position in the U.S.A market through competition. However, on a more positive note, Bangladesh is expected to maintain its tariff-free access to EU under the European GSP, since the GSP is not covered by the Uruguay Round Agreement. Recently, Canada has also provided tariff-free access of all the items from Bangladesh.

Meantime, Bangladesh RMG industry has earned strong competitiveness as a global standard RMG source. Marketing network has been spread over the economies of the continents. End users could well recognize and differentiate the products confidently. Till today, Bangladesh RMG industry largely depends on the imported yarns and fabrics. Bangladesh produces only 10% of export-quality cloth used by the garments industry. The need for establishment of backward-linkage industry has become an immediate concern to the government and the exporters. There are enormous opportunities in setting up composite textiles industry combining textile, yarn and garments.

Investment Opportunities RMG and textile sectors have enormous investment opportunities. Government provides highly favorable policy framework for investment in these sectors. Investors have the following choices: o o o o

Establishment of new textile / RMG mill in the private sector.

Joint ventures with the existing textile / RMG mill.

Acquisition of public sector textile mills that are being privatized.

Indirect investment through financial services and / or leasing.

Spinning Value Addition to the Fibrous Substances Spinning is the first step in textile value chain that adds value to the fibrous substances by converting them into yarn or thread through the processes of drawing, twisting and winding (Exhibit 1).

Characteristics of the yarn vary based on the materials used, fiber length and alignment, quantity of fiber used and degree of twist. The earliest spinning probably involved simply twisting the fibers in the hand. Later, the use of a stick to help twist the fiber was introduced.

Drop spinning involves the use of a stick with a whorl or weight to stabilize the spinning of the stick (called a spindle). The spindle is spun, and hangs supported by the yarn as more fiber is introduced.

This introduced fiber picks up the twist and becomes yarn. However, the development of spinning wheel allowed a continuous and faster yarn production. Spinning wheels are either foot or hand powered. Modern powered spinning, originally done by water or steam power but now done by electricity, is vastly faster than hand spinning. Materials that can be used to create yarn fall into three broad classes: plant, animal, and synthetic. o

Plant materials: cotton, flax (to produce linen), hemp, raffia, yucca, coconut husk, ...;

o

Animal materials: wool, goat (angora or cashmere goat), rabbit (angora), llama, alpaca, dog, camel, silk, ...;

o

Synthetic materials: polyester, nylon, rayon, acetate, mylar...;

o

Apart from the above, mineral materials like asbestos are also used, but not very often.

Spinning Industry in Bangladesh Development of spinning industry in Bangladesh is closely associated with the development of Textile and Clothing (T&C) sector as a whole. Power-driven modern textiles in Bengal were traced back to early twentieth century. Before 1947, modern textiles were only the composite textile mills having spinning and weaving facilities.Later, activities like specialized textile weaving, knitting and hosiery and dyeing-printing-finishing were added. During 1947, there were about 11 composite textile mills in Bangladesh (then East Pakistan) with 1.1 millions spindles and 2.7 thousand looms. Spindles grew to 3.2 millions in 1956 but declined to 0.8 million in 1972 as worn-out obsolete spindles went out of operation. In 1972, large-scale manufacturing units including textile mills were nationalized.

After 1982, state-owned spinning mills were gradually denationalized. By 1999, spindles installed were 2.8 million (2.4 million in the private sector and 0.4 million in the public sector) with an annual production capacity of 200 million kg. BOI sectoral Survey found that in 2004, about 3.44 millions spindles are producing 382 million kg of yarn for the textile industry.

BOI Spinning Sector Study 2008 The spinning sector census was conducted during March? June 2008. Initially, a spinning population frame was prepared combining the lists of BOI registered mills and BTMA members. Total 198 spinning mills were listed and all of them were surveyed. In practice, 10 units could not be traced, while 17 mills were found closed and 13 mills undertook no action to implement their projects. In terms of spindle capacity, only 10.7% spindles were found inactive while 81.2% spindles are in production

Mainly Dhaka-based Production: A geographical analysis of the active spinning mills demonstrates that about 81.6% of millsare located in Dhaka Division and 11.4% in Chittagong Division. On the other hand, Khulna, Rajshahi, Sylhet and Barisal Division have only 2.5%, 1.3%, 1.3% and 1.9% mills respectively.

Dominated by the Local Entrepreneurs and Human Resources: It is observed that among all 158 active mills, almost all the mills (96%) were set up by the local entrepreneurs. Only 4% mills have been established jointly with the foreign investors. Total investment in the active spinning mills is amounted to Taka 8,554 crores. The survey found that about 92,172 people are working in the spinning sub-sector including only 85 foreign experts / technicians.

Yarn Types and Market Scenario The products of the spinning sub-sector are yarns of different categories like cotton, polyester, synthetic, acrylic, filament, woolen, blended, etc. Production data shows that 138 ?in production spinning mills? produced 382.11 thousand MT of yarn in 2003 of which 81% are cotton yarn. Some secondary sources indicate that in 1999, yarn production of 112 million kg satisfied only 22% of total yarn requirement of the Value country. The total demand-supply gap of yarn for 1996-97 was 429 million kg, which increased to 639 million kg in 2002.

Import pattern of yarn into Bangladesh also illustrates the intensity of demand. Exhibit 3 presents data on import of yarn to Bangladesh since FY 1990-91. Major sources of yarns are Taiwan, China, Hong Kong, Korea, Indonesia, India and Thailand. It shows the potential of spinning for further investment.

Challenges of and Supports to the Spinners The success of a robust textile sector largely depends upon an improved and reliable spinning subsector. If spinning sub-sector produces substandard / inferior yarn, its adverse effect persists right across the entire value chain. Availability of raw materials, transportation, port facilities and tariff rationalization are the key challenges to the spinners.

The Government has been supporting the spinners providing lower tariff for machinery spares and raw materials, cash incentives, reduced tax rate, and low-cost funding etc.

Investment Outlook Textile & Clothing is the largest manufacturing sector of Bangladesh providing over 4 million jobs, accounting for 5% of GDP, 40% of manufacturing value addition and 75% of total foreign exchange earnings.

The growing demands for yarn in the local market, comparatively low cost of doing business, lucrative incentive package, favorable investment policy regime etc are the main reasons for investment in this sustainable sector. Spinning could be chosen.

The overall growth performance of modern textiles excepting the export-oriented garments industry has been very poor with only very limited investment taking place in weaving sub-sectors and relatively more new investment in the spinning sub-sector. Modern textiles have developed in a haphazard and footloose manner with little balancing among spinning, weaving, and dyeing-printingfinishing sub-sectors. Most mills are unbalanced with their own structures, and suffer from technological and production shortcomings. Over the years the links between the downstream textiles and garments sub-sector remained weak. Bangladesh entered into export market of readymade garments (RMG) in 1977. Exports of RMG grew at a very fast rate during the last two decades. But this growth has not been supported by a growth of the backward linkage facilities. The RMG industry has to depend upon imports for 85% of fabrics and 40% of yarn required for this expanding export market.

As of 1999, the textile sector of Bangladesh may be characterised by the following facts: there were 2.8 million spindles with an annual production capacity of 200 million kg of thread; the total number of looms were 3,900; 1,200 in private sector and 2,700 in public sector and the annual production capacity was 66.9 million metres of cloth. All the specialised textile mills were in the private sector and they had 40,500 looms producing annually 69 million metres of cloth. The number of body machines/circular machines in knitting and hosiery sector was 8,884, of which 5,753 operated for export market. There were 250 dyeing and finishing units - 175 semi-automatic and 75 automatic and the number of export oriented RMG manufacturing units was 2,650 having an annual production capacity of 1,8 billion pieces.

The total demand-supply gaps of fabric and yarn for 1996-97 were 2,433 million metres and 429 million kg respectively. These gaps would increase to 3,717 million metres and 639 million kg respectively by 2002. This speaks of this textile sector as an important area for potential investments.

The investment in this sector is also attractive because of low wage ($40-70 dollar) per month, and relatively low cost of infrastructure required for setting up textile mills. In an international environment cost of capital and labour in Hong Kong, Korea, Singapore and Taiwan etc are rapidly increasing. The government policy also encourages private investment, especially foreign investment in the textile sector by allowing special facilities such as (a) tax holiday for five, seven, nine and twelve years for industries set up in the developed, less developed, least developed, and special economic zones respectively, (b) tax exemption on royalties, technical know-how and technical fees, (c) tax exemption on interest on foreign loans, (d) tax exemption on capital gains, (e) avoidance of

double taxation, (f) exemption of income tax for foreign technicians for a period of up to 3 years; (g) remittance up to 50% of the salary of the foreigners employed in Bangladesh, (h) facilities for repatriation of invested capital, profits, and dividends abroad, and (i) provision for treating reinvestment of repatriable dividend as new foreign investment. Bangladesh is a member of the World Trade Organisation and its exports of RMG products are benefiting from the Most Favoured Nation status including the post-Uruguay Round tariff rates and reductions in them made by all major developed nations. Bangladesh is a favoured partner in the Generalised System of Preferences of the EU. It is also a signatory to the Uruguay Round Agreement on Textiles and Clothing. It concluded bilateral Multifibre Agreement (MFA) on trade of textiles and clothing with Canada, EU and USA. MFA restrictions on textiles and apparel trade will be withdrawn in phases by 2005 creating a more competitive environment when access to export market will not be as assured as under the current quota system.

A significant number of garment factories that made basic RMG products earlier faced closure in China recently. Bangladesh and other competing countries are now exporting RMG products to China, local manufacturers said. According to Export Promotion Bureau (EPB) statistics, Bangladesh exported knitwear products to China worth $3.071 million in fiscal 2007-08 against $7.65 lakh in the previous fiscal year, posting a staggering 400 percent growth.

In fiscal 2007-08 the country exported woven garments to China worth $6.691 million against $6.323 million in fiscal 2006-07, the EPB data said. The total export to China from Bangladesh amounted to $106.946 million against the import of around $3.0 billion in fiscal 2007-08. China is a prospective market for Bangladeshi RMG as many Chinese manufacturers.

Bangladesh exported cotton T-shirts, singlets and other vests worth $7.92 lakh against $5.78 lakh in 2006. China imported such kind of apparel items worth $976.890 million in 2007 and $926.330 million in 2006 from the rest of the world. "The figure clearly indicates that China itself imports apparel items of a significant amount.," Currently Bangladesh enjoys duty concession on exports of 757 products to Chinese market under Asia Pacific Trade Agreement. Of the 757 products, 22 knitwear items and almost the same amount of woven items are included in the concession category. As a result, the export of knitwear and woven products is maintaining a steady rise in China, market operators.

According to a study by Euromonitor (July 2007), China's middle class (with household incomes of $8,300 to $68,800 per year) grew 22 percent in the last two years to reach 80 million and is expected to increase nearly tenfold by 2020. "As the disposable income of Chinese consumers grows, increased competition within the apparel market offers new opportunities for retailers, both domestic and

international," Euromonitor said. As a part of marketing drive in China, EPB is going to submit a priority list of some Bangladeshi products to commerce ministry next week proposing the Chinese government for giving duty free market access for those A strong chance stays yet to materialize the dream of exporting readymade garment (RMG) worth $25 billion within 2013 from the existing $11.70 billion if the sector is given proper and timely policy support and financial aid from the government side. It may sound ambitious to many in the time of tumultuous global economy that has already affected many of the export destinations of Bangladeshi THE COMPARISON STUDY IN BETWEEN SINHA TEXTILES, ASHRAF TEXTILE MILLS LTD AND ECHO COTTON MILLS SINHA TEXTILES Sinha conception of business germinated from their vision which sees it as a means to the well being of the investors, stakeholders, employees and members of the society at large by creating new wealth in the form of goods and services that go to satisfy the wants of all of them without disturbing or damaging the socio-ecological–economic balance of the Mother Earth and the process of human civilization leading Co-existence of all the living beings. Their mission is the pole star of for maximization of production of quality life saving products and services strictly on ethical and moral standards at minimum costs to the society ensuring optimum benefits to the consumers, the shareholders and other stakeholders.

Their vision is the pose star to million that fulfils their objectives with emphasis on the quality of product, process and services blended with good governance that help build the image of the most venerable corporate-citizenship at home and abroad.

Square all for top quality products at the least cost reaching the lowest ranges of the economic class of people in the country. They value their social obligation.

They strive for best compensation to all the employees who constitute the back born of the management and operational strength of the company through a pay-package composing retirement benefits and other emergency grants and gratis. the financial statements have been prepared in accordance with the going concern principle and historical cost convention. Certain prior year figures have been regrouped/ reclassified to conform to current year’s presentation. Comparative financials of prior period are not consolidated because there were no financials subsidiary of that period.

Now I am showing all Comparison Data specialy in Financial Performance as well as Ratio analysis of Sinha Textile, Ashraf Textile Mills Ltd. with respect of Echo Cotton Mills Ltd. SINHA TEXTILES LTD Financial Result: The Company’s operating financial results, as compared to the previous year, are summarized hereunder: (Taka)

(Taka)

(Taka)

(Taka)

(Taka) Year 2006

Year 2005

Year 2004

Year 2003

Year

2002 Turnover

2,620,965,931

2,390,978,521

2,041,065,393

1,847,818,461

579,900,538

543,160,060

2,459,200,684

2,102,670,263

1,789,018,386 Cost of Goods Sold

2,083,702,523

37,055,759

375,498,161

365,614,504

1,500,281,590 Gross Profit 288,736,796 Operating Expenses

65,329,725

57,551,911

63,866,211

51,363,473

70,530,935

124,160,747

241,101,015

190,090,284

146,362

225,844

47,147,818 Finance cost

77,350,086

67,966,406

150,687,693 Operating Income

437,220,727

417,641,744

1,606,504

61,069 663,215

90,901,286 Other Income 663,215 Net profit Before WPPF 424,163,287

417,702,812

241,247,377

190,316,128

91,564,501 Contribution To WPPF

20,198,252

19,890,610

11,487,970

9,062,673

4,360,214 Net Profit (BT)

403,965,035

397,812,202

229,759,407 181,253,455

87,204,287 Provision for Income Tax 55,131,582

59,864,394

31,069,729

13,359,728

5,751,014 Net Profit (AT)

348,833,453

255,494,330

198,689,678

167,893,727

22.72%

15.27%

1 7.39%

81,453,273 Gross Margin 16.14%

22.13%

Net Margin

13.31%

10.69 %

8.08%

7.98%

10.17

7.45

5.79

4.90

21.24%

17.85%

15.38%

14.11%

27,709,000

25,190,000

4.55% Earning per Share (EPS) 2.38 Return on Equity (ROE) 7.12% Outstanding Shares

34,289,887

30,479,900

25,190,000 Face value Per share (TK)

10

10

10

10

10 The Turnover increased by 9.61% during 2006 over 2005 when it fell by 2.78% over 2004. However the gross margin fell by 2.60% to 22.13% during the year 2006 as against a rise of 48.79% to 22.72% during the previous year. As the operating expenditure and finance cost increased by 13.51% and 13.81% respectively the operating income rose at a lower rate of 4.69% only over the previous year.

Due to non provision of Deferred Tax the Bet Profit increased b 36.53% over the previous year.

SINHA TEXTILES LTD. Unit Cost/kg in Tk.

2006

2005

2004

2003

2002

Raw Material Consumed in Tk.

102.46

93.17

113.35

88.87

74.82

Packing Materials

1.97

1.56

1.50

1.49

1.92

Fuel/Power etc

5.59

4.64

4.73

4.60

4.91

Spare Parts

9.72

6.10

5.71

5.61

4.79

Other Overhead

16.56

17.53

15.49

18.12

17.97

Unit Cost

136.30

123.00

140.78

118.69

104.41

Raw Materials Cost % of Total

75.18%

75.75%

80.52%

74.88%

71.66%

Cost of Production-per KG 120 100

80 Co st in Ta ka

60 40 20 0

2006

2005

2004 200 Financial Year 3

200 2

ASHRAF TEXTILE MILLS LTD. Ashraf Textile mills limited were incorporated in Bangladesh as a public company with limited liability o 20 July 1985 and commenced commercial operation in 1989.

During the year under review, turnover comprised of export and local sales of cotton yarn of different counts including sales of waste cotton from the factory after satisfying all the conditions for revenue recognition as provided in IAS 18. Basic earning: This represents earnings for the year attributable to ordinary shareholders. As there was no preference dividend, minority interest or extra ordinary items, the nit profit for the year has been considered as fully attributable to the ordinary shareholders.

Comparative information have been disclosed in respect for the year ended June 2005 for all numerical information in the financial statements and also the narrative and descriptive information when it is relevant for understanding of the current period’s financial statements.

As you are all aware, world economy during the last financial year had to face severe challenges.

Unbundled price increase of petroleum products and some essential commodities in the international Market led to the consequential impact on the consumers, phasing out of the MFA and the dooms day forecast for the Bangladesh RMG industry. Liquidity crisis and the extreme volatility in the inter bank

money market at levels never witnessed before, the “dollar crisis� in the local market affected opening of import L/Cs, devaluation of the Bangladesh Taka and the resultant inflationary pressures are worth the mention.

ASHRAF TEXTILE MILLS LTD. Financial Report The operating financial results of the company for the year under review both or Unit-I and Unit-II in comparison to the previous yea are given hereunder.

Particulars

Unit-I

Unit-II 793,557,356

2005-2006 Taka 1,350,995,368

2004-2005 Taka 1,240,623,365

Sales Revenue

557,438,012

Cost of Goods Sold

497,912,802

696,932,223

1,194,845,025

1,141,692,341

Gross Profit

59,525,210

96,625,133

156,150,343

98,931,024

Admin/Selling/Written off Expenses Financial Expenses

13,026,054

14,409,089

27,435,143

26,870,869

38,994,525

71,452,176

110,446,701

56,501,618

Operating Profit

7,504,631

10,763,868

18,268,499

15,558,537

Non-Operating Income Allocation to WPPF

15,500

11,502

27,002

28,810

376,007

538,769

914,776

779,367

Non Profit Before Tax

7,144,124

10,236,601

17,380,725

14,807,980

Net Profit After Tax

6,072,505

8,701,111

14,773,616

14,040,428

Ratios %

%

%

%

%

Gross Profit to Sales

10.68

12.18

11.56

7.97

1.82

2.03

2.17

9.00

8.18

4.55

Admin/Selling/Written 2.34 off Expenses to Sales Financial Expenses to 7.00 Sales

Key Operating and financial data have been presented below in summarized formYear

Fixed Assets

Current Assets

Total Equity

Total Debt

Current Liabilities

1996 1997 1998 1999 2000 2001 2002

180.23 228.54 534.13 504.88 491.61 469.16 502.54

129.14 98.93 131.68 166.63 262.24 454.91 515.03

161.58 173.21 238.57 221.76 228.92 236.91 244.78

99.27 81.45 324.13 296.62 316.74 316.29 316.83

52.72 48.39 85.33 134.74 199.70 368.68 459.70

2003 2004 2005 2006

474.04 449.81 424.41 468.86

631.43 873.69 641.44 690.50

250.20 254.88 259.61 265.93

308.30 293.64 256.56 275.91

550.04 777.47 551.54 617.52

Sales, Net Profit, Rate of Dividend Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Sales Turnover 290.12 309.08 335.73 495.57 582.84 775.43 790.16 829.83 935.34 1240.99 1350.99

Cost of Sold 245.48 267.32 290.88 452.79 490.06 659.12 696.11` 705.98 821.46 1141.69 1194.85

Goods Net Profit Before Tax 16.39 10.46 10.18 15.89 17.11 26.73 7.87 14.25 14.73 14.81 17.38

Rate of Reserve and Dividend Surplus 10.00% 18.97 -29.43 -39.61 22.80 05.00% 29.95 10.00% 37.94 05.00% 45.82 05.00% 51.23 05.00% 55.91 05.00 60.65 05.00% 66.96

Ashraf Textile Mills Ltd.

Fixed Assets-Net 600 500 400

Ta300 ka200 in M100 illi on

0 199 6

1997

199 8

1999

2001 Year

2000

200 2

200 3

200 4

200 5

1500

Turnover

1200 900 600

300 200 100 0 1996

199 7

1998

199 9

2000 Year

200 1

200 2

2003

200 4

2005

Cu rre nt Ass ets

Ta ka in M illi on

1000 800 600

Ta ka in Mil lio n

400 200 100 0 199 6

199 7

199 8

199 9

2000 Yea r

200 1

200 2

200 3

200 4

200 5

1000 800

Current Liabilities

600

400

T 200 a 100 k a 0 i 1996 1997 1998 1999 2001 2000 n Year M il li STATEMENT OF AKIJ TEXTILE MILLS LTD. FINANCIAL o Taka innmillion

2002

2003

2004

Particulars

2002

2003

2004

2005

2006

Authorized Capital

500

500

500

500

500

Issued & Paid Capital

162

162

162

162

162

Current Assets

1,099

1,396

1,342

1,537

1,755

Tangible Fixed Assets(Gross)

468

668

1,006

1,087

1,131

Shareowners Equity

590

668

861

906

974

Turnover(net)

2053

2240

2,558

3,089

3,516

Gross Profit

631

639

740

957

1,176

Profit Before Tax

164

93

141

169

233

Profit After Tax

109

85

90

112

154

Dividend

61

65

69

73

97

Current Ratio (Times)

1.2

1.2

1.2

1.0

1.0

Quick Ratio (Times)

0.5

0.5

0.5

0.6

0.6

Return on Equity(%)

18.5

12.7

10.4

12.4

15.8

Inventory Turnover(Times)

2.7

2.3

2.4

3.0

3.3

Debtors Turnover(Times)

23

16

12

11

10

Fixed Assets Turnover

8.8

7.3

3.8

4.2

5.1

Net Asset Per Share(Taka)

36.5

41.3

53.3

56.0

60.2

2005

Market Price per share

54.2

66.7

94.4

69.6

70.2

Earning per share(Taka)

6.75

5.25

5.54

6.94

9.51

Dividend per Share(Taka)

3.75

4.00

4.25

4.50

6.00

Dividend Rate(%)

37.5

40.0

42.5

45.0

60.0

Dividend Payout Ratio(%)

55.6

76.2

76.6

64.8

63.1

Price Earnings Ratio (Temes)

8.0

12.7

17.0

10.0

7.4

Dividend Yiesl(%)

6.9

6.0

4.5

6.5

8.5

Number of Employees

1,662

1,883

2,000

2,000

2,476

AKIJ TEXTILE MILLS LTD.

Net Sales Income & Profit Before Tax 6000 5000 4000

3000 2000 1000 0

2001 2002 2003 2004 2005 Year

25

Earning Per Share(Taka)

20

15

10

5 0

2002

2001

200 4

2003

2005

2000

RATIO ANALYSIS SINHA TEXTILES Ratio

2005

2004

Net profit margin

10.69%

Return on total asset (ROA Return on total equity (ROE) Earnings per Share (EPS)

12.18% 17.85% 7.45 Taka

Dividend per share Asset per share

2003

4.40 Taka 71.91 Taka

8.08% 12.46% 15.38%

2002

2001

7.98%

4.55 %

3.75%

12%

7.07%

10.40%

14.11%

7.12%

5.99%

5.79Taka

4.90 Taka

2.38 Taka

2.08Taka

3.99 Taka

3.99 Taka

3.80 Taka

3.00 Taka

63.04 Taka 53.68 Taka 8.08 Taka 44.09 Taka

ASHRAF TEXTILE MILLS LTD. Ratio Net profit margin

2005 14.81%

2004 14.73%

Return on total asset (ROA) 16.88%

16.26%

Return on total equity (ROE) 19.99%

19.78%

Earnings per Share (EPS) 12.35 Taka

12.16Taka

Dividend per share Asset per share

5.00 Taka 80.34 Taka

5.00 Taka

2003

2002

2001

14.25%

7.87%

16.73%

16.11%

10.01%

18.20%

19.35% 12.01 Taka 5.00Taka

12.45%

25.90%

9.28 Taka 8.17Taka 5.00 Taka

83.04 Taka 79.99 Taka 68.36 Taka 95.19 Taka

10.00 Taka

AKIJ TEXTILE MILLS LTD. Ratio

2005

Net profit margin

2004

8.21%

8.33%

Return on total asset (ROA) 12.88%

13.26%

Return on total equity (ROE) 18.99%

17.78%

Earnings per Share (EPS)

5.25Taka

6.75Taka

Dividend per share Asset per share

3.75Taka 36.5Taka

2003 9.25%

2001

9.87%

14.11%

10.73%

16.01%

18.35%

4 .00 Taka

41.3Taka

2002

13.45%

5.54Taka

17.20% 18.90%

6.94Taka 9.51Taka

4.25Taka

4.50 Taka

6.00 Taka

53.3Taka

56.0Taka

60.2Taka

2003

2002

2001

4.28%

6.47%

9.65%

ECHO COTTON MILLS LTD. Ratio

2005

2004

Net profit margin

5.26%

2.68%

Return on total asset (ROA)

6.18%

Return on total equity (ROE) Earnings per Share (EPS)

7.83% 10.79 Taka

Dividend per share Asset per share

3.17%

10.00 Taka 73.43Taka

4.18% 12.38Taka 25.00 Taka

5.33% 6.71%

8.45% 10.61%

8.75 Taka 6.66 Taka 5.00Taka

13.66% 16.94% 4.40Taka

10.00 Taka 10.00 Taka

73.62Taka 67.85Taka 48.08 Taka 66.74Taka

FINDINGS OF COMPARISON STUDY Assessment that the above mention all the Textile mills that is Sinha Textiles, Ashraf Textile Mills Ltd. and Echo Cotton Mills Ltd. are doing well in export orientation activities. They are earning the foreign currency by exporting the quality yarn through RMG sector. I observed all their financial performance, quality management, marketing, almost every Textile Mills are in good position.

TO CONDUCT SWOT ANALYSIS OF ECHO COTTON MILLS 7.1: STRENGTH: •

Strong financial capacity.

•

Expertise of the present Managing Director

•

established reputation of the Company

•

Combination of modern technology.

•

A group of skilled and trained human resource with national and internal expertise.

•

Efficient management under umbrella of Echo group.

•

Reputation in the national and international market for the higher quality product.

•

A strong linkage between the all sister companies of Echo Cotton Mills Ltd. Textile division.

7.2: WEAKNESS: •

Dependent on 100% imported raw materials and technology.

•

Difficult to cope with always upgraded new technology.

•

Administrative cost is comparatively higher.

•

Higher dependency of borrowed capital.

•

Out-dated plan of decision making

7.3: OPPORTUNITY: •

Very higher quality product which have a good demand in both nation al and international market.

•

Market for a large portion of product is ensured within the other sister companies of Echo Group.

•

After withdraw of the quota system of garments products from early 2007 demand of the yarn will be higher.

•

After full integration of total Echo Cotton Mills Textile Division the administrative cost might be lower.

•

There is a good opportunity for marketing more production in future.

•

Increased Demand structure with Industrial development.

•

Scope of establishing new composite Textile Industry Unit

7.4: THREAT: •

Very competitive national and international market.

•

Many new companies are coming in front with new product and new technology.

•

Dependency of foreign countries for raw material.

•

Many neighboring companies are in more advanced situation.

•

National and international yarn market is always fluctuating.

7.5: Observations: Till today, Bangladesh RMG industry largely depends on the imported yarns and fabrics. Bangladesh produces only 10% of export-quality cloth used by the garments industry. The need for establishment of backward-linkage industry has become an immediate concern to the government and the exporters.

There are enormous opportunities in setting up composite textiles industry combining textile, yarn and garments. RMG and textile sectors have enormous investment opportunities. Government provides highly favorable policy framework for investment in these sectors. In view of Padma Textile Mills three shifts working a day and 361 days during the year under report with sincerity, devotion and cordiality our members of work force at the factory have been able to achieve production target

matching our expectation; we have been able to attain 91% production of our installed capacity which is the same as of the previous year. Padma We mainly produce 100% cotton yarn, ranging from 6/1 to 82/1 counts and 65:35 PC of various counts depending upon customers’ order and market demand.

We know that quota for Readymade garments (RMG) exports to USA market eliminated totally from the dawn of January, 2006. As a result textile sector in general is facing manifold challenges and our company is no exception. During the year although there was slight increase in the yarn price but the benefit could not be reaped because of increase of price of raw cotton in the international market. The high price of raw material some what diminished the margin in the revenue which in turn resulted decrease in income over last year.

In spite of the fact that the production capacity of the factory remained unchanged as that of the previous year the management of the company by using its highest management capability and close monitoring could keep the cost of production under control even after increase in the price of raw cotton, fuel & lubricant, spare parts, packing materials and other related items. Because of this endeavor of the management the company has been able to earn some amount of profit during the year under report, however, small it is.

7.6: MEASURES TO INCREASE THE EXPORT MARKET OF TEXTILE PRODUCT 1. Enhance the efficiency of Chittagong Port Bangladesh can become more competitive by reducing transaction costs. The government should within seven days launch a package of special measures to increase the efficiency of Chittagong Port.

It is possible to halve the time to load and off load containers. The services of one of the many efficient port operators in Singapore, Malaysia or Hong Kong should be engaged for this purpose.

Chittagong port should operate 24 hours a day, seven days a week in three shifts. The port should be declared an 'essential service' thereby ensuring there is no stoppage of work. The most modern equipment should be used. We should bench mark our performance on the basis of that of Singapore or Hong Kong. At the end of the 100 days the existing surcharge should be eliminated, our freight rates should be the most competitive in the region.

2. Direct Shipping Facilities BSC and other shipping companies should operate a twice weekly service to Korea, Taiwan and Hong Kong to speed up the movement of fabrics from these countries to Bangladesh.

3. Improved Air freight facilities Govt. should immediately permit unrestricted air freight services to all major export destinations for garments, as well as to countries from where fabrics are imported. There should be a minimum of red tape. The govt. should rapidly move to an "open skies" policy and give the maximum possible

encouragement to the private sector. The 'open skies' policy should also apply to passenger traffic.

Aviation fuel and handling charges should be brought into line with neighboring countries.

4. Improved inland trucking, rail and barge services Various measures should be taken to improve movement of trucks between Chittagong and Dhaka.

The import of new cargo trucks should be made duty free. Railway wagon capacity should be increased and improved barge services between Dhaka and chittagong should be encouraged.

5. Image building and promotion of Bangladesh's RMG products The government, with the help of a reputed international public relations company, should launch a media campaign in the US and Europe to promote simultaneously the image of the country, its range of RMG products and other exports. In addition to the media campaign Bangladesh should increase its participation in trade fairs and specialized garment exhibitions and fairs. BATEXPO which has been postponed should be held at the earliest opportunity. All our missions abroad should be fully mobilized to ensure the maximum possible participation from overseas buyers.

6. Search for new markets A serious effort should be made to explore new markets for RMG exports. Japan, Australia, Russia, Eastern Europe, the Nordic countries, Central Asia, Africa, the Middle East are some of the places a serious effort can be made to carve out a niche for Bangladesh garments. President BGMEA can lead a delegation in some of these countries.

7. Expansion of exports to the European Union There is a lot of potential to expand exports to Italy, Germany, Britain and France, who are the principal importers in Europe, and also to other EU countries. Special efforts should be made to persuade the EU to relax its rules of origin. All our Ambassadors and High Commissioners should be instructed to give the search for new markets and the expansion of existing ones the highest priority.

8. Duty free access to the Indian market The government should make a special effort to persuade the Indian government to fulfill its commitment to extend duty free access to all ready made garments from Bangladesh along with 24 other items. Every effort should be made to get India to implement this commitment within the next hundred days. Duty free access to the Indian market will open up tremendous opportunities for Bangladesh.

9. Establishment of joint BGMEA/ EPB IT and research unit BGMEA and EPB should jointly set up an IT unit, which should also be able to undertake research work. Some top IT experts should be hired. BGMEA’s web page should be interactive and should serve to market worldwide, the full range of RMG products produced in the country. The IT/ research cell should monitor world wide developments in the garment sector and keep track of exports in all important categories to the US and EU markets. Bangladesh manufacturers should become much more price sensitive and product sensitive and must know the nature of the competition they have to face.

10. Government should assume full responsibility for lobbying and research work in support of the RMG sector Although presently the entire cost of lobbying and research work in the US is being underwritten by BGMEA, it is essential that the government of Bangladesh assume this responsibility either partially or in full. This will ensure the optimum co-operation, co-ordination and team work between all the key persons in Washington and also between the team in Washington and the proposed task force in Dhaka.

11. Bangladesh Bank should encourage improved banking services Bangladesh Bank should meet periodically with local Banks to monitor developments in the RMG sector. Local Banks should be encouraged to substantially reduce their charges across the board, in particular their commission on LCs. Equally important Bangladesh Bank should ensure that local banks promptly settle their payments against LCs on the due dates.

12. Customs procedures should be simplified and computerized While there has been some recent improvement in reducing customs procedures, much more needs to be done. The Govt. should immediately engage the services of a top IT firm to provide a software package, which could further simplify the existing procedures while allowing for full transparency.

This will enable the govt. to closely monitor the performance of the customs authorities, avoid corruption, increase customs revenues and substantially reduce transaction time and costs.

13. Government should revamp and improve BEPZA A through overhaul of BEPZA should take place. BEPZA should be very sensitive to both the concerns of foreign and local investors inside BEPZA while ensuring that the interests of the workers are upheld. BEPZA should provide improved facilities to investors and should remove some of the existing anomalies such as the dollar based wage schedule. BEPZA should above all upgrade and strengthen security within all the

EPZs. Under no circumstances should acts of terrorism, intimidation, toll collection be tolerated. This should of course apply to the entire country.

14. Reduction of utility costs and ensuring uninterrupted supply of power Government must closely monitor not only labor costs but also utility charges in all the neighboring countries, Bangladesh must remain competitive. If necessary RMG factories may be given electricity and water at subsidized rates. Telephone charges for overseas calls from Bangladesh are today among the highest in the world. These charges should be reduced substantially. Similarly government must ensure a steady supply of power to all RMG factories.

15. Establishment of garment villages Within 100 days the government in close consultation with BGMEA, must prepare a blue print to establish two garment villages, one in Dhaka and the other in Chittagong, which could house most of the existing garment factories located in residential and commercial areas. Dormitories should be provided along with a special bus service to transport the workers to the garment village and back.

Government should immediately allocate the 1000 acres of land promised in Sreepur to BGMEA for this purpose. Such a garment village should provide state of the art facilities; should ensure safety of the workers and meet the international norms regarding working conditions and workers’ rights. The garment village should be provided with all necessary utilities and security arrangements.

16. Preparation a of blue print for backward linkage industries Within 100 days the government should prepare a blue print to set up 10 new composite textile mills.

Some of the existing loss making jute and textile mills in the public sector should be closed down and the premises should be used for the new composite mills. Bangladesh should launch a major drive to attract foreign direct investment for these 10 composite textile mills; a special effort should be made to contact textile factory owners in the US, who have been obliged to close down their loss making factories. The machinery from these mills can be then upgraded and shifted to Bangladesh. Mill owners in India and Pakistan can also be contacted. Chinese suppliers of textile machinery have already indicated their willingness to participate as joint venture partners. The government should help the local private sector mobilize the funds. Support from ADB, World Bank and IFC should be sought.

17. Unanimous resolution against hartals and student politics The government and opposition should join hands to adopt a unanimous resolution in parliament agreeing to an indefinite moratorium on all hartals, as well as on all student politics. 18. Shift to a six day week with Sunday as the weekly holiday In order to facilitate business with the rest of the world Bangladesh should follow the international practice of having Sunday as the weekly holiday. To make

up for lost time and increase productivity we should dispense, with the two-day weekend for the time being.

18. Essential Services should be available 24 hours a day seven days a week Since the port will be open 24 hours a day, customs services and all other support facilities should also be available seven days a week. This should also apply to the ICD in Dhaka.

19. BGMEA/BEPZA/EPB : 24 hour emergency service A focal point to address all complaints and emergency requests in respect of RMG exports should be established. This would help garment manufacturers, buyers and a host of other stake holders to speak to someone in authority about complaints or emergency assistance, which may be required. 21 20. Finalization of paper on current status and future out look for RMG exports While BGMEA has recently prepared a status report based on a survey of 1500 RMG factories, which indicates that one third of the factories have closed down whilst a further one third are in serious difficulties, some further research work is required. The report should also examine the outlook for 2002 and address the issue of the implications of the decline of RMG exports on the economy as well as on the social fabric of the country.

21. BOI/BGMEA welcome service at Zia International airport It is imperative that during these critical days a special effort be made to create a good impression on foreign visitors to Bangladesh. All buyers as well as prospective investors, should be able to enter Bangladesh without having to face the trauma of negotiating immigration and customs by themselves, and thereafter the chaos and commotion awaiting them outside. A welcome service would help to create a positive impression on arrival and should also be available to departing buyers. In this connection we should further liberalize our policy in regard to issuing long-term multiple entry visas and work permits to buyers and foreign investors.

22. Production of high value items The quality of stitching in Bangladesh is today considered among the best in the world. This expertise should now be used to produce a wider range of RMG products, in particular more value added items.

This will require investment in consultancy services and the development of new training programme and institutions. Bangladesh needs its own designers, specialists in quality control, experts and supervisors.

23. Combating the problems of law and order, traffic congestion and pollution For any serious investor and this applies also to important buyers, many of whom are frequent visitors to Bangladesh, the quality of life in the country is of paramount importance. In recent years there has been a sharp deterioration in the quality of life in Dhaka; the law and order situation, the traffic congestion and the sharp increase in pollution are the principal reasons for this. These three problems have already been identified by the new government as priority problems. It is important during the first 100 days there is tangible evidence that the government is making some progress in tackling these problems.

24. Reaffirmation of commitment to MOU on child labor It is essential that BGMEA, with strong support from the government, continues to adhere strictly to the MOU on child labor. This path breaking agreement, which took underage children out of factories and put them in schools, earned Bangladesh worldwide praise and recognition. While continuing with the programmed, it is important that this pioneering achievement get both the recognition and reward in the U.S. and Europe that it clearly deserves.

25. Compliance with labor standard codes Most RMG exporters to the US are required by their American buyers to comply with a strict code of labor standards. Factories have to be periodically inspected by auditors appointed by the buyers, who assess work conditions, safety standards, salaries and benefits. BGMEA must be sensitive to the latest developments and should help its members meet the requirements set by US buyers. If Bangladesh establishes a reputation for being sensitive to labor standards, it will give Bangladesh an important advantage vise a some of the competition in the region.

26. Mobilization of NGOs in support of female empowerment Given the fact that Bangladesh has a significant string of achievements in various fields thanks to its many dynamic and visionary NGOs, we need to use the wide range of contacts enjoyed by our NGOs with NGOs all over the world to try and save our garment industry. Our NGOs should contact their partners in the US and Europe and stress the importance of a level playing field for Bangladesh to retain a fair share of these two key markets. We should emphasize the significant multiplier benefits arising out of female employment. The loss of the US market, with hundreds of thousands of unemployed women, will certainly create a major social and economic catastrophe. The slogan 'buy a shirt from Bangladesh and send a child to school' should now be expanded to 'buy a shirt from Bangladesh and empower both a mother and a daughter'. Our NGOs should make their voice heard.

27. Establishment of a task force chaired by the Minister of Commerce A task force chaired by the Minister of Commerce consisting of President BGMEA, Executive Chairman BOI, Vice Chairman EPB, Chairman BEPZA and representatives of all the concerned ministries, should meet once a week to review the implementation of the above mentioned recommendations. The task force should also monitor at the same time the progress by our team in Washington in respect of obtaining duty free and quota free access to the US market.

MAJOR STEPS FOR EFFECTIVE COST REDUCTION STRATEGY ● Improvements in Labor Productivity ● Better industrial Relations ● Reduction of high dependency on imported fabrics ● 4. Reduction of lead time ● Improvement in Backward linkages ● Efficient management of port ● Maintenance of Direct Relationship with Clients ● Provide incentives, Provide Marketing Support ● Ensuring compliance of standards RECOMMENDATIONS & CONCLUSIONS ECHO COTTON MILLS is one of the renowned textile mills of Bangladesh. Every organization some time face different problem during the change of time it is very natural. But if the company successfully over come the barriers then the company can successfully achieve the goals. By getting chance to report on this company here I give some advice for the kind consideration of ECHO COTTON MILLS .

1. ECHO COTTON MILLS gather a large name and fame during her long journey. ECHO COTTON MILLS can take the capital machinery by the help of different renowned leasing company. I thin this will help them t avoid the lengthy banking process and increase its capital.

2. The mill must need to produce superior quality products than the neighboring country products.

3. ECHO COTTON MILLS can import raw cotton from Thailand and Punjab this can reduce their production cost and also save time.

4. Though ECHO COTTON MILLS is one of the famous textile mills in the country but the mill management has a tendency to consider all the textile mills as their competitors we think if the mill consider those extolment as her competitors that they are producing the same count of yarn. They will do better.

5. The mill management must need to take necessary steps to group their customer boundary. They need to operate their business by the demand of their customers.

6. No doubt ECHO COTTON MILLS has vast good will large customers boundary, name and fame.

But at present all the business is controlled, and accelerated by the media. So the mill authority must need to fore cast their advertising for their products promotion at printed media and electronic media.

Before our previous analysis we saw that the mill is now at a maturity stage of their products life cycle. In this stage the mills must need some advertising to increase their sells.

Bangladesh has a great demand of dyed Yarn If ECHO COTTON MILLS Ltd. Set up a new unit for only dying they will earn a lot of foreign currency.

They working condition of the department should be improved. Employees must be provided with adequate working resources. So they can perform their job smoothly.

The salary level should be increased as most of the employees feel that their salary level is much lower than others. If this does not happen then there is a good chance that the department is going to lose some experienced Accountants.

Employees must be put into challenges, so they feel excited and important. Moreover it will increase their working interest & improve their services.

Hired more skilled and experienced employees.

The company is legging behind the technology. So use more modern technology for update information.

Ensure collection of periodical reports, returns, and information about the borrowers.

The company should always monitor the performance of its competitor in the field of foreign trade.

Today’s business is very competitive and complex. To survive in the market the organization need competent people and has to take some effective policy. Now-a- days, textile section continuous to contribute to a great deal in the economy of Bangladesh.

Echo Cotton Mills Ltd. (ECML) has done 15 years of operation in the textile sector. Now a days, there is an opportunities for the textile mills to go in the world market for some treat with European countries. As ECML exports only in Chinas, Japan, Thailand. So ECML has huge opportunity to enter in the European market.

BIBLIOGRAPHY: To prepare this report we have to take help from some annual report of different organization take help from Journals and also take help from Echo Cotton Mills Ltd. Different record. We take helps from these followings: 1.

Annual Report Echo Cotton Mills Ltd

2.

Annual Report of E.P.B

3.

Annual Report of BGMEA.

4.

Annual report of Bangladesh Textile Mills owners association.

5.

Annual report of Bangladesh Spinning Mills owners association.

6.

Annual report of Bangladesh Textile Mills Corporation.

7.

Paper cutting of different daily news paper.

8.

Web Site: http://www.cottonbd.org

9.

Web Site: cottonbangladesh.com

10.

International Textile Magazine