The New Nation - Internet Edition

LIKE their support to the readymade garment (RMG) industries of the first generation in the eighties and the nineties, the banks can now come forward to invest in the second generation of industries linked to the garment sector. There is a huge opportunity to invest in the backward linkage industries needed by the RMG sector. Investment in such industries can prove to be just as rewarding as in the RMG industries. Presently, there is a scope for the establishment of many spinning mills, weaving and 280 dyeing cum finishing units. Massive investments await being made profitably in the textile sector.

The establishment of even a single spinning mill to make yarn or a composite mill to produce both yarn and fabric requires huge investments. For a local bank in the past, it was easy to finance even a dozen medium to large RMG industries by itself in a short period of time. The bank's resource base allowed such investment. But the spinning mills or composite mills require higher investment. The banks can get around this problem by forming consortiums among themselves to pool enough resources into a fund for investment exclusively in backward linkage industries for the RMG sector.

There are several reasons why the banks should be promoting the linkage industries. If the RMG industries face setbacks from the insufficiency in the easy availability of local yarn and fabric, then the effects of the same will be passed on to the banks. If the garment industries start failing as a consequence of insufficient linkage support, then the huge investments made by the banks in the RMG industries would be at serious risks. The government should play a leading role in promoting such industries. Funds could be mobilised by selling bonds. The government, the banks, other financial institutions and potential investors should waste no time to act together and invest in RMG linkage industries.