Readymade Garments in transition Economy: A case study from CMT Bangladesh Company

Abstract

This report is a study to observe the correlation between Correlations between CMT Bangladesh as a readymade garments company on the transition of the economy of Bangladesh from LDC to Developing country. The United Nations divides all countries of the world in three categories- Least Developing Countries, Developing Countries, and Developed/ Advanced countries. Until 2018 Bangladesh was considered as a LDC and recently qualified for LDC graduation. There are three indices that need to be successfully passed with required scores- Economic Vulnerability Index, Human Asset Index and Gross National Income per capita. The company in question is a multinational ready-made garments company, Compagnie Mauricienne de Textile Ltée Bangladesh, with vertically integrated operational structure. The company is originated in Mauritius and has a number of plants and offices throughout the sub-saharan region, Europe and Asia. The primary objective of the report is to identify if there is any association between the company and the transitioning economy of Bangladesh. This report also intends to provide insight on how the transition process takes place in case of graduating from the LDC category along with the impact garments industry has had to bring this change. It is also essential for the report to portray the scenario of the textile and ready-made garments in industry in Bangladesh. The financial reports of the two companies- Consumer Knitex Limited and Dignity Textile Mills Limited has been analyzed using different financial ratios to capture its operational efficiency, solvency scenario, liquidity, profitability and value of the company. The analysis reflects both similar and different results for the two companies. Both companies seemed to be a bit sow in terms of converting inventory into cash, DTML much slower than CKL. The efficiency in using assets to generate sales is much better in CKL than in DTML. In terms of liquidity both companies performed similar as in they had more than enough current assets to pay off the liabilities even if those need to be paid with most recent activities. There wasn’t much cash available at hard to pay off all short-term liabilities. In terms of solvency the two companies acted differently. CKL’s state of solvency improved while for DTML it deteriorated. None of the companies made income in those years, they rather suffered loss. So the profitability ratios were actually negative. For CKL, the company seemed to improve by occurring less loss in the company and for DTML, the company was actually suffering more loss in the second year. The valuation ratios gave both positive and negative outcomes. It was concluded that there is actually a connection between the transitioning economy and the performance of the companies and the connection may not always be reflected by evaluating the financial data only, it can be inherent in the company culture and internal control of the company. This report also recommends some plans of action for the company to improve its performance and to cope with the upcoming challenges of the transitioning economy such as to automate operations more, to penetrate newer market segments, and to develop skillful employees etc. There are some recommendations for the government as well to prepare and develop the biggest export industry for a noteworthy change in the economy in which it operates like the signing agreements to obtain trade benefits and help build up the infrastructure of the industry to cope with the imminent changes in the transitioning economy.