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Although the country’s apparel sector witnessed tremendous export growth in 2022 amid the global economic and political crisis, exporters say the new year will be very challenging for them.
In 2023, the sector is likely to face five major crises – fewer work orders, labour unrest, formation of the new minimum wages board, domestic political crisis, and energy crisis.
Industry insiders said the new year would be tougher for them than 2021 and 2022. They said they would directly deal with work orders, labour unrest, and formation of the new minimum wages board but have no control over the political and energy crisis.
To retain export growth amid the global crisis, apparel exporters called on all politicians to carry out political activities peacefully. They also urged the government to ensure uninterrupted power and energy supply.
Commenting on the matter, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, “Considering everything, I can say the new year will be more challenging compared to the last couple of years.”
Global apparel market may shrink
With a strong sign of recovery from the Covid-19 pandemic, the global economy started bouncing back in the early months of the immediate past year. But after the Russian invasion of Ukraine in February, the political and economic situations changed rapidly around the world.
Global supply chains were disrupted, and most countries faced high inflation. This reduced their consumers’ purchasing power, which negatively impacted Bangladesh’s apparel exports.
Industry insiders said they were waiting for Christmas sales but brands failed to release their full stocks during the festival. Buyers also said in the first half of 2023, orders are likely to fall because of high inflation and the huge stocks still left in warehouses.
JFK Fashion Managing Director M Kafil Uddin Ahmed said the situation is horrible in terms of orders in traditional markets. “Buyers are also delaying new orders. Many are even deferring the payments of previous orders due to the financial crisis.”
Bangladesh Garment Buying House Association President Kazi Iftekhar Hossain said exporters would face liquidity and confidence crisis as brands failed to release their full stocks during Christmas.
“Besides, we do not know when the war will stop. On the other hand, Western consumers are struggling to even afford essential goods due to high inflation. This means even if the war stops soon, it will take at least six to seven months for the order situation to turn around.”
The BGMEA president said it is true the global apparel market would likely contract by up to five per cent.
“But we will try to increase exports. Low product costs, good infrastructure, and exploring new markets will hopefully help us retain export growth. Besides, we are focusing on high-value items, which will help us increase export value. But creating new jobs is almost impossible in 2023,” he explained.
Energy crisis
In 2022, all sectors in the country faced severe power and energy crisis, which cut production by up to 40 per cent and also reduced export earnings, industry people said.
When winter arrived, the situation slightly improved, but the government is yet to find any solution to tackle the crisis during next summer. Besides, the government is regularly increasing fuel, gas, and electricity prices, which is increasing production costs.
Southeast Sweaters Chief Executive Officer Mahbubur Rahman Lucky told The Business Post, “We spent Tk 60 lakh on diesel and gas to run generators in 2021, which rose to Tk 3.8 crore in 2022 due to the electricity crisis and the fuel price hike.”
“If the government fails to ensure uninterrupted electricity and gas supply in 2023, we will no longer be as competitive as before.”
Political instability, labour unrest
Though the next general election is still months away, political parties recently engaged in street confrontations. The confrontations even resulted in deaths.
Apparel exporters said if the government and opposition parties fail to solve the crisis through dialogues, it will turn into a big political turmoil, which will severely affect the sector’s earnings.
Besides, as per the labour law, the government will form a new minimum wages board this year. The panel will announce a new wage structure at the end of the year. Many workers have already taken to the streets and demonstrated demanding a new wage board.
Moreover, due to reduced export orders, many factories have announced layoffs and closures.
Industry insiders said more factories would face an order crisis in the new year, which might lead to large-scale worker unrests.
The BGMEA chief said the political conflict should be solved through dialogues for the sake of the economy.
Otherwise, all parties will be losers and citizens will suffer as well, he said.
“If work orders do not increase, it may lead to further worker unrests. We may hold negotiations with labour leaders and the government over new wages. But if there is political instability, everything will go out of our control,” Faruque added.
