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Export growth retention becomes uphill battle

Arifur Rahaman Tuhin
04 Dec 2023 22:13:50 | Update: 05 Dec 2023 16:48:00
Export growth retention becomes uphill battle

The retention of export growth has become an uphill battle for Bangladesh, as the country posted back to back negative export earnings in October and November this fiscal year.

Latest monthly provisional data from the Export Promotion Bureau (EPB) shows that Bangladesh posted a 1.3 per cent year-on-year export growth in the July-November of FY24, and earned $22.23 billion through exports.

The figure is 9.23 per cent lower than the commerce ministry’s $24.49 billion export target for this period.

Meanwhile, the country posted a 6.05 per cent year-on-year negative earnings this November and earned $5.09 billion from merchandise exports. In October this FY, export earnings dropped by 13.64 per cent to $3.76 billion year-on-year, according to the EPB.

This happened because Bangladesh’s key export industry – the apparel sector – posted negative export growth in those months due to global and domestic crises, including a massive workers’ unrest in the country’s readymade garment sector, spanning from October 23 to November 14.

Industry insiders say earnings from the apparel sector will most likely drop this December as well, and if this happens, overall exports would slip too.

The country faces such a situation at a time when Bangladesh’s forex reserves are steadily dwindling, slipping to $19.4 billion in November 30, central bank data shows.

Due to the ongoing USD shortage, banks are failing to open Letters of Credits (LCs) for exporters, while $1 was being sold for Tk 127.95 last week.

Apparel sector in a bind

According to the EPB, the apparel sector contributed nearly 84 per cent to the country’s overall export earnings. But in the last two months of this FY, this sector failed to retain export growth.

EPB data shows that the apparel sector earnings dropped year-on-year by 13.93 per cent to $3.16 billion in October, and 7.45 per cent to $4.05 billion in November.

As a result, the readymade garment sector witnessed just 2.75 per cent year-on-year growth in the July-November period of FY24, and earned $18.84 billion. The amount is 8.79 per cent lower than the commerce ministry’s $20.65 billion export target for the period.

Industry insiders say they have been facing severe order shortages for a long time due to the ongoing global economic crisis. Amid the situation, the apparel sector recently faced a massive workers’ unrest, which turned violent, leaving at least four dead and hundreds injured.

To tackle the unrest, over a hundred factories postponed production for at least two weeks in Gazipur and Ashulia areas.

Among the factories that temporarily closed doors, many are big volume exporters. Besides, buyers have become cautious in placing orders due to the ongoing political instability in Bangladesh, and rumours of sanction against the apparel makers.

These crises impacted in the last two months exports, insiders told The Business Post.

Commenting on the issue, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, “We are facing global and domestic crises at the same time, which is reflected in our export earnings.

“We are running factories with fewer orders, unit prices are down, the country is facing political instability, and many think the US will impose sanctions against individual exporters as well as on the country’s trade. Both have created pressure on the apparel sector.”

He, however, is optimistic that the December earnings are likely to get better if the country's political atmosphere manages not to worsen further.

Primary commodities

EPB data shows that earnings from fish and agriculture products, which are considered as primary commodities, slipped by 5.61 per cent to $601 million in the first five months of this fiscal year.

Of the figure, frozen and live fish items earned $175 million, which is a 15.88 per cent drop compared year-on-year. Besides, earnings from agriculture products dropped by 0.86 per cent to $421 million in the July-November of FY24, compared to the same period last year.

Leather and leather goods

According to EPB data, earnings from the leather and leather goods sector fell drastically in the first five months of this fiscal year. During the period, the sector earned $427 million, which was 20.55 per cent lower compared to the same period of FY23.

In the July-November period of FY24, export earnings from the leather footwear dropped by 34.75 per cent to $214 million year-on-year.

Jute losing shine

During the Covid-19 period, the jute and jute goods sector achieved a tremendous export growth, and earned over $1 billion in FY21. But when the Russia-Ukraine war started, the sector started to suffer an order crisis.

In the last two FY, the jute and jute goods sector posted negative export earnings.

Recent EPB data shows that export receipts from jute and jute goods experienced a negative growth of 10.99 per cent to $362 million in July-November of FY24.

Another potential export sector, engineering products, again fetched a negative growth of 8.02 per cent to $201 million during the period, down from $218.32 million in the same period of last FY.