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RMG exports up, despite dip in raw material imports

Arifur Rahaman Tuhin
15 Feb 2024 21:25:16 | Update: 15 Feb 2024 21:25:20
RMG exports up, despite dip in raw material imports

Bangladesh managed to retain export earnings throughout the last one and a half years – from July FY23 to Dec FY24 – despite a downward trend in readymade garment raw material imports, show Export Promotion Bureau (EPB) data.

Meanwhile, central bank data shows that Bangladesh’s imports of RMG raw materials, raw cotton, yarn, fabric and dyeing materials, slipped year-on-year by 17.3 per cent to $7.92 billion in the first half of FY24, and 22.20 per cent year-on-year to $17.31 billion in the entire FY23.

Despite the downward trend in imports, EPB data show that the RMG sector posted a 1.72 per cent to $23.39 billion year-on-year export growth in H1 FY24, and 10.27 per cent to $46.99 billion year-on-year growth in the entire FY23.

Industry insiders say they have been struggling with order shortages since the middle of 2022 due to global economic headwinds, which forced them to reduce raw material imports.

Considering the circumstances, they cast a shadow of doubt on EPB data regarding Bangladesh’s export growth, and urged the government to provide appropriate statistics to help ensure that proper policies are in place.

Speaking to The Business Post, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice President Fazlee Shamim Ehsan said, “When taking central bank data on imports into consideration, EPB’s export statistics seem unrealistic.

“The Bangladesh Bank’s raw materials import information indicates the vulnerability of the situation we are currently in.”

He added, “We believe that the EPB information does not represent our sector’s actual scenario, as there is a gap of billions of USD compared to the central bank export value data. I do not want to say the EPB data is fabricated, but it seems unrealistic.”

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, “Undoubtedly, we have been facing order shortages, which is reflected in the raw material import information.

“Factories in the Bangladesh Export Processing Zone Authority (BEPZA) areas have sent raw materials to other factories, and the EPB is most probably factoring this amount into Bangladesh’s export data.”

Forum, a panel of BGMEA members, recently conducted a survey titled “Garment Industries’ Crucible: Our views.”

The survey findings show that 11.8 per cent of the factories had less than 50 per cent orders than capacity last year, and 42.6 per cent owners have less than 50 per cent orders for the next four months.

Sixty-six exporters participated in the survey, and the factories had on an average 27.5 per cent less order than capacity in 2023.

Cute Dress Industry Ltd Managing Director Sheikh HM Mustafiz, who was involved in the survey, said, “When we evaluated the government data, we experienced a difference.

“There is significant mismatch between the EPB, NBR and Bangladesh Bank information, though those are all government organisations. The government usually follows EPB data to make policies. But due to misinformation, the policies do not work properly.”

The Business Post tried to reach EPB Vice Chairman AHM Ahsan on phone for comments on the matter, but he did not respond till the filing of this report.

Cotton imports dip 38.9%, yarn jumps 5.3%

According to the BGMEA, Bangladesh’s clothing exports are 71 per cent cotton-based. The country, however, meets 99 per cent of its cotton demand through imports. The apparel makers meet their yarn and fabric demands through local spinning mills and imports.

Brazil is the largest cotton supplier to Bangladesh, and occupies 16 per cent market share, while India and the USA hold second and third positions with 12 per cent and 10 per cent market share respectively, according to the United States Department of Agriculture (USDA).

The Bangladesh Textile Mills Association (BTMA) data shows that 519 spinning millers are producing yarn, and meeting more than 70 per cent of the local demand.

Central bank data shows that in the first half of FY24, raw cotton imports declined year-on-year by 38.9 per cent to $2.68 billion. In FY23, raw cotton imports were down by 3.71 per cent to $4.27 billion, compared to the $4.44 billion recorded in FY22.

Local spinning millers said due to the persisting gas supply shortage, their production is down by up to 40 per cent, which in turn caused yarn prices to go up. As a result, apparel makers are forced to increase yarn and fabric imports.

BTMA President Mohammad Ali Khokon had earlier written to the government seeking a rule that will make it mandatory to source at least 80 per cent of raw materials domestically, as they have huge stocks of yarn and fabric in their warehouses.

Khokon said, “If we have good sales, we increase cotton imports. But during the last two years, a large volume of yarn remained in our stock. That is why cotton imports are showing a downtrend.”

Central bank data shows that the country imported yarn worth $1.52 billion in the July-December period of FY24, which is 5.3 per cent higher compared to $1.44 billion recorded year-on-year.

In FY23, however, Bangladesh’s yarn imports had dropped by 46.72 per cent to $2.79 billion year-on-year.

Fabric imports slip as well

Bangladesh usually imports three types of fabric – cotton, man-made fibre (MMF) and mixed, and nearly 98 per cent of the country’s MMF demand is import dependent. The central bank data shows these fabric imports slipped in the first six months of FY24.

During this period, fabric imports dropped by 13.4 per cent to $3.66 billion, whereas manmade fibre imports dropped by 11.6 per cent to $686 million year-on-year.

Meanwhile, in the entire FY23, fabric imports had dropped by 20.05 per cent to $7.94 billion, and MMF imports dipped by 7.66 per cent to $1.45 billion year-on-year.

Apparel makers said due to the gas and energy shortages, they had increased fabric imports compared to previous years, and the raw material mostly came from India, China and Indonesia. Despite the situation, fabric import values slipped as demand decreased.

Sparrow Group Managing Director Shovon Islam said, “Except for January and February’s orders, we had been in a terrible situation in the previous year. There is little reason to be optimistic in the coming days.

“This is happening due to the ongoing global economic headwinds. We are trying to manufacture high-value items, but we are far away from our competitors.”