.webp)
Like the Covid-19 pandemic, the country’s export-oriented readymade garment sector has gone through a difficult time in 2023. This year is comparable only with the time after Rana Plaza collapsed when the sector faced big trouble at home and abroad.
In 2023, the apparel sector has had its ups and downs in export earnings and work orders. It has also grappled with problems due to gas and fuel price hikes, interest rate hikes, gas supply shortage, pressure from the western communities on labour rights and massive RMG unrest, which killed at least four workers.
The country’s ongoing political instability also put pressure on the sector’s entrepreneurs. The sector, however, increased minimum wages for RMG workers by 56.25 per cent which has been effective since December 1 this year.
In addition, the sector has achieved a big milestone in terms of the green revolution as two factories received the global top-rated LEED certificate from the US Green Building Council (USGBC).
Industry insiders said that most of the crises will continue next year. Even more crises are likely to hit the sector in the coming year if the ongoing political instability is prolonged and the Western community, especially the United States of America, imposes potential sanctions.
They claim that bureaucratic tangle has increased in 2023, especially from the National Board of Revenue (NBR) and customs, creating barriers to ease of doing business.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice President Fazlee Shamim Ehsan told The Business Post, “Considering everything, we were much better during the coronavirus pandemic period than in 2023.”
“Energy shortage and low order and product prices hit us hard over the year, and these crises continue. Besides, banks are facing liquidity shortage and interest rate is hiked, hampering private investment in the sector.”
Ehsan, also the director of the Bangladesh Employers Federation (BEF), further said, “Political stability and relief from bureaucratic tangles are most important to do business smoothly in the coming year.”
Export earnings
According to the Export Promotion Bureau (EPB) data, Bangladesh earned $42.83 billion in January-November of 2023, registering a 4.35 per cent growth year-on-year.
Despite the economic headwinds, as per the “World Trade Statistical Review” published by WTO in 2023, Bangladesh has regained its ranking as the 2nd largest apparel exporter in the world with a 7.87 per cent share of the global market.
Moreover, Bangladesh has already become the top denim-sourcing country for the US and EU and is now in close competition with the largest apparel exporter-China- in the EU market.
However, the sector posted negative export earnings growth for four months in the January-November period this year.
Industry insiders said that as the Russia-Ukraine war led to a global economic crisis, the Western countries, which hold nearly 80 per cent of Bangladesh’s apparel market share, were hit by high inflation.
That is why consumers’ purchasing capacity went down and brands have a large volume of clothes stocks in their warehouses.
“The crisis continues and the ongoing Palestine-Israel war fuels the crisis. Due to the war, freight cost has gone up, which will impact our business,” Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said.
Businesses said that though they are continuing production with fewer orders than the capacity due to the order shortage, they failed to meet the shipment deadline due to gas shortage. However, they are receiving a good number of orders from non-traditional markets, which helps them to survive.
BGMEA Director Mohiuddin Rubel said that the country failed to retain growth in the US, the single largest export destination, and earnings dropped by 9 per cent in the January-November period.
“Besides, we achieved only 2.28 per cent export earnings growth in the European Union (EU). But the country posted 22.53 per cent growth in the non-traditional market which helped us retain the overall export growth so far this year.”
“Considering ongoing global and domestic crisis, it will be tough for us to retain the growth in the coming days,” he added.
Domestic crisis
Throughout this year, the sector entrepreneurs have been facing many crises from the domestic side. The government increased gas prices up to 178 per cent in early 2023 citing increased gas pressure through LNG import from the spot market.
However, the authority failed to meet their commitment due to the severe forex reserve shortage. Due to the forex reserve shortage crisis, the USD rate going up to Tk 128, which increases their investment costs. Besides, due to the government borrowing from the commercial bank, the sector is facing sloth private credit growth.
This year, Bangladesh also faced political instability, which caused concern among the global community. Since last month, major opposition political parties have been observing countrywide blockades and strikes, and sometimes they turned into violent incidents.
Western community, especially, the US announced a visa sanction policy for creating barriers to a free, fair, participatory and well-accepted election.
Besides, on October 23, workers began protests seeking an increase in the minimum wage to Tk 23,000 to help them cope with skyrocketing inflation. The demonstrations soon turned violent and continued till November 12.
During the unrest, at least four workers were killed and over a hundred got injured while 26 factories were vandalised, and two were torched. Factory owners and police filed 43 cases against workers and trade union leaders, and 115 workers were sent to jail.
To tackle the situation, over a hundred factories were forced to close, and as the situation cooled down following police action, most of the closed factories resumed production on November 15.
The government set Tk 12,500 as the minimum monthly salary for RMG workers which took effect on December 1, though trade unions rejected this, citing insufficient and announced its decision to continue protests peacefully.
Though most of the workers already got bail from the court, some are still in prison, trade unions claim.
The US Department of State, other major global stakeholders, as well as apparel sector brands condemned the “violence” against garment workers in Bangladesh who are demonstrating an increase in the minimum wage.
These stakeholders asked the government to ensure a decent wage for nearly four million RMG workers.
Besides, the US Presidential Memorandum on Advancing Worker Empowerment, Rights, and High Labor Standards Globally, which will allow the country to impose sanctions, penalties and visa restrictions was another headwind. The global attention on US disclosures and European labour regulation has created additional pressure.
The RMG industry is heating up yet again, after a workers’ rights group, Sammilita Sramik Parishad (SSP, announced fresh work abstention from January 1 next year.
Claiming that everyone is using the RMG sector as a political weapon, BGMEA Vice President Md Nasir Uddin said, “The sector will not be able to absorb any further unrest or any violence.”
