Home ›› 22 Sep 2022 ›› Editorial
Just after the Covid-19 pandemic when the world was slowly opening up, the RMG sector experienced a boom in Bangladesh as other garment manufacturing countries were still closed for business due to safety concerns. Bangladesh defied the prediction for a mass outbreak of the virus and with a nation-wide inoculation drive, the factories went for full-blown production. Consequently, orders piled up and export earnings soared. However, with the Ukraine war severely disrupting the supply chain and adversely impacting economies across the globe, economists have given a forewarning for a slowdown that may lead to recession or recession like conditions.
As per a TBP report, Bangladesh’s readymade garment (RMG) industry which had been witnessing a steady growth in exports since August last year, registered negative growth in the first 18 days of September.
National Board of Revenue (NBR) data – compiled by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) – show that the sector’s earnings dipped 12.36 per cent to $1.72 billion in this 18-day period, which was $1.97 billion compared year-on-year.
This is indeed disquieting but definitely not entirely unexpected.
Local manufacturers blamed the decline of overseas sales on the Russia-Ukraine war, global economic crisis, high transportation costs, and increased bank interest rates in their export destination countries.
When the war began in Europe, it was felt initially that it would not last long; however, from the current state of affairs, a long drawn out conflict seems inevitability.
In Bangladesh, rising inflation, abrupt increase of the Dollar exchange rate and energy crisis create a sobering picture. The exhortation from the highest authority to embrace austerity only indicates to tough times ahead.
Since the war has had a deleterious impact on economies in Europe and USA, apparel orders will automatically fall and Bangladesh needs to accept the reality and seek out new markets.
Buyers in developed nations have taken warnings of economic slowdown seriously and are tightening their belts – a fair enough reaction to hard times ahead.
However, RMG industry insiders also bemoan the erratic power supply, which is forcing manufacturers to buy and burn huge amount of diesel in generators. Naturally, in an industry dominated by intense competition, an additional expense brings down profit margins.
The current decline in export earning from falling orders was envisaged six months ago with more emphasis given on finding non-traditional markets. For too long, the focus had been on USA and Europe and therefore, seeking out new markets will be the top priority.
Since the African market is still not fully explored, Bangladesh should open embassies in African nations or send special trade missions. The state can also support an apparel manufacturing trade committee to organise exhibitions in countries where we do not have embassies.
The BGMEA president’s suggestion of a roadshow is practical; however, another canny move may include launching a set of Bangladeshi brands for the international market along with tapping into high end clothing industry. It may seem foolhardy to try to enter the apex segment of the apparel industry but once a presence is ensured, the benefits can be reaped for decades to come.
Keeping the war plus its ramifications in perspective, all moves need to be made strategically and with the acceptance of a falling orders.
The immediate step has to be to reach out to nations in Africa and South America. A few months back, Argentina expressed desire to increase trade with Bangladesh – a proposal that can be pursued.
The embassies in Africa and South America may be given special assignment to showcase Bangladesh’s export potential not only in garment but also in other sectors.
Since the world is slowly sliding into slowdown, a cohesive approach can minimise a fall in export earnings.
