Home ›› 25 Sep 2022 ›› Editorial
High inflation, abrupt rise in the price of fuel, supply chain disruptions plus a grim warning of an impending recession coalesce to create a very sobering picture for the entire world. Being a global player, Bangladesh is not immune to the consequences; we have already seen in recent times, a feeling of unease dominating the economy.
The fall in forex reserves is an added worry although the flow of remittance is still maintaining its momentum. However, the RMG industry which experienced a boom just after the pandemic, is showing marked signs of slowing down. In a post Covid-19 world, with a rapid recovery rate and far less health damage than previously predicted, Bangladesh opened up to the world for business when other manufacturing nations were still grappling with a health crisis.
As a result, the local RMG industry was flooded with orders, leading to a bonanza for garment owners. However, the war is now manifesting itself damaging ways with predictions for a dip in RMG income. As per a TBP report, alluding to data from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), local exporters received 163,636 Utilisation Declaration (UD) approvals in the first eight months of 2022, compared to 148,251 posted in the same period last year.
Though this indicates a 10.38 per cent year-on-year growth in Bangladesh’s RMG export orders between January and August, industry insiders say buyers have been reducing and deferring orders since the last two months.
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 an inevitability.
One other factor through which garment sector earnings can be accurately predicted is through UD or Utilisation Declarations. These are essential to import raw materials, export goods, and avail GSP, cash incentives, and other benefits. Exporters are granted UDs by their respective trade associations.
A UD is made three months prior to the exporting of goods; this means that is a UD was made in August then the products will be sent out in November.
BGMEA data show that its members received 22,218 UDs in January, 19,625 in February, 21,465 in March and 21,684 in April. Exporters said the volume was excellent compared to their expectations.
But since May, the number of UDs began to fluctuate. Exporters received 17,001 UDs in May, 23,095 in June, 17,005 in July and 21,543 in August. Many exporters also claimed that the buyers are reducing their order volume even after the issuance of UD.
The current decline in export earnings 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.
