Home ›› 21 Jul 2022 ›› Front
Bangladesh, with a 34.38 per cent year-on-year growth, crossed the $50 billion milestone in export earnings for the first time in FY22, but the country’s jute and jute goods sector has failed to maintain its upward momentum.
Affectionately called the “Golden Fibre” industry, this promising sector bagged over $1 billion through exports in each of the previous two fiscal years, shows data from the Export Promotion Bureau (EPB).
Against a government target of $1.42 billion, the sector posted 1.13 billion in export earnings in FY22, which is a 2.91 per cent decline from $1.16 billion recorded in FY21.
Speaking to The Business Post, a number of industry insiders blamed the global inflation, high freight charges, Russia-Ukraine war and a lack of adequate marketing for the sector’s underwhelming export performance in the just concluded fiscal year.
The EPB data reveals that the jute and jute goods’ contribution to Bangladesh’s overall export earnings for FY22 has declined as well, hitting 2.15 per cent in FY22 compared to 2.99 per cent posted in FY21.
The industry earned $698 million through exports of its main items – jute yarn and twine in FY22, which is a year-on-year decline of 12.67 per cent. Export earnings from jute sacks and bags – commonly known as finished goods – declined by 14.01 per cent to $119 million.
However, Bangladesh’s raw jute exports rose to $216 million in FY22, a 56.48 per cent rise from $138 million recorded in the previous fiscal year.
Responding to a query, former chairman of the Bangladesh Jute Mills Association Mohammed Mahbubur Rahman Patwari said, “The industry earned above $1 billion for the first time in FY21, but it was in terms of value not volume.
“After the Covid-19 crisis, raw jute prices almost doubled, and our production costs were adjusted appropriately. This is why export values went up. High transportation costs – especially freight charges – are one of the key reasons behind the decline in jute exports.”
Why did jute good exports decline?
The exporters of jute goods in Bangladesh said they have been navigating through difficult tides ever since the Covid-19 pandemic started spreading across the globe, and the crisis is deepening day by day.
During the Covid-19 pandemic, raw jute prices doubled and freight fare rose by four to five times, which had put the buyers in a difficult situation. Moreover, most of the export destination countries are currently facing political and financial crises.
Just when the jute good exporters were inching towards recovery from such issues, the Russia-Ukraine war and high global inflation blindsided them, industry insiders say.
Bangladesh Jute Mills Association (BJMA) Chairman Md Abul Hossain said, “We were exporting to Russia and Ukraine, but these markets are not accessible now. The purchase capacity of consumers in other countries has dropped as well.
“Because of this, the international buyers have reduced their orders.”
Exporters of jute goods further said buyers import jute yarn and fabrics from Bangladesh and then manufacture a diversified range of goods. But due to skyrocketing prices and high freight charges here, the buyers are now looking for alternatives in their manufacturing process.
Besides, Bangladesh’s competitors are steadily grabbing the market due to a lack of strong marketing initiatives.
Esrat Jahan Chowdhury, director of the Bangladesh Jute Goods Exporters Association, said, “When we export goods worth $40,000 goods in a 40qft container, buyers must pay a minimum vessel fare of $12,500, which was $2,500 – $3,000 in the pre-Covid times.”
“This issue is creating pressure on the buyers and impacting our export earnings.”
Exporters said that although the devaluation of local currency against USD will help them better compete in the global market, the government should organise an international exhibition in Bangladesh to attract buyers.
Policy support key to realising potential
The global jute bag market reached $2.3 billion in 2021. Looking forward, research firm IMARC Group expects the market to hit $ 3.8 billion by 2027, exhibiting a CAGR of 8.94 per cent during 2022-2027.
According to jute good exporters, the global demand for Bangladesh’s golden fibre is high because of its higher quality. However, exporters are unable to cash in on the opportunity due to a lack of adequate research, lack of policy support and proper marketing initiatives.
They added that India and Turkey import raw jute and jute yarn from Bangladesh respectively, and then manufacture value-added products for sale and exports. However, Bangladesh is yet to focus on traditional high demand items such as jute sacks and bags.
It should be noted that the European Union and many other western countries are gradually leaning towards environment friendly packaging items, while phasing out the use of plastics and polyethylene.
Industry insiders say Bangladesh can earn billions by exporting jute goods and sacks to the ever growing western markets.
Oporajeo Ltd’s Managing Director Kazi Monir Hossain said, “Bangladesh is currently exporting primary and secondary goods such as raw jute and yarn. But if the government provides adequate support for producing bags, sacks and other finished goods, exports will go up five-fold.
“To achieve this goal, Bangladesh should organise two to three exhibitions where the government will invite western buyers.” He continued, “Japan and Korea are also interested in using jute items, but our exports to those destinations are very low. Aside from boosting exports to more markets, we need long term policy support and collaboration with the government.”
Echoing the same, Esrat Jahan Chowdhury – also the owner of Tulika, said, “By focusing on goods diversification, we will be able to earn three to four times more through exports. But there are currently not enough initiatives in this regard.
“There are no international standard fairs where we can display our goods. Moreover, there is not enough research and financial support to boost diversification in this sector.”
Raw jute market facing instability
Jute goods exporters claimed that for the last two seasons, raw jute market is facing instability due to syndication and easily available permission to export raw jute without any assessment of local demand.
Bangladesh produces around 11 lakh tonnes of raw jute every year. The country uses two lakh tonnes of the fibre locally, four lakh tonnes to manufacture jute yarn, one lakh tonne to make sacks and bags, around one lakh tonnes for other purposes. Bangladesh exports around three lakh tonnes of raw jute annually, industry insiders claimed.
They said local jute millers begin purchasing raw jute from August to March, but the government allows its export before the demand of local mills are met, this in turn triggers instability in the domestic market.
Stakeholders say although the government gave directive to not stock raw jute for after a certain period and fixed a maximum volume for stocking, most of the middlemen violate this regulation and increase prices through syndication.
“For these reasons, raw jute prices go up locally, which severely impacts our final products,” Syed Ali Alfe Sany Akash, director at the Monami Impex Ltd, told The Business Post.
He added that the government should take further steps to protect this sector for syndicates, and permit the export of raw jute only after the fulfillment of local mills’ demands.
