Home ›› 23 Aug 2022 ›› Front
For record inflation in the US and European countries, readymade garment buyers of this major destinations are delaying in taking their deliveries and seeking discounts on Bangladeshi apparel products.
They are not only seeking discounts but also demanding reduction in purchase order (PO) more than Utilization Declaration (UD).
The global media report claimed that due to the ongoing inflation, many US and European buyers like Walmart and Target had cancelled their orders globally which would heavily affect Bangladeshi apparel exports.
As a consequence, Bangladesh is unlikely to meet the export target in the current FY23. Even many factories might fail to export like the previous year.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) claimed that the country’s export earnings in August is likely to decline by around $500 million than the same period of the previous year due to less order, delay in delivery and forced discounts.
Fakir Fashion exported around $180 million last year and the factory targeted 20 percent growth this year. But buyers cut around 30 percent purchase orders than UD.
Amid this situation buyers are delaying in taking delivery of clothes over $8 million and fixed new shipment dates in October-November, the company’s Managing Director Fakir Kamruzzaman Nahid told The Business Post.
“Due to deferred delivery, letter of credit (LC) liabilities are rising, putting extra burden on me. We are worried about retaining the previous year’s export value,” Nahid added.
Nipa Group Managing Director MD Khosru Chowdhury told The Business Post that his two US buyers claimed that their sale went down due to the rocketing inflation. This is why the buyers asked Khosru to give discount.
“I was compelled to give 5 per cent discount. Buyers also asked us to slow down production. I think discount is better than deferred delivery,” Khosru said.
Square Group Executive Director Md Alauddin said though buyers defer a few quantities of goods, buyers’ business situation is very bad due to the ongoing inflation. This is why they are placing less orders and delaying in taking deliveries.
“Our projection finds that apparel exporters are likely to face tough situation in 2022-2023 if the ongoing global economic situation is not improved soon. During this time, small size factories will have to go through a very critical time due to fall in orders,” Alauddin said.
Square Group targeted 35 per cent growth but after the end of the current fiscal year, the rate might decline to below 20 per cent, he added.
The annual inflation rate in the United States is 8.5 percent for 12 months ending in July 2022 after a rise of 9.1 percent in June, the highest since November 1981, according to the US Labor Department data published on Aug 10.
On the other hand, Euro area annual inflation was 8.9 percent in July 2022, up from 8.6 percent in June, according to a flash estimate from Eurostat, the statistical office of the European Union.
To prevent inflation, the US and European countries raised bank rate and EU devalued euro rate against USD which has reduced purchase capacity.
The BGMEA data showed that Bangladesh’s apparel export orders declined by 12.17 percent during the March-June of 2022 when compared year-on-year due to the Russia-Ukraine war. The situation worsened in July and August.
Global media report said due to low sale and huge stock, Walmart, Target and many major Bangladeshi buyers started cancelling billion dollars’ worth of work orders and deferring shipment.
Shahidullah Azim, Acting President of the BGMEA, told The Business Post, “Walmart is our fourth largest buyer and they purchased above $3 billion clothes from Bangladesh. Target also purchased big volume of clothing. Their cancellation decision will heavily impact our export earnings and it will begin to be visible from October.”
However, Shahidul Haque Mukul, Managing Director of Adams Apparels, said at the end of the year the situation is likely to improve if the war doesn’t prolong.
