Bangladesh exports struggling to grow in US market

Bangladesh’s export sector has struggled to achieve significant growth in the US market, the largest export destination for the country, in the first four months of FY2022-23, where exporters had achieved 49.38 per cent growth in FY2021-22.

According to the Export Promotion Bureau (EPB), the country earned $3.074 billion from the market, posting 0.16 per cent growth between July and October of the ongoing fiscal year. The amount was $3.069 billion during the same period in FY22.

Even the readymade garment sector, which is the leading contributor, saw a fall in export earnings by 0.11 per cent to $2.660 billion in these four months. It was $2.663 billion during the same period in FY22, the data showed.

Industry insiders said that buyers have been left with a huge volume of clothes in stock due to the ongoing global economic crisis and that is why they have been placing fewer orders since July.

The export earnings from the four months reflect that. This situation is likely to continue till January 2023, they said.

Commenting on the issue, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan told The Business Post, “The ongoing Russia-Ukraine war has left the global economy struggling and that has greatly impacted the US economy also.”

“Due to this, the inflation rate there has risen and cut the consumers’ purchase capacity. The brands had sourced a good number of clothes last year and are yet to sell a major portion of the goods,” he said.

“We hope they will able to sell the clothes during the Christmas holidays and come back to us with a large number of orders,” he added.

Order crisis

Industry insiders said Bangladesh had received a huge number of work orders from US companies after the Covid-19 pandemic situation improved. That helped Bangladesh earn $10 billion through exports from a single country in a fiscal year for the first time.

EPB data showed that Bangladesh earned $10.42 billion in FY22, posting 49.38 per cent growth year-on-year. It was $6.97 billion in FY2020-21.

The achievement came at a time when China was facing an energy crisis, Vietnam imposed a strict Covid lockdown and Myanmar was going through a political crisis. Due to these reasons, many buyers from the US market chose Bangladesh as their alternative sourcing hub thanks to the export-oriented factories that operated amid the Covid lockdown.

But when Russia invaded Ukraine in February, the global supply chain collapsed and most of the countries — including the US — fell into severe economic crisis.

“In the first five months of 2022, a huge number of orders came from the US, which we produced and exported till August. But when buyers failed to clear their stocks, the number of orders reduced rapidly,” said Nipa Group Managing Director (MD) Md Khosru Chowdhury.

“The US is one of the countries where my company exports the most but orders from there have dropped by at least 30 per cent in recent times.

“Buyers have said they will place new orders if they can clear their stocks by selling a maximum number of clothes. I think we will receive a big volume of orders after January,” he added.

Talking to The Business Post, TAD Group MD Md Ashikur Rahman Tuhin said, “If we focus on the last fiscal year’s export growth, 49.38 per cent is not normal performance. Buyers had come to Bangladesh but many returned to their previous sourcing countries after the situation improved.”

“It’s true that on-time deliveries will retain maximum buyers longer in Bangladesh. If we can maintain shipment deadlines and the global economic situation improves, Bangladesh will start performing far better in the US market. But it will take more time to achieve that,” he added.

Huge opportunities, little cashing in

China’s apparel exports to the US market have been declining since 2017 owing to the rivalry between the two world superpowers, opening up opportunities for other apparel exporters to raise their market shares.

Bangladesh — the second largest RMG exporter in the world — is yet to capitalise fully on this opportunity, despite having the potential to boost its export volume to western destinations.

BGMEA data shows the US imported 33.69 per cent of clothes from China in 2017, which later dropped to 24.03 per cent in 2021 and 20.68 per cent in the first half of 2022.

On the other hand, the country imported 6.32 per cent of clothes from Bangladesh in 2017, which later rose to 8.76 per cent in 2021 and 10.12 per cent between January and June 2022.

Industry insiders and economists say although a significant amount of orders have already shifted to Bangladesh, the industry is yet to utilise its existing capacity due to a lack of adequate measures.

If the barriers — which include proper research, adoption of technology, strong backchannel linkage, ease of doing business, energy crisis and skilled manpower — are resolved soon, most of the global apparel orders will shift to Bangladesh considering its experience and the relatively low production costs here.

BGMEA President Faruque told The Business Post, “The majority of the orders that shifted to Bangladesh are for cotton-based apparel products.

“We are also trying to boost our manufacturing capacity for non-cotton-based clothes to cash in on this opportunity. We are observing and learning which types of products are shifting to Bangladesh, and preparing to capture more work orders.”

Weighing in on the issue, Research and Policy Integration for Development Chairman Mohammad Abdur Razzaque said that the Chinese market share in the western region is likely to decline up to 10 per cent more within 10 years due to the China-West conflict.

“That will shift most of the orders to South Asia and Bangladesh needs to prepare for it quickly,” he added.