Export earnings up $14.7b defying inflation, instability

Bangladesh’s export earnings – riding mostly on the apparel industry – rose by a robust 36.54 per cent to $54.70 billion in the just concluded 2022, braving economic crisis, geopolitical instability and soaring inflation in western countries.

The export earnings are $14.70 billion higher compared to $40.05 billion in 2021. Of this increase, $9 billion came from the readymade garment (RMG) sector.

Moreover, the country recorded the highest-ever single-month export earnings of $5.36 billion with a 9.33 per cent year-on-year growth in December 2022, show the Export Promotion Bureau (EPB) data released on Monday.

Who’re the key contributors?

Apparel sector, the largest contributor to the national exports, contributed 83.60 per cent or $45.7 billion to the total figure. Out of the $45.7 billion, knitwear exporters earned $24.71 billion, while woven products fetched $21 billion.

Beyond the RMG sector, the home textile industry contributed a lot to the national export earnings, turning into the second largest earner with $1.5 billion earnings in 2022.

On the other hand, the leather sector recovered from setbacks and regained its billion dollar mark. Leather and leather goods contributed $1.32 billion to national export earnings, while jute and jute goods earned $1 billion.

Agriculture sector, which has the highest value addition, earned $1 billion.

Among the emerging sectors, non-leather footwear fetched $487 million, followed by pharmaceuticals bringing $176 million, plastic goods $195 million, bicycles $163 million, and furniture $103 million.

Impetus to robust growth

Better performance in non-traditional markets, boosted buyer confidence, diplomacy, rise in unit prices and exports of value added products mostly in the apparel category largely contributed to the robust growth.

Moreover, agriculture products and a few new emerging products also expedited the growth. Another factor was the Covid-19 crisis in China, which prompted buyers to relocate orders to Bangladesh.

Speaking to The Business Post, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, “This export performance exceeds our expectation and is very encouraging at a period when Bangladesh is going through a forex crisis.

“In 2021, we launched apparel diplomacy and met global stakeholders amid the Covid-19 pandemic.

We explored new markets and buyers, especially in the Middle East and North America.”

The unit prices of products also increased due to a hike in raw material prices, and the quantity of value added products exported from Bangladesh rose, he pointed out. Metropolitan Chamber of Commerce and Industry (MCCI) President Saiful Islam said, “In 2022, demand for goods rose due to the ease of Covid-19 situation across the globe. Buyers reduced dependency on a single country like China, which had a cumulative positive impact on us.

“If we consider the export growth of leather and leather products, which is about 40 per cent, it is because of higher demands.”

Experts see relief amid forex crisis

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), said, “An additional $14.70 billion export earnings is very positive for the economy at a period of forex shortages. The RMG sector played a very important role in this regard.”

Another positive sign is that the year ended with a double digit growth, but there are challenges ahead in 2023 which must be addressed, said the economist, also an exporter of leather goods and footwear.

How to retain this growth?

To retain this export growth, the government has to ensure that exporters can open letters of credit (LCs) and there is availability of USD. Meanwhile, it is crucial for the government to ensure supply of electricity and gas to run the factories, said Moazzem.

“It will give confidence to buyers that Bangladesh will be able to execute work orders,” he added.

He then said, “Another key area of focus for exporters is to nurture the new buyers currently on board, while continuing to explore new markets. The government must also take measures to remove non-tariff barriers in countries, mostly in India and other neighboring nations.

“In addition to this, the government has to assess which products have prospects to grow and where, for a continuous increase in export earnings.”

Hopes for Bangladesh

As Bangladesh mostly procures basic items, there is hope that in 2023 it will also post a double digit growth. There are challenges, but low cost production is a secret weapon for the country.

Findings of the McKinsey State of Fashion 2023 Survey show that renowned global buyers and retailers are planning to continue sourcing products from Bangladesh because of a major advantage – reasonable prices.

“Many fashion players are expected to continue to produce garments in historically low-labour cost manufacturing countries such as Bangladesh and Pakistan, but nearshoring will remain on executive radars,” the report notes.

Commenting on the issue, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice President Fazlee Shamim Ehsan said, “We expected about a 20 per cent dip in the European market, but 4 per cent to 5 per cent negative growth would not be a big problem.

“As they promise to continue buying from here, we just need fair prices from retailers and branding to survive and overcome this critical period. In addition to this, the Bangladesh government should continue its policy support to remain competitive in the export market.”

Challenges in 2023

With prospects, there are challenges too. Geopolitical tension centering the Russia-Ukraine war, soaring energy prices and fear of recession are major challenges, said BGMEA president Faruque Hassan.

“Probable political instability ahead of the national polls could put pressure on exports, as well as the economy. Our call is to a peaceful transition. But government policy support can reduce these challenges,” he added. On the issue, MCCI President Saiful Islam said, “Amid the challenges, there is a silver lining for Bangladesh as our products are mostly in the category of everyday needs.

“But it is quite certain that there will be growth unless there is supply chain disruption and further escalation in the Russia-Ukraine war. But the figures might not match those recorded in 2022.”

According to the McKinsey State of Fashion 2023 Survey, inflation, geopolitical instability and supply chain disruptions persist as top risks, and these factors could make global fashion businesses worse in 2023. Seventy-eight per cent of the respondents reported that inflation will be the top risk for fashion businesses in 2023, while 66 per cent said it will be geopolitical instability, and 52 per cent pointed at supply chain disruptions.

Meanwhile, 31 per cent cited increased economic volatility, 28 per cent volatile energy price, 17 per cent rising interest rate, 15 per cent financial market volatility, 7 per cent trade policy changes and 5 per cent Covid-19 pandemic as key risks.