Home ›› 07 Oct 2022 ›› Opinion
According to Bangladeshi exporters, orders for garments in Europe and the USA have dropped by 20 per cent in September. This percentage is done by calculating the purchase order from September to November. The prevailing situation is mainly the result of the high inflation in the importing countries and the stoppage of exports to Russia. According to industry insiders much more RMG products exported to Russia through alternative sources (countries) than direct exports. Currently, around 83 per cent of Bangladesh’s export earnings come from ready-made garments. Half of our exports goes to European countries and 40 per cent to the USA.
In the current economic instability of countries throughout the world, people are spending money not only on clothes but mainly on the purchase of essential commodities.
A few days ago, Walmart, the world’s largest clothing retailer, cancelled orders in various countries including Bangladesh. Bangladeshi-made clothing traders are afraid of huge losses due to such a decision of the USA based company.
Another global economic recession is predicted. The market for clothing in Russia is about $4 trillion, although only 1.5 per cent is exported from Bangladesh. So the Russian market can be a new potential for garment owners because 95 per cent of Bangladesh’s exports to Russia are ready-made garments. Therefore, various initiatives were taken to spread the influence of Bangladesh in this market. But due to the ongoing situation that too is hampered.
Western countries, including the USA, have imposed various sanctions on Russia and kicked out Russian banks from the international transaction system SWIFT, so Bangladeshi businesspersons have been facing obstacles in monetary transactions. For some, the payment has been stuck; some have been cancelled or delayed by the buyer companies just before delivery. The biggest weakness of the garment industry of Bangladesh is the shortage of raw material; in this case we are completely dependent on imports. 80 per cent of the fabric comes from China. Also, India, Pakistan and Sri Lanka are in the list of raw material exporters of garments made in Bangladesh. So when the orders start coming in, Letter of Credit for raw materials is issued accordingly. Later, the clothing traders have to suffer huge financial losses due to the cancellation or postponement of the orders.
Along with this, adverse relations are being created with the companies. In addition, the world’s leading shipping companies have stopped transporting goods to Russia, which has complicated the exchange of goods with the country.
The global energy crisis caused by the Ukraine-Russia war has also affected the country. As prices of fuel oil and liquefied natural gas (LNG) skyrocketed at an unusual rate, the government reduced its imports. Due to this, the power crisis has become severe across the country including the industries. There is a shortage of 1500 MW in the supply of electricity during the peak time of demand.
According to United Power Generation and Distribution Company Ltd (UPGDCL), due to insufficient import of liquefied gas or LNG, these gas-based power plants having a capacity of more than 10,000 MW of electricity are producing half the , but less than half the amount is being produced in these plants. There is a lot of load-shedding in garment factories due to insufficient supply despite the demand, thereby disrupting productivity there.
And for those who continue their production using alternative energy sources; their production costs are increasing many times more than before. 51 per cent of the raw material for power generation comes from gas. This demand is met by adding imported liquefied natural gas to natural gas.
Meanwhile, the world is suffering from the crisis of dollar, the most used currency internationally. In the country’s market, the price of the dollar is increasing uncontrollably, and the price of imported raw materials has also increased abnormally.
The organisation importing raw materials have to suffer due to this. Cost of production and other supplementary costs have increased. But compared to that, importers are not getting enough orders and prices as some exporters are taking advantage of the war from the traders.
Besides, many traders are not being able to deliver products on time because of the raw material crisis. Some US economists have advised importing countries to increase imports from neighbouring countries thereby reducing transit costs to alleviate the on-going energy crisis, which further threatens our country’s export-oriented industries.
Data from the Export Promotion Bureau shows, garment exports generated $42.61 billion in the outgoing fiscal year after the Covid-19 outbreak, which is 35.47 per cent higher than the previous fiscal year and 21.25 per cent more than the target.
So, it is understood that the garment sector would have progressed much further if not for the economic crisis caused by this war.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) came out with the information that four million workers are directly and indirectly involved with the garment industry, of which, 58 per cent are women. Therefore, if for any reason the demand for Bangladeshi manufactured garments falls in the global market, the sector as well as the economy may face a major threat. The authorities concerned should take proper steps in this regard.
Our export basket should be expanded. No country can rely on a single export product. Exporters in general have lack of negotiation skills and they must ensure getting what they deserve for the product.
Like other sectors, the RMG entrepreneurs should be prepared for Post LDC graduation challenges. Though backward linkage industries have developed in the recent years there is room for further improvement. The exporters should seek further avenues. This sector needs to develop the strategies to capture the haute couture market. The exporters should improve their negotiation skills at the bargaining table. The government should allocate a portion of the central fund for the purpose of health insurance for garment workers.
The writer is a journalist. He can be contacted at [email protected]
