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The Financial Express

Boosting RMG exporters' bargaining power  

| Updated: January 31, 2021 22:32:20


Boosting RMG exporters' bargaining power   

The Readymade Garment (RMG) Industry's vulnerability to market uncertainties became manifest during the pandemic more than ever before. Even some big names in the international retail market, which buy garment products from Bangladeshi exporters, failed to go by the stipulated provisions in their contracts. In some cases, the overseas importers even cancelled the previously agreed upon supply orders. Others, on the other hand, came up with arbitrary demands for discounts, price reduction, deferred payments and so on. Being at the receiving end, local RMG companies were left with fewer options but to accept their last-minute demands. What was further upsetting is that in the majority of cases the buyers displayed little or no concern about the plights of the garment workers. Clearly, such incidents have once again exposed how unprepared Bangladesh's RMG sector is to any external shock.

However, such unsavoury pandemic-time experience should be a lesson for the export trade operators. It is that like in diplomacy, there is nothing called permanent friendship or partnership in business. As such, there is hardly any point grudging the opportunistic behaviour of even time-tested buyers in difficult times. Instances of such less-than-ethical business proclivity by overseas buyers of our RMG products were unravelled in a study recently carried out jointly by a local policy think tank and a RMG export-trend tracking body.  Another potentially risky aspect of the country's RMG export that came out from the study is that more than 300 local apparel exporters depend only on six foreign brands for their supply orders. This is despite the fact that there are around 3,600 global brands including retail companies who have been sourcing their apparel imports from over 3,200 Bangladeshi RMG exporters during the last four years. One simply fails to understand why a major chunk of the country's apparel export should be concentrated in the hands of a handful of foreign buyers. That such concentration and the dependence that follows from it can be counter-productive need not be overemphasised.

The best way to avoid such predicament is to be able to enhance the local exporters' bargaining strength with the foreign buyers. And the best way to gain that strength is through the oft-advised path of diversifying the export market for our RMG products. Notably, this lack of bargaining power is not limited to the country's export-oriented garment business alone. In truth, the export sector in its entirety is susceptible to such risks. Such a state of affairs does not speak well of an economy that is otherwise known for its resilience and stability. And such a weakness cannot be allowed to dog it when the country is soon to upgrade itself as a middle-income economy.

While the garment sector should lay stress on diversifying its exportable items, it should also work on widening its export market. At the same time, the government should extend its support, both in terms of policy and incentives, to other potential export sectors. These other sectors may include, for instance, pharmaceuticals, agricultural products, electronic goods, light engineering, shipbuilding, IT and others. Needless to say, the bigger the export basket, the stronger will be the economy's ability to absorb external shocks. It will also go a long way in boosting the exporters' morale to face up to the powerful foreign buyers.

 

 

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