a year ago

RMG export orders fall 20pc in Apr-June

AP file photo
AP file photo

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The domestic apparel industry has witnessed a downtrend in work orders from global buyers in recent times, posing a threat to the country's export growth.

Industry insiders, however, attribute this downswing to growing inflation and possible recession in major economies due to uncertainties caused by the Russia-Ukraine war.

Bangladesh, which fetched work orders aplenty after post-lockdown periods from its European and US markets to cater to consumer needs, now receives at least 20-per cent less orders, they say.

They mainly blame the ongoing war for stoking global inflation and also apprehend a prolonged uncertainty that has eaten up the demands for apparel items.

The declining trend is also reflected in the issuance of utilisation declaration (UD) by two local apparel trade bodies -- BGMEA and BKMEA.

Both Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), on average, issued 20-per cent less UD last month.

BGMEA president Faruque Hassan says high inflation and oil prices have force consumers to reset their priorities as food prices have significantly shot up.

Demands for apparel and other fashionable accessories are thus decreasing, causing a stockpile for many buyers while others are not willing to take risks of placing fresh orders, he adds.

"Work orders have also fallen by 20 per cent during the April-June period compared to the same period in 2021 due to these global factors," Mr Hassan told the FE on Tuesday.

Echoing Mr Hassan, BKMEA executive president Mohammad Hatem explains that they received plenty of orders in the last one year followed by increasing demands.

Following lockdowns, demands were up from buyers to replenish their empty stores, he says, adding that buyers also placed huge orders in Bangladesh to get timely shipments.

Buyers move to reduce reliance on China, and disruptions to garment-producing countries like Cambodia, Vietnam and Myanmar also encourage them to shift orders here, he argues.

"Bangladesh as the only safest country can meet demands with its large capacity and political stability," Mr Hatem claims.

Despite high raw-material prices and other logistic costs, Bangladesh offers competitive prices. Local factories often receive orders below their production costs only to stay afloat, he continues.

The purchasing power of western consumers is declining, so are demands and orders, according to Mr Hatem.

BKMEA former president Fazlul Hoque, however, sees things differently. He says order is not decreasing; rather a correction is taking place.

The pandemic induced an 'abnormal situation', forcing lockdowns and holding off sales, he says, explaining skyrocketing raw-material prices. However, the prices have now started to come down.

Consumers' post-Covid buying spree and increased raw-material prices pushed demands and growth last year.

"So, the growth the sector has posted in the last one year might not sustain in the coming months," Mr Hoque says, terming the future challenging.

Both Mr Hatem and Mr Hoque, however, look optimistic as they say buyers' China-plus strategy, US-China row and other manufacturers' internal issues will encourage more buyers to shift their orders.

Bangladesh will stand high in the race with full safety, capacity and political stability, they add.

As Bangladesh produces mostly basic items, Mr Hatem believes, it is less likely to be affected and export may not enter the negative territory in the new fiscal.

Snowtex Outerwear managing director SM Khaled tells the FE that orders from more than a dozen buyers dwindle.

He faces a decline in work orders for basic items, whereas no impact on value added ones.

He, however, opines that the scenario may deteriorate in the coming days if the global situation prolongs, especially the Russia-Ukraine war.

In fiscal year 2021-22, the RMG sector fetched $42.61 billion which is more than 81 per cent of the country's total export earnings of $52.08 billion.

Out of $42.61 billion, over 52 per cent or $21.40 came from the EU, $9.01 billion or 21 per cent from the US, $4.49 billion and $1.32 billion from the UK and Canada respectively, according to BGMEA data.

The remaining $6.37 billion came from non-traditional markets like Japan, Australia, Russia, India and Korea.

Bangladeshi RMG exports stood at $31.45 billion in FY2021, which was $27.94 billion in FY2020.

In FY2019, RMG export earnings were $34.13 billion, according to official data.

When asked, Prof Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), says foreign buyers are apprehending recession in developed countries and reducing orders anticipating demand fall.

Citing this trend a 'disquieting signal', he says: "What we need is to see whether this is a temporary or medium one. Such signal when we need foreign currency is not positive."

He suggests looking into the prices of imported apparel inputs like cotton, yarn and fabric.

If prices of raw materials start decreasing, the impact in terms of value retention will be lower. Otherwise, it will affect negatively, Prof Rahman observes.

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