Dipping exports call for firefighting measures
Restructuring of wages of garment workers along with high prices of electricity, gas, water and cost of transportation—all add to the cost of production
Export extended its losing streak and earned 4.79% less in the first eight months of the current fiscal compared to the same period last year.
According to the data of the Export Promotion Bureau (EPB), Bangladesh shipped products worth $26.24 billion in July-February period of the current fiscal year, posting a 4.79 percent negative growth year-on-year.
This performance also falls nearly 13 percent short of the $30 billion strategic export target for the first eight months' in the same year.
Export continued to plummet for the second consecutive month and six out of the eight months of this fiscal year reported negative growth.
All the major export items including knitwear, woven garments, home textile, leather & leather products, ceramics products, and wood & wood products witnessed sharp to moderate fall during July-February.
At the same time export earnings from the apparel sector fell by 5.53 percent to $21.84 billion from $23.12 billion in the same period of FY19.
As apparels account for 84% of export earnings, a 5% decline in the sector means earning $1.32 billion less than the same period last year.
The recent Coronavirus outbreak disrupted raw material supplies from China and its full-blown impact is yet to be felt by manufacturing industries, mainly readymade garments.
A 4.9% negative growth in eight months means exporters have to fetch 25-30% more in each of the rest four months to attain 12% annual growth target, which is 'almost impossible,' said Dr Mustafizur Rahman, distinguished fellow of Centre for Policy Dialogue.
Export prices fell globally, so overall export value dropped in dollar term despite increase in volume in merchandises, he pointed out.
Global economic recovery has slowed down, impacting worldwide trade. Even then, some countries are faring better than Bangladesh.
"Vietnam is expanding its export in the USA while Cambodia and Turkey are doing well in Europe," he mentioned.
Then why is Bangladesh lagging behind?
Trade analysts and industry insiders identified three reasons: industries' failure to improve efficiency and diversify products, government's rigidity over currency devaluation and port's failure to reduce lead time.
Our inherent competiveness and labour efficiency has gone down compared to our competitor countries, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
Firstly, we did not devalue our exchange rate for which exporters are facing difficulties. Secondly, manufacturers had to absorb the shock of wage increase last year, Mansur added.
"I think the solution is to devalue exchange rate which is a legitimate policy instrument. All the other countries like, China, India, Vietnam use that policy, then why do not we?" he questioned.
Dr Rubana Huq, president of the apparel sector apex body Bangladesh Garment Manufacturers and Exporters Association, foresees tougher time ahead.
"The challenges and weaknesses still remain, and the sector has apparently lost its competitive edge as price continues to decline (-0.79% in February according to NBR), mandatory annual increment of wages has been put in place, and our currency still remains stronger compared to other currencies against US dollar," she listed the reasons that held them back.
On top of it, price of electricity has gone up by 4.9% recently, and coronavirus is also predicted to have certain impact on the industry as it has already delayed imports, production and shipments, the apparel sector leader pointed out.
Rubana also referred to slump in retail sales in key export destinations.
US clothing retail sales in January has gone down by 3.1% which is the worst in the last 10 years. Shopping malls in few big cities have already started facing the effect of Covid-19, she said.
"And we are yet to see what impact do BREXIT and EU-Vietnam FTA bring in to the sourcing dynamics," Rubana said, stressing that the industry now needs support for its survival.
"Our competitive countries adjust the price of the US dollar with the local currencies while the price of the dollar has remained unchanged for the last 10 years," said SM Abu Tayyab, a director of Chattogram Chamber of Commerce and Industry (CCCI).
He suggested devaluing taka against the US dollar to cope with competitors in the export markets.
But businesses are most concerned about the port and customs services.
"We need up to 10 days at the port to complete all formalities for export shipment while our competitor countries spend only one to two days," said Tayyab, owner of Independent Apparels.
Chattogram port facilities must improve so export merchandises reach global destinations on time.
It takes at least five days to get raw materials cleared from customs, said Md M Mohiuddin Chowdhury, chief executive officer of Clifton Group, a leading ready-made garment exporter.
"But if any item requires laboratory test then we have to face real hard times as the Chattogram Customs does not have enough facilities. They need to send samples to Dhaka and that might set us back up to two weeks," Chowdhury said.
This is how costs of Bangladesh's products go up compared to major competitors like Vietnam, Pakistan and India, while export price of apparels did not rise, he explained.
Restructuring of wages of garment workers along with high prices of electricity, gas, water and cost of transportation—all add to the cost of production and make Bangladeshi apparels less competitive now, the exporter pointed out.
Chattogram, as the principal port of Bangladesh, handles 92 percent of the export-import trade.
The port is also unable to handle large amount of shipping items as the capacity of the port has not been developed along with the growth of trade.
The exporters complain that they cannot ship their products on time which increases their cost of doing business and make them less competitive.
Chattogram Port Authority (CPA) has its answers ready with a list of projects and initiatives they have taken to address the complaints.
"Projects like Patenga Container Terminal (PCT) and Bay Terminal are being developed to handle the increased volume, but it is taking time to complete," Omar Farooque, secretary of Chattogram Port Authority told The Business Standard.
He said that a floating container yard will be operational next month and it will help accommodate more containers in the port yard.
"After the opening of the PCT for operation the present vessel waiting time will go down."
