Bangladesh: RMG sinks, so does export  | The Business Standard
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TUESDAY, MAY 30, 2023
RMG sinks, so does export 

Trade

TBS Report
04 February, 2020, 09:30 pm
Last modified: 05 February, 2020, 02:34 pm

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RMG sinks, so does export 

Apparel exports were expected to fetch $22.11 billion, but real earnings were $19.06 billion

TBS Report
04 February, 2020, 09:30 pm
Last modified: 05 February, 2020, 02:34 pm
RMG workers at a factory. File Photo: Mumit M/TBS
RMG workers at a factory. File Photo: Mumit M/TBS

Pulled down by the garments sector's low earnings, Bangladesh's export continues to slump, raising concerns that the country will not be able to achieve the current fiscal year's target of $45.5 billion.

Earnings were $3.43 billion short of the overall export target of $26.34 billion during the first seven months of this fiscal year. Of the shortfall, RMG alone accounted for $3.05 billion. 

Apparel exports were expected to fetch $22.11 billion, but real earnings amounted to $19.06 billion.

During the seven months, overall exports posted positive growth only in July and December by – 8.55% and 2.89% respectively on the back of better performance of apparel sector. 

Lower export receipts also are a threat to a widening of the country's already negative balance of payments and trade deficit, which in turn can turn the exchange rate further volatile.

The latest data compiled by the Export Promotion Bureau (EPB) show that during July-January export earnings fell by 5.21 percent, the figure being negative at 1.70 percent in January.

If Bangladesh wants to achieve its annual target, it has to export goods worth $4.5 billion per month on an average, which has never happened in the country's history.

Exporters have blamed the sluggish exports on declining prices, overcapacity and a stronger local currency compared to the US dollar. 

An analyst, however, said Bangladesh has to enhance its efficiency and reduce lead time in order to remain competitive in the world market.

"December to January is supposed to be peak months, but we haven't picked up yet," said a frustrated Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

She said that after the minimum wage hike, prices have not gone up and manufacturers have continued facing overcapacity problems accompanied by a strong currency, she noted.

"In January we have had a value decline despite quantity growth, which proves that prices are falling," said Rubana Huq. 

Exporters note that the situation may worsen in the coming months with the outbreak of coronavirus in China, from where a country like Bangladesh sources raw materials and machinery for producing apparels.

"After seven months of the current fiscal year we saw the country's export going down by nearly 6 percent. It is a horrible situation for us and the economy as well," commented Md Siddiqur Rahman, a former president of BGMEA and incumbent vice president of FBCCI, the country's apex trade body.

He said if exports continue to depress in the remaining months, some factories, including backward and forward linkage ones, will not be able to run their operations.

If China fails to control coronavirus, there will be further trouble for Bangladeshi apparel exporters, he said, adding that India and Pakistan may increase the prices of their fabrics to cash in on the situation.

Mohammad Hatem, first vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), forecasts that the negative trend in export will continue in the months to come because of the outbreak of coronavirus.

He, however, sees a silver lining for Bangladesh.  

"Apparel export orders may shift from China if the impact of coronavirus continues there. It may create some opportunities for Bangladeshi knit garments manufacturers, as we have a strong backward linkage,'' Hatem added.

Bangladesh is facing a deep crisis in exports due to its poor competitiveness and high lead time, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

"Bangladeshi apparel exporters have to improve productivity and efficiency, which may help minimise trade losses," he added. 

Mansur said supply chain disruption in China due to coronavirus will immediately hurt woven garment exporters as they are highly dependent on Chinese fabrics.

He advised exporters to diversify their sourcing destinations to reduce over dependency on China.

Trade deficit widens
Bangladesh Bank data revealed on Tuesday that the country's trade deficit has widened during the July-December period of this fiscal year, while the current account deficit got slightly narrowed. 

Analysts said a significant fall in exports has extended the trade gap to $8.22 billion in the first half of this fiscal year, up from $7.80 billion in the same period a year ago. 

But the higher inflow of remittance has mitigated the pressure on the current account deficit, which has been reduced to $1.34 billion this year from $3.38 billion for the same period in the previous fiscal year. 

In the first six months of the current fiscal year, import growth fell by 2.72 percent, while export growth dipped by 5.89 percent. However, remittances grew by 21.34 percent. 

Meanwhile, the overall balance has a surplus of $27 million and that gives breathing space for the country's foreign exchange reserves. It (balance) was $513 million negative for the same period in the previous year.  

Foreign exchange reserves, which remained below $32 billion for a long time, crossed the figure in December and stood at $32.25 billion as of January 27.

Economy / Top News

RMG / export

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