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Corporate - July 28, 2022

Export order continues to decline in RMG sector

Industry Desk: Work order inflows for the country’s apparel exporters witnessed slight gain by 3.33% raising fear among the manufacturer to see negative growth in the coming month.
According to Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Utilization Declaration (UD) permission taken by the exporters rose by 3.33% to 14,083 during the January-June period of 2022, which were 13,628 in the same period a year ago.
UD is a permission given to an exporter to import raw materials to execute work orders placed by an importer and it indicates flows of work orders. Among the six month it posted positive growth only in January by 150.57% to 3037 as it recovered from Covid-19 pandemic.
However, the issuance of UD by the BGMEA declined by 12.77% to 2178 in June, which was 2497 in the same period of last year. It declined by 15.80% to 1907 in May, followed by9% to 2452 in April, 11.60% to 2269 in March, and 6.27% to 2240 in February. Continuous decline in the last five month made the exporters fearsome and they fear negative growth in the upcoming months.
“With the recent work orders trend, we are expecting negative growth in the coming months. The work orders decline because of lower demands caused by soaring inflation in European and US markets mostly,” Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) executive president Mohammad Hatem said.
Ongoing Russia-Ukraine war created the economic crisis that hit the supply chain of export oriented industries, while the invasion pushed the prices of good grains and fuel. These caused high inflation, said the business leader. It is alarming for the country’s export earnings, which may put a bar to attain the government target of $47 billion from the sector, said Hatem.
Inflation in the EU rose 8.6% in June, while the consumer price index rose by 9.1% in the US, where about 85 percent of apparel products are exported.
As an export led growth economy, Bangladesh cannot escape the impacts of the global economic crisis. High inflation in the EU and US is a big concern for Bangladesh, Professor Mustafizur Rahman, distinguished fellow at Centre for Policy Dialogue (CPD) said.
To avert the impact of the crisis, Bangladesh has to focus on non-traditional markets most in South Asia and East Asian markets, said the economist. On the other hand, intra RMG diversification is the key to remain safe amid the crisis, said Rahman. Meanwhile, exporters called for more policy support to overcome the crisis and retain the export growth. In FY22, export earnings from readymade garments rose by 35.47 per cent to $42.61 billion year-on-year.
“In the current budget the government increased tax at source to 1% from 0.5%, which is a burden for exporters right now amid the crisis” said BGMEA vice president Shahidullah Azim. In the given context, the government should offer new incentives for the sector and reduce the source tax to 0.5% for FY23, he added.

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