Exports-remittances in new uncertainty

Farhad Chowdhury: To restore stability in the foreign exchange market, the dollar rate was increased by Tk 7. On May 8, the intermediate rate of the dollar was set at Tk 117 by introducing the ‘crawling peg’. Earlier it was Tk 110. The dollar rate was stable at Tk 117 to Tk 118. Remittances were increasing. However, the situation created around the students’ movement has created new uncertainty about exports, remittances and foreign investments. The amount of remittances received in six days of last week is less than the previous day.
From July 1, the students started the movement demanding reform of quota in government jobs. More than two hundred deaths have been reported so far in the violence surrounding the complete shutdown of students. Internet services were stopped from the night of July 18. While Facebook and WhatsApp have been shut down, broadband connections have been launched on July 23, but mobile data internet is still completely shut down. Nowadays most of the communication outside the country is internet based.
In this situation, all activities of industries are closed for four consecutive days. Due to international trade, the country’s export sector is facing the biggest crisis. As per the export contract with the foreign brand-buyer, the shipment of the goods was not possible within the stipulated time. Some entrepreneurs have to send products by air at a cost of at least 500 times more. No new export orders are coming. Some buyers are trying to pay less than the contract price. Late payment or even non-delivery of finished goods is reported by some companies. Many shipments are feared to eventually fall victim to stocklots. Export entrepreneurs say that there is concern among them until the overall situation in the country is completely normal. Because, brand-buyers constantly want to know about the situation. They will wait for a long time.
Meanwhile, a section of expatriates have started a campaign to send remittances to Hundi without sending remittances through legal channels to protest the government’s repression of students in the ongoing movement. A drop in remittances between the current limited internet and restricted banking transactions will put the entire country in jeopardy. A further appreciation of the dollar will fuel inflation.
Executive director of research institute Policy Research Institute Ahsan H. Mansoor told that the foreign exchange market has been under pressure for a long time. In the current scenario, if export orders are canceled or shipping is delayed, the pressure will increase. And remittances are sent mainly for family needs. As a result, people will not send remittances or do hundi for a long period of time – it is not realistic. But if the political situation worsens, foreign loans and grants may be disrupted if the UN investigates and takes action. IMF, World Bank may also stand aside.
According to the data of Bangladesh Bank, remittances received only $78 million last week from 19 to 24 July. Before this, 1 to 18 July came $142.02 crore. This means, in the first 18 days, an average daily remittance of $79 million came. If this trend is maintained, remittances of $245 million would have come in July. Remittances of $225 million in May and $254 million in June came after the appreciation of the dollar. The remittances in those two consecutive months were the second and third highest for a single month.
Export goods to be sent by air A consignment of 70,000 pieces of shirts ordered by a buyer in Germany is scheduled for shipment on July 25 from the Hannan Group factory in Gazipur. As the production stopped for four days, it was not possible to make the shipment on time. In this situation, a shipment of 7 thousand pieces of shirts has to be sent by air. Airfare is $4 per piece. Accordingly, more than $28 thousand or Tk 33 lakh have to be paid. When asked to know, Hannan Group Managing Director ABM Shamsuddin Ahmed told that he will suffer financial loss in this shipment. If production and shipment were done on time, there was no cost involved. Transport by ship is the responsibility of the exporter until it reaches the buyer’s representative. The remaining expenses are borne by the buyer. He said that 39,000 pieces of the consignment should be delivered by air. Due to the long-term commercial relationship with the buyer company, the buyer company has agreed to bear the rest of the cost of the air route. The remaining 31 thousand pieces are going to the ship.
No new export orders
Talking to at least 10 entrepreneurs, no one has received any new export order in this situation. Executive Chairman of BKMEA Mohammad Hatim told that none of the factories under his organization received new exports in the last 10 days. Citing the example of his own factory, MB Knitwear, he said that the negotiation of an export order with a brand was at the final stage. But in the end the negotiations were suspended by the company. He said, buyers have no responsibility to wait. They now have many alternative sources of procurement. Many factory owners have told him of similar experiences.
Retail buyers taking advantage
Some buyers are taking advantage of this situation in Bangladesh. They are trying to pay less than the contract price. Late payment is even declaring non-receipt of ready goods. Small consignment retail buyers are taking this opportunity. In this situation, BGMEA, an organization of ready-made garment producers and exporters, will hold a meeting with Buyers Forum, an organization of buyers’ representatives in Dhaka. The meeting is scheduled to be held at the BGMEA building in the capital’s Uttara on Monday.
When asked about this, BGMEA president SM Mannan told Kochi that they will try to reassure the buyers about the overall situation. Attempts will be made to convince the Buyers Forum that there is an effort to produce the product and reach the buyers at the earliest. So that due to the unexpected situation of the last few days, the foreign brand-buyers do not create a negative attitude towards Bangladesh and the garment sector of this country.