RMG exports poised to see negative growth in October too

Apparel exports are poised to post negative growth in October like in the previous month and the fall in export income from the largest foreign currency earning sector will reduce the country's overall export receipts, industry insiders have said.

In the first 20 days of this month, the readymade garment sector raked in $1.77 billion, down by 19% from $2.17 billion in the same period last year, according to sources with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

The country's apparel exports posted a 7.5% negative growth in September this year compared to the same month last year, after a prolonged spell of growth for 13 months. 

The decline in the last two months is attributed to a reduced demand because of record inflation and economic slowdown in the sector's major destinations.

BGMEA President Faruque Hassan predicts that the rate of negative growth in exports will be higher this month as compared to last month and this trend is likely to continue for several more months.

Garment industry owners told The Business Standard that production in most factories had already fallen below 30% compared to three to four months ago.

Economists also see no chance of the situation improving before next January or February.

Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), told TBS that the gloom in garment exports may continue till February next.

Western retailers were sitting on huge stockpiles as demand plummeted, he noted, adding that export orders may start increasing once the inventory becomes slim. Even then, it was most unlikely that Bangladesh's exports would post positive growth in the current fiscal year 2022-23, let alone reach somewhere near last year's 35% growth, he observed.

As the demand for clothing has decreased, the demand for its raw materials has also decreased to a great extent. As a result, the prices of yarn and cotton have come down. Cotton prices have now fallen to their lowest levels in the last six months.

According to ICE Futures US, cotton price is now down 50% when compared to that in May this year, per the estimate made on 22 October. As a result, the local spinning mill owners also have huge stockpiles of cotton and yarn. After buying cotton at higher prices in the past, now they are also incurring losses.

On top of this, the prevailing crises of gas and electricity have caused the production cost to rise.

Entrepreneurs in the clothing and textile sectors have sought policy support from the government in this situation.

According to sources, the BGMEA has started negotiations with the government to bring down the existing 1% source tax on garment exports to 0.5% as before.

When contacted, BGMEA President Faruque Hassan told TBS that they raised the issue with the prime minister recently.

"We expect a supportive role from the government offices to survive in these difficult times, but the opposite is happening," he said.

Citing the example of the Customs Department of the National Board of Revenue (NBR), he said, "We are getting the most non-cooperation from them, which is making the situation more difficult for us."

Economist Ahsan H Mansur said if the export situation worsens, some assistance may be required on a case-to-case basis like in the Covid period. But that situation has not yet arrived, he added.

Nonetheless, some entrepreneurs do not want to lose hope completely.

BGMEA Vice-president Miran Ali told TBS since Bangladesh manufactures basic items of clothing, there is little chance of a major drop in demand.