We expect better days in the second half of 2023

Covid-19, the Ukraine war, supply chain disruptions and worldwide inflation spikes — none of these factors are within our control. What we can do is stay alert about these developments and address internal issues to minimise the adversities. 

For example, to deal with the dollar shortage, existing foreign currency holdings should be prudently utilised with strong safeguards against waste, misuse and corruption in development works. Less important expenditures should be skipped for now.

The dollar crisis is now a global issue and we cannot increase dollar inflow if we just wish. There is not much scope to enhance export earnings overnight. Diversifying products and finding new markets will take time.

So, more focus should be given on bringing in more remittance through formal channels. Is the exchange rate set for overseas wage earners right? Is the incentive enough for them to send money through banks? About 11 lakh workers went abroad last year, but the remittance income was not proportionate to the growth in overseas jobs. Even a bigger number of people are expected to go abroad to work this year. Enough measures should be put in place so that they find banking channels more attractive to them than hundi. This is one vital area of foreign currency inflows where we can work more to improve the system.

Energy crisis is costing businesses heavily. The government has said energy subsidies will be phased out. But abrupt and unusual increases in energy prices will cause further rounds of price hikes in the local market and erode competitiveness in the export market. There might have been logic behind hiking gas prices. But policymakers should have thought if this is the right time to hike prices, and if the rate of hike was tolerable for industries.

Export order flow is low, global competitors — China, Vietnam, Indonesia, Cambodia — all are racing for whatever orders are out there in the export market. In such a situation, becoming less competitive means losing the market.

Though some factors are beyond its control, the government has some tools too, which should be used judiciously to help businesses out of the crisis.

There are questions about how China's reopening will impact global trade. From a broader perspective, China's full reopening after almost three years can be an answer to global recession fears. The Asian giant will generate huge demand and ease the supply chain, which will accelerate economic activities worldwide.

Again, China's demand surge may create a supply crisis of goods it procures from the global market. One good thing is that China is in fact not facing an energy crisis now as it procured huge amounts of Russian oil at a cheaper rate. So, the global supply of fuel oil is less likely to face demand pressure from China. Though China's return to the export market creates some concern for us, the country is a key supplier of our raw materials.

So, China's reopening, in fact, will do us more good than harm.

The market outlook for both the European Union and the US is somewhat confusing as we are getting queries from both our destinations about our assessment of either. We fear that some more months will be gloomy. There is some growth in exports to markets like China and India, but that would be far from making up for any abrupt declines in our two biggest markets — Europe and the US.

Still we want to stay optimistic about a turnaround in the second half of this year. If everything goes well, if no fresh adversity emerges, we hope to see better days from July onwards.

The new European compliance act is another headache for us. The due diligence act of Germany and similar initiatives of the EU would put further pressure on our exports in regards to environmental and rights issues throughout the whole supply chain. After the Rana Plaza and Tazreen disasters, apparel industries invested millions of dollars in factory safety. We are now champions in green-certified factories. Our good green initiatives have never been rewarded. Still, we are facing fresh conditions from buyer countries which they do not apply to our competitors. Any such conditions, if not commonly enforced for all, expose us to uneven competition, which we do not expect from responsible buyer countries.

It is true that industries should be energy-efficient and more innovative in exploring alternative energy sources. There are some initiatives from individual entrepreneurs for solar and wind energy solutions. But so far, these are piecemeal. For a visible change in energy scenario, there should be a holistic approach involving the government and the private sector.

There are some good signs as some apparel entrepreneurs are making, or at least planning, fresh investment to expand production capacity as they forecast future growth. History shows that such an economic crisis does not last long. This crisis will also be over. Coronavirus has made us brave enough to face such adversities. When the whole world was shut in the first year of Covid-19, we somehow kept our factories open. What can be worse than that?

We hope political parties, while preparing for the next elections in the year-end or early next year, will be sincere about maintaining a peaceful environment so that business activities go unharmed.

The author is the managing director of Plummy Fashions and former president of the BKMEA.