Turmoil raises cost of RMG manufacturing by 30 per cent

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Monira Munni Cost of apparel manufacturing has gone up by 30 per cent in recent months following ongoing political turmoil including strikes and hartals, industry insiders said. The present situation forced the exporters to make air shipment of their products to maintain the lead time. This, along with other factors like hike in prices of utility services, high bank interest rates, wages and fluctuating exchange rates of dollar against taka, is increasing the manufacturing cost, they said. Exporters said, there were more than 15 hartals, strikes and country-wide shutdowns from December last to March 8. The country's largest foreign currency earner-ready-made garments-which is already going through a tough time because of the global economic meltdown in its major two markets of the European Union and the US, they said. The recent continuous hartals have extended another blow to the industry. The insiders said, the sector is incurring huge losses due to such a situation. But none of them could figure out any specific amount of such losses. "Manufacturing cost has increased by 10-15 per cent during the last two years while recent hartals and strikes made it costlier," Shafiul Islam Mohiuddin, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) told the FE. The impact of political instability is uncountable. It not only hampers production but also destroys the image of the country, he said. Such type of continuous political turmoil hampers the normal activities of the whole supply chain from import of raw materials to shipment of apparel products, he added. The sector is struggling to maintain its competitiveness with seven-time hike in utility services in the last two years, rise in transport costs, wages hike, over 16 per cent bank interest rate, 84 per cent hike in source tax and devaluation of dollar against taka, he said. "The political situation frustrates the exporters." "Our cost of manufacturing increased by nearly 30 per cent in recent times mainly because of political instability," Managing Director of Envoy Group Abdus Salam Murshedy said. Production also fell by 30-35 per cent during the last few months, he added. "The continuous hartals and strikes have forced the exporters to make air transportation for timely shipment of their products," Managing Director of Giant Group Faruque Hassan said. Moreover, air freight charge also has gone up to $ 5-6 for a kilo which was earlier $3.5 per kg, he said adding this extra cost also raises the total cost of production. Thus the Bangladesh-made apparels are losing its competitiveness in the global arena, he said. Echoing Hasan, Vice President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Md Hatem said, a buyer Friday threatened to cancel a consignment, which was supposed to be shipped on February 28. "I could not make the timely shipment due to hartal and extended a week but failed again. Now my buyer told me to make air shipment. Otherwise, he will cancel the order," he said. "Shipment of two containers will cost Tk 5.0 million while I need to pay no penny if I use ocean-going vessels as the buyer would bear the cost of the transportation," he said. Because of hartals and strikes, 50 per cent garment factories now have to make air shipments, he claimed. Many of the international buyers have started threatening to cancel orders if this trend continues, Md Siddiqur Rahman, Chairman of Sterling Group said. Due to political turmoil, most of the RMG makers will not be able to make shipment of their goods in time, he said. "We are bound to send goods by air instead of ocean-going vessels. This increases the transportation cost about 70-75 per cent more than that of sending the consignments through ships." There are a number of containers piled up at the airport and none is getting schedule within a week, he added. Airport officials said, about 400 tonnes of products are being shipped through air daily while 90 per cent of them are garments.