Apparel sector faces tough time

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Jasim Uddin Haroon
The country's apparel sector faces a slump in export as it sees overseas buy orders falling due to freak weather that dampens demand in the US and European markets.
The buy-orders dropped by around 30 per cent over the past few months.
Wal-mart, which orders around US$ 750 million in Bangladesh a year, has reduced 30 per cent orders across the world and other buyers including JC Penney, K-mart also cut their orders globally due to the drop in sales.
However, April showers, and cold weather, were not enough to stop most major retailers from posting strong sales' gains last month - although two major retailers, Kmart Corp. and Gap Inc., warned that weak sales in the period would cut expected fiscal first-quarter profits.
Kmart, the third-largest retailer in the US after Wal-Mart and Sears Roebuck & Co., saw a 0.8 per cent drop in sales during the four-week period ended April 26. Overall sales gained 0.8 per cent to $2.8 billion for the period.
For the company's fiscal first quarter, same-store sales were flat, while overall sales rose 1.5 per cent to $8.1 billion. But that was not enough to allow it to meet estimates.
Sources at the buying houses and readymade garment sector said the leading buying houses cut their orders due to their large quantity of inventory.
"We have a large quantity of inventory following drop of sales in the last winter," one official at the Wal-mart office in Dhaka told the FE Wednesday.
Sources at the buying houses said the world's leading buying houses have large stock mainly due to early advent of autumn and early exit of winter in America and European countries.
According to the statistics prepared by Bangladesh Buying Houses Association (BGBA), the local garment sector got orders worth $ 56 million in May this year against $ 80 million in the same period of the previous year.
The BGBA prepares its statistics taking data from the Export Promotion Bureau, Bangladesh Bank, Bangladesh Garment Manufactures and Exporters Association (BGMEA) and others.
The order for ready-made products in April this year was worth $ 68.10 million and it was $ 83 million in the same time in 2006.
The apparel sector received orders in March this year worth $ 67 million this year while it was $72 million in March in 2006.
Bangladesh's ready-made garments fetch around $10 billion in export receipts a year. March, April, May and June are considered as lean period and orders do not cross $ 100 million a month during that time.
The slump might continue in the next two months, which might create a serious setback for the small apparel units in the country.
"The situation is deteriorating alarmingly and I think small garment factories might be forced to shut down their units following continuous losses due to such poor orders," said Kazi Iftekhar Hossain, vice president of the Bangladesh Garment Buying House (BGBA) said.
There are around 40 per cent small factories out of 4,000, located mainly in Dhaka and Chittagong.
The BGBA sources said a large number of buyers now prefers Sri Lanka for buying apparels following revision in rules of origin (RoO) by the European Union (EU).
The EU revised RoO for Sri Lanka to take advantage of the new Generalised System of Preference (GSP) offered to that country for being hit by tsunami.
Besides, political chaos during late October to early January, congestion at ports and non-compliance of various buyers' conditions by the RMG units also induced the buyers to look for alternative destinations.
While talking to the FE, Bangladesh Garment Manufactures and Exporters Association (BGMEA) President Anowar-ul-Alam Chowdhury Pervez said the export growth of both woven and knit fell over the past few months.
"The Wal-Mart's sale has dropped by 3.5 per cent. So, we are also affected," Pervez added.
The BGMEA president said most of the buyers have deferred their orders by one and a half months.
BGBA President Quayuum Reza Chowdhury told the FE that a large inventory by the leading buying houses was not the main reason, there were other problems relating to exports.