Global financial crisis starts to bite Bangladeshi garment makers

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Mushir Ahmed
The worst global financial crisis since the 1930s has started to bite Bangladesh's key garment industry as buyers are cutting prices and delaying orders meant for spring and summer seasons, manufacturers said Monday.
Exporters said in the past week alone top buyers including Wall-mart, Tesco, Prominent and Mercury --- who bought apparel worth one billion dollars last year --- have demanded up to two per cent rebates on their existing orders.
Bangladesh, which last year became the world's second largest apparel makers, prides itself of being the world's cheapest clothing manufacturers.
But the dubious distinction was not enough to make the retailers happy, as the credit crunch in its main markets, the United States and the European Union, have suddenly changed all the equations.
"Things are bad. Some of the buyers have made us give rebates on the existing orders," said Salim Rahman, managing director of KDS Garments, one of the largest apparel manufacturers of the country.
"Some of them even are making us to adjust rebates on future orders. They said they were hit hard by the global financial meltdown," said Rahman, whose company exported apparel worth $150 million.
The Bangladesh Knitwear Manufacturers Association (BKMEA) early this month reported a ten per cent drop in knitted items such as T-shirts and pullovers, but some manufacturers said things have worsened since then.
"The past week was like a massacre," said Ziaul Islam Chowdhury, a director of Knit Asia, adding buyers are now renegotiating prices and delaying orders citing the ongoing financial turmoil.
"We thought the crisis would not affect us because we offer cheapest rates to the buyers. But most manufacturers I talked to over the last few days narrated the same gloomy scenario," he said.
He said a number of big orders for the spring and summer seasons have also been delayed as the retailers were not sure how the economic crisis would play out in the near future.
Top buyers like H&M told the FE last week that they would increase sourcing from Bangladeshi manufacturers, despite a squeeze in retail sales in most of the rich countries.
But this week buyers including the country chief of UK retail giant Tesco, however, would not comment on the issues of rebates and delayed orders.
"Most of the top buyers are assessing the situation. We are hearing a lot of noises of declining orders. Some are even trying to cut already offered prices," said Nazrul Islam Swapan, managing director of Nassa Group.
Swapan's group is the country's second largest apparel exporter, shipping garments worth $210 million last year. This year it wants to hit the $250 million mark.
"I don't know what the situation will look like in the next few months. If the gloom persists, there is no way we can cross our target," Swapan said.
Anisur Rahman Sinha, the owner of the country's biggest garment manufacturing group, Opex, however, sees no reason to be panicked, saying cheap prices will help Bangladesh ride out the turmoil.
"It's true some of the top retailers are downsizing their inventories due to the crisis. But we don't think we have much to worry about," said Sinha, whose group exported over $250 million dollar in 2007.
"We have to be careful. If we can make shipment timely and keep the quality intact, I don't think the global financial crisis will affect us," he said.
Bangladesh exported garments worth $10.7 billions last year --- up more than 16 percent than last year --- which accounted for 76 per cent of the country's total shipments.