Practice of \\\'undercutting\\\' saps RMG of bargaining power

Shah Alam Nur | Published: May 07, 2014 00:00:00 | Updated: November 30, 2024 06:01:00

A section of apparel units, against the backdrop of a decline in work orders from the international buyers, are, allegedly, undercutting their rivals at home.
Industry insiders said the 'unhealthy' trend that has become strong lately has been causing substantial export revenue loss to the country. Moreover, it has strengthened the bargaining power of the international buyers, they added.
Many garment exporters undercut their competitors at home. This has been strengthening the position of the buyers, President of BGMEA (Bangladesh Garment Manufacturers and Exporters Association) Atiqul Islam told the FE.
He said a good number of exporters, including small and medium RMG factories, especially the new players, have been offering cutting and making (CM) charges at reduced rates than that offered by the mainstream market players.
"They are undercutting the rivals by about 10-15 per cent in recent times," he added.
The CM rates in the case of knitwear items declined by 15 to 20 per cent last year, sources said.
On the other hand BGMEA data showed that during the last one year the CM of woven garments declined by 10-12 per cent.
"Many of the industry owners are resorting to the unethical practice which is forcing the sector to incur loss", the Managing Director of Abedin Garments Ltd, Quazi Zainul Abedin said.
He said this evil practice by the factories is compelling others in the sector to reduce their prices as well.
Managing Director of Shimex International Ltd Anwar Shahid said the BGMEA should fix a base price for all woven items and ensure compliance with the same by all its members. Â
He said the overall export earning would be 15-20 per cent higher if the practice to undercut the rivals in the industry could be stopped.
Former president of BKMEA Fazlul Hoque said, "Despite around 20 per cent rise in the cost of doing business during last one year due to an increase in prices of raw materials, the buyers have reduced the CM charges."
He said, "We are really worried about RMG price cut. We are just losing our competitiveness."
Managing Director of Giant Group Faruque Hassan said: "Many RMG factories engaged in sub-contracting are going to face closure as buyers have not increased making charges following introduction the new wage structure."
He said for lower rates offered by the buyers many apparel units could hardly make any profit after paying workers' wages and meeting other business costs.
More than 1,200 factories are thought to be involved in sub-contracting in the RMG industry, employing nearly 1.0 million workers.
According to EPB, the knitwear and woven garments, the two major export earners, posted 16 per cent and 13 per cent growth respectively in the first nine months of the current fiscal year (FY).