Meltdown hits non-RMG exports hard
Saturday, 21 March 2009
Sheikh Shahariar Zaman
Export of non-readymade garment (RMG) products has been plunging since October last when the global economic meltdown began to bite the industrialised countries, the biggest export destinations of Bangladeshi goods.
During October-January, exports from major sectors including frozen foods, leather, vegetables and pharmaceuticals fell sharply putting the industries in dire straits.
"Exports of non-RMG sectors fell by about 20 per cent on an average, which is very alarming," said Centre for Policy Dialogue (CPD) executive director Mostafizur Rahman.
The developments in the developed world are not at all encouraging and the export sector would suffer a big blow unless the government comes up with solid short and long-term packages.
In the short-term, the government should provide incentives for exploring new markets and create a fund for technological upgradation. "Cash incentives will also give the export sector a big boost," Mr Mostafiz said.
The country needs to increase its competitiveness but it could not be achieved overnight, he cautioned. The government should chalk out a future plan to make the country more competitive, he suggested.
The leather sector is in deep trouble as its exports fell by about 47 per cent in the October-January period, said Rezaul Karim Ansari, president of Bangladesh Finished Leather, Leather Goods and Footwear Exporters' Association.
"My company, Karim Leather, lost 25 per cent export orders in the last couple of months," he said.
If the recession deepens, the survival of the industry, which exported products worth Tk 32 billion (3,200 crore) in the last fiscal, would be at stake, he feared. About 65,000 are employed in the sector.
"Value addition of the sector is about 85 per cent as the primary raw materials - raw skins - are procured from local sources," he said.
The industrialist demanded that the government provide 25 per cent cash benefit to the sector. "The sector now enjoys 10 per cent cash incentive which is not enough for sustainability in this crisis period," he said.
Due to export fall, it is difficult for the leather exporters to repay bank loans, Mr Ansari said. He urged commercial banks to consider the present crisis and put a moratorium on repayment of loans, at least for the recession period.
Vegetable exports dropped by 44 per cent in the period, said SM Jahangir Hossain, president of Bangladesh Fruits Vegetables and Allied Products Exporters' Association.
"At the beginning, we thought the recession would not continue for long and business would improve in the future but as the days go by, the exporters are incurring huge losses and now it is difficult for us to bear it any longer," he said.
Even before June, the exchange rate of the UK's pound sterling against taka stood at the level of Tk 130-140 but now it has come down to the level of Tk 95, said Mr Jahangir.
"Exporters are getting Tk 35-40 less by exporting products worth one pound sterling," he explained. About 40 per cent of the total vegetable exports go to the United Kingdom market.
If the exporters get an exchange rate of Tk 125, they reach the survival stage, he said.
"We have urged the government to fix the rate to that level for the recession period, otherwise it will not be possible for us to export to the UK market," he added.
About the Middle Eastern and other destinations, he said they are facing a lot of transportation problems.
"First of all, transport cost is high as all products are shipped by air and the second, cargo space is limited for vegetable export," he lamented.
Frozen food, the second biggest export earning sector after RMG, also lost 22 per cent earnings in the October-January period.
Kazi Belayet Hossain, president of Bangladesh Frozen Food Exporters' Association said on an average the price fell by $2 per pound in the last couple of months.
"The price has declined as demand dropped sharply after the recession broke out," he said.
If the trends continue, the frozen food export would decline by 30 per cent, he feared.
The sector has bank loans of about Tk 1,000 crore and it would be difficult for the exporters to repay the loans in the crisis period, Mr Belayet said.
The banks can help the sector by putting the loan amount in 'block account' and the exporters would repay the loans within five years, he suggested.
"The government should provide 20 per cent cash subsidy and withdraw 5 per cent tax on subsidy immediately to save the industry," he said.
Pharmaceutical export also dropped by 35 per cent in the October-January period of the current fiscal.
Export of non-readymade garment (RMG) products has been plunging since October last when the global economic meltdown began to bite the industrialised countries, the biggest export destinations of Bangladeshi goods.
During October-January, exports from major sectors including frozen foods, leather, vegetables and pharmaceuticals fell sharply putting the industries in dire straits.
"Exports of non-RMG sectors fell by about 20 per cent on an average, which is very alarming," said Centre for Policy Dialogue (CPD) executive director Mostafizur Rahman.
The developments in the developed world are not at all encouraging and the export sector would suffer a big blow unless the government comes up with solid short and long-term packages.
In the short-term, the government should provide incentives for exploring new markets and create a fund for technological upgradation. "Cash incentives will also give the export sector a big boost," Mr Mostafiz said.
The country needs to increase its competitiveness but it could not be achieved overnight, he cautioned. The government should chalk out a future plan to make the country more competitive, he suggested.
The leather sector is in deep trouble as its exports fell by about 47 per cent in the October-January period, said Rezaul Karim Ansari, president of Bangladesh Finished Leather, Leather Goods and Footwear Exporters' Association.
"My company, Karim Leather, lost 25 per cent export orders in the last couple of months," he said.
If the recession deepens, the survival of the industry, which exported products worth Tk 32 billion (3,200 crore) in the last fiscal, would be at stake, he feared. About 65,000 are employed in the sector.
"Value addition of the sector is about 85 per cent as the primary raw materials - raw skins - are procured from local sources," he said.
The industrialist demanded that the government provide 25 per cent cash benefit to the sector. "The sector now enjoys 10 per cent cash incentive which is not enough for sustainability in this crisis period," he said.
Due to export fall, it is difficult for the leather exporters to repay bank loans, Mr Ansari said. He urged commercial banks to consider the present crisis and put a moratorium on repayment of loans, at least for the recession period.
Vegetable exports dropped by 44 per cent in the period, said SM Jahangir Hossain, president of Bangladesh Fruits Vegetables and Allied Products Exporters' Association.
"At the beginning, we thought the recession would not continue for long and business would improve in the future but as the days go by, the exporters are incurring huge losses and now it is difficult for us to bear it any longer," he said.
Even before June, the exchange rate of the UK's pound sterling against taka stood at the level of Tk 130-140 but now it has come down to the level of Tk 95, said Mr Jahangir.
"Exporters are getting Tk 35-40 less by exporting products worth one pound sterling," he explained. About 40 per cent of the total vegetable exports go to the United Kingdom market.
If the exporters get an exchange rate of Tk 125, they reach the survival stage, he said.
"We have urged the government to fix the rate to that level for the recession period, otherwise it will not be possible for us to export to the UK market," he added.
About the Middle Eastern and other destinations, he said they are facing a lot of transportation problems.
"First of all, transport cost is high as all products are shipped by air and the second, cargo space is limited for vegetable export," he lamented.
Frozen food, the second biggest export earning sector after RMG, also lost 22 per cent earnings in the October-January period.
Kazi Belayet Hossain, president of Bangladesh Frozen Food Exporters' Association said on an average the price fell by $2 per pound in the last couple of months.
"The price has declined as demand dropped sharply after the recession broke out," he said.
If the trends continue, the frozen food export would decline by 30 per cent, he feared.
The sector has bank loans of about Tk 1,000 crore and it would be difficult for the exporters to repay the loans in the crisis period, Mr Belayet said.
The banks can help the sector by putting the loan amount in 'block account' and the exporters would repay the loans within five years, he suggested.
"The government should provide 20 per cent cash subsidy and withdraw 5 per cent tax on subsidy immediately to save the industry," he said.
Pharmaceutical export also dropped by 35 per cent in the October-January period of the current fiscal.