RMG export hit by global inflation blowback

Apparel makers rue receding orders from buyers

FE REPORT | Sunday, 19 March 2023

Bangladesh's apparel makers say they are now finding export orders ebbing down amid the buyers' changed sourcing strategy induced by economic jitters amid high inflation and geopolitical tensions.
As part of the emerging sourcing trend, western buyers are placing work orders in small sizes, instead of large volumes, in a downturn due to declining demands as a fallout from record inflation in the major markets, including the European Union and the USA, they said Saturday.
The adverse economic situation resulted in a fall in work orders, making it difficult for the local readymade garment sector to cope with the changing circumstances, they added.
"The buyers are changing their sourcing strategy and placing work orders in small slots. As a result, our production at factory level is facing difficulties," Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan told a press conference at the trade body's headquarters in Dhaka.
Despite falling orders for the last few months, however, export earnings from readymade garments had maintained a positive growth until February last riding on increased unit prices and shipments of value-added products, he said.
And exports to non-traditional markets also saved the situation, helping them in sustaining the growth momentum in the country's main export industry that fetches the highest quantum of foreign exchange.
He further explained that the consumers' interest in the western countries have been growing in discounted apparel products, and in response, the buyers have reduced the volume of orders. "As a result, factories are upset in preparing their production plan."
Regarding the change in global trade policies, the BGMEA president said Bangladesh needs to enhance its capacity to comply with the human-rights and due-diligence protocols adopted by the European Union to navigate future challenges in global business.
He urged the EU and other countries that have been providing Bangladesh with preferential market access to extend the facilities for six years, instead of three years, from graduation of the country from the least-developed-country status.
Though there are measures to diversify the export basket, the RMG sector's contribution to the overall export earnings increased and reached about 85 per cent, he said, adding that the contribution would be about 90 per cent if home-textiles and other textile products are taken into consideration.
Though there are challenges stemming from the rise in energy prices, there are opportunities, too, he noted, seeking government policy support especially for import of post-consumer waste and re-export of those after value addition.
They are also investing in the recycling industry as the sector produces 0.5 million tonnes of textile and garment wastes annually, he said, adding that an additional US$5.0 billion could be earned if these wastes are recycled and exported.
[email protected]