Signals to be wary of the export prospects
Wednesday, 24 December 2008
Syed Fattahul Alim
In a sharp contrast to their previous upbeat mood about the prospect of business in Bangladesh in the face of global recession, a recent official data prepared by the Export Promotion Bureau (EPB) has rung alarm bell among the business community, especially the exporters of the country. The data released by the EPB shows that the volume of export by the garment industry in last October fell by 8 per cent compared to what it was in the same month a year before.
Though the export performance of the Readymade Garment (RMG) in a single month cannot be any measure of its overall performance, which is still on the higher side as revealed by the data from the same official source, the October data has become an issue of concern for the chief foreign currency earner for the country. However, there are also other indicators that have provided the apparel sector with reasons to be justifiably concerned. In fact, it is the behaviour of the overseas importers of our export items that has forced the local exporters to become more circumspect about the trend of the trade in the days to come.
Is there really any reason for the export trading community to be overly concerned about the performance of the apparel sector in a single month? The leaders of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), on the other hand, differ on the interpretation of a single month's performance of the export sector in question. The BGMEA president is of the view that since the celebration of the Eid-ul-Fitr were held in the month of October, it might have left an impact on the export business. The BKMEA president, on the other hand, is wont to take the development more seriously and relate it to the overall situation of economic recession in the developed world.
In fact, it is too early to scream blue murder about the decline in the performance of the apparel sector in a single month seeing that the general trend is still favourable for Bangladesh export. But as it has been said in this column more than once in the past, there never was any room for complacency over the performance of overseas trade in export by any sector of the industry, let alone the apparel. That the developments in the rest of the world, especially in the highly industrialised nations in Europe and North America, will finally leave their harmful impact even on a least developed economy like ours, is a conclusion derived from common sense. And neither the government, nor the section of the business community engaged in export was ready to accept the reality even a month back.
One can, however, understand the stake of the government on the issue, for expressions of unnecessary concern on the global recession might have pressed the panic button among the local business community and the people in general. And we know too well who gains most from the rumours and speculations in the market at the expense of the common people's purse. That is why a note of reassurance about the robustness of our business and the financial system was welcome from the government as well as the businesses. It is one thing to be self-confident; but it is another to be smug and oblivious of the hard facts around. For if one is talking about export and that too in the European Union (EU) and North American markets, then how can anyone ignore the basic fact that the consumer demand in those markets are on a steeply declining curve? What is happening in Europe, America and other advanced nations is tantamount to a global sink. The emerging economies are emerging, because there is the existence of the strong western economies to absorb the commodities produced by them. But as the demand for consumer goods has fallen drastically due to the crisis of credit in the advanced economies, the fast growing economies of China, India, Brazil and others in the second and the third world have naturally their back to the wall. With their exports curtailed, their industries geared mainly to export are to certain to face the consequences. So, the economic slowdown in the West means a slowdown of the global economy. And there is no escape from this stark reality, whichever country one may be talking about on this planet. And, Bangladesh is certainly no favoured island immune from the developments in the rest of the world.
Against this backdrop, Bangladesh, especially its trading community has to consider the issues in their correct perspective. True we have certain advantages so far as our foreign currency earning is concerned. Firstly, the kinds of products our apparel industries export are the least competitive ones in the global market. The western buyers can still afford to buy those low-end apparel products. But does this fact provide any strong reasons for jubilation? It does not. And that is for the simple reason that the retail chains that buy our products cannot run their business basing on these low-end products alone. So, if their overall business is affected, many of these importers will be forced to close their business and reports are there that some of them have already done so. In that event, supply orders from those prospective buyers will fall off affecting our volume of export in those countries.
The president of BKMEA has pointed exactly to this side of the problem when he expressed his concern over the delayed placement of purchase orders and deferred orders for shipment by the overseas importers from Bangladesh. Such behaviours demonstrated by the Western buyers do not certainly bode well for the country's export, at least for now. That a more cautious outlook for the export sector is necessary should be evident from the continuing trend in the economies of the Western world. In reality, the crisis in the western economies is not showing any sign of early recovery. On the contrary, it is deepening further. From the perspective of the least developed economies, this is disconcerting for its exporters of garments, knitwear and agro-based products.
The Executive Director of the policy think tank, the Centre for Policy Dialogue (CPD), too, spoke in a similar vein and called for more synergy between the industry and the government in the fight against the encroaching global recession. Regarding export, he however recommended more watchfulness on the part of the government and the business to track the evolving scenario on the global theatre. The export sector, on its part, will have also to improve its performance in the meanwhile. For example, our products have to be more competitive, the products should have more value added to them and the operators of the export business have to be more competent in the marketing of their merchandise if they want to survive in the competitive marketplace. Or in other words, dependence on the low-end products is no guarantee for survival in the marketplace that is getting more unpredictable with the passage of time
So, cautiousness and preparations should be in place in the face of the turmoil in the economic world. Such preparedness will provide the business community with the strength they need to prevail over the tougher days lying ahead. Otherwise, the local business will at times remain too complacent, while panicky at others. And either of theses states of mind has the potential to spell disaster for the economy.
In a sharp contrast to their previous upbeat mood about the prospect of business in Bangladesh in the face of global recession, a recent official data prepared by the Export Promotion Bureau (EPB) has rung alarm bell among the business community, especially the exporters of the country. The data released by the EPB shows that the volume of export by the garment industry in last October fell by 8 per cent compared to what it was in the same month a year before.
Though the export performance of the Readymade Garment (RMG) in a single month cannot be any measure of its overall performance, which is still on the higher side as revealed by the data from the same official source, the October data has become an issue of concern for the chief foreign currency earner for the country. However, there are also other indicators that have provided the apparel sector with reasons to be justifiably concerned. In fact, it is the behaviour of the overseas importers of our export items that has forced the local exporters to become more circumspect about the trend of the trade in the days to come.
Is there really any reason for the export trading community to be overly concerned about the performance of the apparel sector in a single month? The leaders of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), on the other hand, differ on the interpretation of a single month's performance of the export sector in question. The BGMEA president is of the view that since the celebration of the Eid-ul-Fitr were held in the month of October, it might have left an impact on the export business. The BKMEA president, on the other hand, is wont to take the development more seriously and relate it to the overall situation of economic recession in the developed world.
In fact, it is too early to scream blue murder about the decline in the performance of the apparel sector in a single month seeing that the general trend is still favourable for Bangladesh export. But as it has been said in this column more than once in the past, there never was any room for complacency over the performance of overseas trade in export by any sector of the industry, let alone the apparel. That the developments in the rest of the world, especially in the highly industrialised nations in Europe and North America, will finally leave their harmful impact even on a least developed economy like ours, is a conclusion derived from common sense. And neither the government, nor the section of the business community engaged in export was ready to accept the reality even a month back.
One can, however, understand the stake of the government on the issue, for expressions of unnecessary concern on the global recession might have pressed the panic button among the local business community and the people in general. And we know too well who gains most from the rumours and speculations in the market at the expense of the common people's purse. That is why a note of reassurance about the robustness of our business and the financial system was welcome from the government as well as the businesses. It is one thing to be self-confident; but it is another to be smug and oblivious of the hard facts around. For if one is talking about export and that too in the European Union (EU) and North American markets, then how can anyone ignore the basic fact that the consumer demand in those markets are on a steeply declining curve? What is happening in Europe, America and other advanced nations is tantamount to a global sink. The emerging economies are emerging, because there is the existence of the strong western economies to absorb the commodities produced by them. But as the demand for consumer goods has fallen drastically due to the crisis of credit in the advanced economies, the fast growing economies of China, India, Brazil and others in the second and the third world have naturally their back to the wall. With their exports curtailed, their industries geared mainly to export are to certain to face the consequences. So, the economic slowdown in the West means a slowdown of the global economy. And there is no escape from this stark reality, whichever country one may be talking about on this planet. And, Bangladesh is certainly no favoured island immune from the developments in the rest of the world.
Against this backdrop, Bangladesh, especially its trading community has to consider the issues in their correct perspective. True we have certain advantages so far as our foreign currency earning is concerned. Firstly, the kinds of products our apparel industries export are the least competitive ones in the global market. The western buyers can still afford to buy those low-end apparel products. But does this fact provide any strong reasons for jubilation? It does not. And that is for the simple reason that the retail chains that buy our products cannot run their business basing on these low-end products alone. So, if their overall business is affected, many of these importers will be forced to close their business and reports are there that some of them have already done so. In that event, supply orders from those prospective buyers will fall off affecting our volume of export in those countries.
The president of BKMEA has pointed exactly to this side of the problem when he expressed his concern over the delayed placement of purchase orders and deferred orders for shipment by the overseas importers from Bangladesh. Such behaviours demonstrated by the Western buyers do not certainly bode well for the country's export, at least for now. That a more cautious outlook for the export sector is necessary should be evident from the continuing trend in the economies of the Western world. In reality, the crisis in the western economies is not showing any sign of early recovery. On the contrary, it is deepening further. From the perspective of the least developed economies, this is disconcerting for its exporters of garments, knitwear and agro-based products.
The Executive Director of the policy think tank, the Centre for Policy Dialogue (CPD), too, spoke in a similar vein and called for more synergy between the industry and the government in the fight against the encroaching global recession. Regarding export, he however recommended more watchfulness on the part of the government and the business to track the evolving scenario on the global theatre. The export sector, on its part, will have also to improve its performance in the meanwhile. For example, our products have to be more competitive, the products should have more value added to them and the operators of the export business have to be more competent in the marketing of their merchandise if they want to survive in the competitive marketplace. Or in other words, dependence on the low-end products is no guarantee for survival in the marketplace that is getting more unpredictable with the passage of time
So, cautiousness and preparations should be in place in the face of the turmoil in the economic world. Such preparedness will provide the business community with the strength they need to prevail over the tougher days lying ahead. Otherwise, the local business will at times remain too complacent, while panicky at others. And either of theses states of mind has the potential to spell disaster for the economy.