Photo : Collected
In the second half of the current financial year, Bangladesh’s garment industry export earnings may face a challenge, as indicated by a Bangladesh Bank report.
It has been said that the global economy is currently encountering multifaceted challenges. High inflation and high interest rates are contributing to uncertainty. There are risks to the geo-economic situation and concerns regarding increasing productivity in the coming days.
Due to these reasons, export earnings from Bangladesh’s ready-made garments sector may encounter significant challenges during the remainder of the financial year, as outlined in a recent Bangladesh Bank research report on ready-made garments. The report also includes necessary recommendations to address such adverse situations.
It emphasises diversifying garment production, increasing productivity and efficiency, reducing lead time, fostering product innovation, exploring new markets, ensuring effective research, improving the skills of garment workers, and modernizing production processes to maintain export momentum.
Currently, the country's export income heavily relies on ready-made garments. However, due to the impact of the Russia-Ukraine war and global high inflation, the income from this cornerstone of exports has begun to decline. Export earnings from this sector decreased in the first six months (July-December) of the financial year 2023-24.
According to the report, purchase orders in the country’s ready-made garment sector have started to rebound; the sector is receiving substantial quantities of purchase orders from international big brands and retailers. This resurgence signifies progress in handling the effects of the Covid-19 pandemic and the Russia-Ukraine war.
In this context, due to high interest rates, price inflation, uncertainty about the future geo-economic situation, reduced productivity growth rate, and a complex financial situation, the export of garments made in Bangladesh may encounter challenges in the coming months. The sector has recently faced multiple challenges, including domestic political unrest, global geopolitical conflicts, rising electricity prices, fluctuating cotton prices, the Covid-19 pandemic, and the EU-Vietnam Free Trade Agreement.
Furthermore, the upcoming LDC transition may pose another challenge to the development of this industry. Despite these challenges, the garment sector contributed 10.35 percent to the GDP last year, while total export earnings increased by 10.27 percent.
According to the report, in the second quarter (October-December) of the current financial year, the total income from the garment sector was $1,177 crore, which is 1.35 percent more than the previous quarter but 7.46 percent lower than the same period last year, and 13.40 percent less than the targeted discussion period.
Among them, the export of knitwear garments declined at a higher rate. Knitwear garment exports during October-December were $671 crore, which is 0.67 percent lower than the previous quarter, 4.17 percent lower than the same period last year, and 9.16 percent less than the target for the same period.
Exporters have said that the crisis has arisen because developed countries, including the United States, have reduced garment imports due to high inflation. According to them, consumers in developed countries, including the United States, are still spending less money on sectors such as clothing. Therefore, export earnings have decreased slightly. This trend may continue for a few more months as Bank of America and Canada raise interest rates to control inflation.
In this regard, Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The Daily Messenger that the report was based on data from December. However, since the beginning of this year, exports in the ready-made garment sector have started to recover. In the first two months of this year (January and February), readymade garments worth $947 crore have been exported from Bangladesh. This export is 13.15 percent higher than the same period last year. However, the previous six months for readymade garment exports were quite challenging.
He also mentioned that the suggestions provided by Bangladesh Bank are correct, and they are actively working on them. Meanwhile, there has been significant diversification of products, and new markets have also expanded compared to before. Efforts are being made to enhance the skills of the employees, with innovation centres established for this purpose. However, he added that more still needs to be done, and they are actively striving towards it.
Messenger/Fameema
