Photo : Collected
The apparel industry in Bangladesh is facing a significant challenge as the value addition in the readymade garment (RMG) sector has fallen by 16 percentage points to 55.4% during the July-March period of the fiscal year 2023-24.
This decline has raised concerns among exporters about the country’s eligibility for the Generalised System of Preferences (GSP) Plus facility in the European Union (EU) market following Bangladesh’s graduation from Least Developed Country (LDC) status.
According to the latest balance of payment data from the central bank, Bangladesh’s apparel exports were $27.30 billion during the last three quarters of FY24, a substantial revision from the previously reported $37.20 billion. This $10 billion discrepancy includes a $6.49 billion reduction in knitwear exports and a $3.41 billion decrease in woven exports.
However, the apparel export data gap between Bangladesh and the Export Promotion Bureau (EPB) data is $10.81 billion during July to April of FY2024.
The central bank’s data also revised the RMG-related import payment figure to $12.17 billion, up from $10.61 billion reported earlier.
This revision highlights one of the record lowest value additions in recent years, at just 55.4%, compared to the previously reported 71.5%.
In response, business leaders have urged the government to reconsider its export targets of $110 billion by 2027 under the current export policy. They argue that the recently concluded fiscal year fell significantly short of these targets due to erroneous export figures – concern exporters have raised for months.
Requesting anonymity, one of the leading denim textile manufacturers said the government must revise all targets related to exports; otherwise, it will create a big gap between target and performance.
He said, “Particularly export targets have been set based on misinformation; it should be revised.”
Exporters said the country has to graduate from the Least Developed Country (LDC) status by 2026. As the apparel value addition declines, it will be difficult to get the GSP Plus facility in the EU market after its graduation.
As GSP Plus requires double-stage value additions, the exporter said, “The EU may not rely on Bangladesh’s trade data and value addition information.”
“If they accept this data, this value addition is not enough to get the GSP Plus facility,” he added. Denim exports might get this access as they can add high value locally, importing only raw cotton and chemicals.
He emphasised that an uninterrupted gas and electricity supply is essential for the industry.
Mohammad Hatem, the executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), pointed out that Vietnam, a close competitor, could now be far ahead of Bangladesh following the revision of export data.
He also highlighted the impact of gas and electricity shortages on the supply of local fabrics and yarn, potentially forcing exporters to import these raw materials and affecting local value addition.
An expert emphasised the need for government support to help exporters reach the ambitious export targets by 2027.
He called for adequate port facilities, simplified customs procedures, uninterrupted gas and electricity supplies, and diversification of the export basket to increase export volumes.
Exporters have expressed concern that the decline in apparel value addition will make it difficult for Bangladesh to secure the GSP Plus facility, which requires double-stage value addition. They fear that the EU may not rely on Bangladesh’s trade data and value addition information, further complicating the country’s eligibility for this preferential treatment.
Messenger/Fameema
