Tuesday, 30 May, 2023

RMG sector may miss $50b export target

Slow growth in overseas sale, internal factors put prospects at risk

 Apparel sector may miss the $50 billion export target by 2021 due to slow growth in overseas sale of readymade garments and other external factors, analysts and exporters fear.


They said shifting of buyers to Vietnam and other neighbouring countries, increased facilities to RMG sector in several Asian nations and gradual fall in prices are affecting the growth in export earnings of Bangladesh RMG sector.


According to sector insiders, RMG export growth is not adequate to achieve the huge target by 2021.


The sector even missed the export target for the July-February period of the current fiscal year (FY), they said.


Export Promotion Bureau (EPB) data show, RMG export in the first eight months of the current FY stood at $28.09 billion, which is 5.64 percent lower than the target of $30.38 billion.


Achievement of the $50 billion target would require export growth at more than 12 percent, but the growth currently hovers around 3 percent.  


Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Md Siddiqur Rahman said, “In the last two years, production cost has increased by up to 17 percent due to several reasons including hike in gas prices.”


“We’re gradually losing competitiveness in the global market because of the increase in production cost, devaluation of euro, fall in price of apparels in the EU and US market on the back of the US election and Brexit,” he said.


Bangladeshi exporters have lost 7 percent market share in Canada, and 6 percent in the UK in last one year.


According to BGMEA data, prices of Bangladeshi apparels dropped by 3.81 percent and 0.76 percent in the US and EU countries respectively in 2015. Last year, the prices came down by more than 1 percent in the US market and 3.19 percent in EU countries.


Dr Nazneen Ahmed, senior research fellow at Bangladesh Institute of Development Studies (BIDS), said the current growth rate will not suffice to achieve the $50 billion export target by 2021.


“It will require more than 12 percent export growth to achieve the target,” she said, adding that maintaining last FY’s growth will take RMG exports to $45 billion by 2021.


She blamed internal factors including infrastructure deficiency and lack of smooth energy supply for the sluggish growth in RMG exports and said there is no immediate solution to the infrastructure issue.  


The researcher, however, said addressing the electricity and gas supply shortage will be helpful to reach the target by the stipulated time.


Exporters Association of Bangladesh (EAB) President Abdus Salam Murshedy said the global apparel market is shrinking gradually. “The size of the global apparel market was $483 billion in 2015 but came down to $443 billion now,” he said.


He also said Bangladesh’s RMG sector has been facing a series of challenges including lack of competitiveness advantages, currency devaluation in the EU Zone, and the impacts of Brexit and US election.


“The whole world is doing business in US dollars and Bangladeshi currency remains very strong against the US currency over the last 4 -5 years,” he said, adding that the competitors are taking the full advantage of devaluation their currencies against the greenbacks. Turkish currency has been devalued by around 68 percent while India and Vietnam devalued their currencies by 40 percent, which is helping their export growth.


“We have quality electricity, but we need quality supply of gas and electricity,” Salam Murshedy said. The EAB president also said the government has set a rather conservative export target for FY 2016-17. “We still lag far behind from the dream,” he said.


Regarding the remediation process in apparel sector after the Rana Plaza incident, he said though remediation involves huge cost, the process is moving ahead.


“The government is giving a lot of support to the sector, but this is not enough compared to the facilities being provided in other countries. Our competitors are maintaining double-digit export growth while we are stuck in around 3 percent,” he said.


Mentioning that the RMG sector currently employs nearly 4.4 million people of whom 80 percent are women, Salam Murshedy urged the government to establish special industrial zones for the RMG sector out of Dhaka on a priority basis to help boost the production.


“The Prime Minister has announced establishing 100 industrial zones and that might take some time. So we would request the government to set up four industrial zones for apparel sector on a priority basis,” Salam Murshedy said.