Garment makers owe spinners more than $376m

In a letter to Bangladesh Bank and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the Bangladesh Textile Mills Association (BTMA) yesterday said garment exporters owe more than $376 million to its members.

The BTMA sent the letter in response to a query by the country's apex trade body regarding the repatriation of export proceeds.

Upon a suggestion by Bangladesh Bank, the FBCCI formed a body to monitor the repatriation process on October 14. It also sought the opinions of different trade bodies as to why export proceeds are not being paid out on time.

In the letter, the BTMA said 15 of its members supplied yarn worth $375.77 million to 307 export-oriented garment factories but are yet to receive payment.

Similarly, four weaving mills are owed $1.08 million for supplying fabrics to 12 apparel exporters.

Monsoor Ahmed, chief executive officer of the BTMA, said they have already established a cell to monitor for delays in payments to millers and spinners.

However, the monitoring cell is yet to take effective measures even though many garment exporters are not honouring their primary agreements, or proforma invoice (PI), when purchasing yarn and fabrics.

The PI is a primary agreement made between buyers and sellers before the delivery of goods.

Besides, the delayed payments to textile millers is making it harder for them to repay loans from the central bank's Export Development Fund, leading to more pressure on the country's foreign currency reserve, he added.

The garment makers' failure to honour this agreement indicates they are again depending on imported yarn as the narrow price gap with local varieties means they can make up for high input costs by delivering better quality products.

Similarly, the lack of work orders means manufacturers now have more time to fulfil shipments, doing away with the need to buy from local spinners to ensure shorter lead-times.

As such, yarn stockpiling is again taking place at the mills as many garment makers are not collecting their orders despite having previously agreed upon a PI.

The trend started from July this year, when work orders from abroad were showing an upward trend as inflationary pressure was easing in the western world along with the rebound of their economies.

But as the work orders were coming in aplenty, yarn prices shot up in the local market.