October’s RMG export earnings may fall 20pc

Earnings from apparel shipments in October may dip 20 per cent year-on-year for high inflation in Europe due to the Russia-Ukraine war and a production shortfall for the ongoing energy crisis in factories, said the BGMEA chief yesterday.

At the end of the current fiscal year, Bangladesh may not achieve its apparel export target, apprehended Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), at a press conference.

This is due to the energy crisis, decline of work orders and high inflation in European countries, he said.

The outlook for November is also not good as international retailers and brands have been delaying issuing work orders for the coming seasons, Hassan said.

"All depends on the local situation and the Russia-Ukraine war. We do not know what will happen in the future," he said.

The ongoing crisis of electricity and gas in the industrial units augmented the falling trend of garment exports as factories and mills can not run at full capacity, Hassan said.

At the end of the current fiscal year, Bangladesh may not achieve its apparel export target, said Faruque Hassan, president of BGMEA

The devaluation of the taka helped recover a bit from the negative growth in export receipts from garment shipments but it will not help to overcome the crisis, he said.

Hassan suggested that the government diverting gas supplies from fertiliser factories to industrial units so that the latter can run smoothly. The government can import fertiliser to meet demand, he said.

The BGMEA chief also urged the government to waive all duties, including value added tax (VAT) and advanced income tax, on the import of liquified natural gas (LNG) from international spot markets.

This can help the government supply gas at adequate pressure to industrial units at an affordable price, he said.

He also said the government should reduce tax at source to 0.50 per cent from the existing 1 per cent so that exports grow and the government can earn money from export receipts.

If the government takes some business-friendly initiatives, it can earn a lot of revenue from the indirect tax as businesses undertake a lot of measures for earning revenue, said Hassan.

Due to some restrictions imposed by the government, import of goods has slowed down, for which revenue is not increasing, he said.

For instance, the opening of letters of credit for importing cars declined due to government restrictions on the import of luxury items based on the fact that this was a time of economic crisis, he said.

The government may lose out from earning Tk 500 crore to Tk 600 crore if the source tax is reduced to 0.50 per cent from the existing 1 per cent, said Hassan.

At the same time, the government will be able to earn a lot of revenue indirectly as businesses will be encouraged to expand their operations, he said.

He also pleaded with the major political parties to keep the garment sector out of political programmes considering the employment of millions of workers. Currently the garment sector is out of political parties' agitating programmes, he said.

Bangladesh has set a target to earn $46.80 billion from apparel exports in the current fiscal year of 2022-23, which is 10 per cent higher than what was earned last fiscal year, according to data from the Export Promotion Bureau (EPB).

Garment shipments rose 13.41 per cent year-on-year to $10.27 billion during the first three months of the current fiscal year.

Of the amount, $5.64 billion came from the knitwear sector and $4.62 billion from woven, similarly up 9.40 per cent and 18.73 per cent respectively.

However, earnings from garment shipments declined 7.52 per cent to $3.16 billion in September because of a fall in demand for a double-digit inflation hitting European consumers on stemming from the ongoing Russia-Ukraine war.

In September, woven exports slipped 5.66 per cent to $1.43 billion while knitwear shipments dipped 9 per cent to $1.73 billion.

The contraction in export earnings came as European and American buyers continue to struggle amidst rising consumer prices.

Inflation in the 19-member eurozone surged to 10 per cent in September, the highest on records, owing to soaring electricity and natural gas prices.

In the US, consumer price index, a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, rose 8.3 per cent year-on-year in August.

Earnings from garment exports grew 36 per cent year-on-year in August and in September it declined 7 per cent, which were indications of the troubles brewing in the sector.

Factories, especially, small and medium enterprises, are suffering as they are failing to pay workers and the BGMEA intervened to provide financial support, said the association chief.

The BGMEA cannot provide such financial support anymore, he said.

The companies face a lot of troubles in customs and the government should remove such trade barriers, he added.

Bangladesh has the highest number of green garment factories in the world and the country accounts for 0.17 per cent of carbon emissions while the US 18 per cent. "We are one of the lowest carbon emitters in the world," he said.

Prior to the press conference, Hassan inaugurated a Centre for Innovation, Efficiency and Occupational Health at the BGMEA Complex in Dhaka.