Multiple factors came into play as the apparel export to some of the 11 prospective non-traditional markets slowed last fiscal when the export performance in nine East European countries remained unimpressive. Factors like higher duty, complex rules of origin and the absence of continued efforts to promote products and explore markets played the spoiler, said industry insiders. Devaluation of currencies against the US dollar in the importing countries and the aftermath of a couple of tragic industrial accidents followed by the country’s post-election political turmoil also played a part in the lacklustre export performance, according to them. Apparel exports to the non-traditional markets witnessed more than 20 per cent growth during the period from the fiscal year (FY) 2011-12 to FY 2013-14, according to data of Bangladesh Garment Manufacturers and Exporters Association (BGMEA). But the growth slowed down to 10.48 per cent in the FY 2015-16. In the previous fiscal year the rate stood at 8.90 per cent. The 11 prospective non-traditional export markets are Australia, Brazil, Chile, China, India, Japan, Korea, Mexico, Russia, South Africa and Turkey, according to the industry insiders. These markets are beyond the three traditional export destinations, namely the US, Europe and Canada, which buy more than 84 per cent of Bangladesh’s RMG products. Out of the $ 4.31 billion apparel exports to non-traditional markets, including the 11 prospective ones, in the last fiscal year, knitwear fetched $2.11 billion and woven wear $2.20 billion. Of the $ 4.31 billion, the country earned $3.16 billion from these 11 markets against $2.86 billion in FY 2014-15, according to official data of the Export Promotion Bureau (EPB). Total export earnings from the non-traditional markets including the 11 prospective ones were $1.08 billion in FY 2009-10. It was up by 27.48 per cent then. In the last fiscal apparel export to Brazil and Turkey fell by 35.53 per cent and 5.69 per cent respectively while shipments to South Africa witnessed 0.49 per cent growth. The remaining countries except China recorded growth ranging from 15 per cent to 38 per cent. Exports to China grew 11.90 per cent, according to the data. Export earnings from the 11 East European countries except Poland and Czech Republic did not increase much, though the EU accounts for about 61 per cent of the country’s total readymade garment (RMG) exports, $28.09 billion, including knit and woven wear. The total export earnings from the European Union countries stood at $ 17.15 billion last fiscal. Of the amount, only $ 143.77 million came from the nine East European countries, namely Bulgaria, Estonia, Hungary, Latvia, Lithuania, Romania, Slovakia, Slovenia and Croatia. The exports in FY 2011-12 fetched $85.65 million, according to the EPB data. The exports to only two East European countries, Poland and Czech Republic, grew remarkably to $616.27 million and $414.37 million respectively last fiscal against $322.74 million and $63.75 million in FY 2011-12. Exporters and experts blamed the high duty– 33 per cent in Brazil, 30 per cent in both Turkey and Mexico and 40 to 50 per cent in South Africa for the poor exports to those countries. Import duty on apparels in Russia is very high which goes up to 20 per cent. In addition to the import duty, 18 per cent VAT also is charged, according to the BGMEA. Though 16.22 per cent growth was recorded in exports worth $249.16 million there in FY 2015-16, the high tariff, complex customs procedures, work orders on a small scale and frequent fluctuations in the Russian currency discouraged local exporters to explore the $4.96 billion apparel market, according to the industry people. Russian buyers resort to deferred letters of credit (L/C) that range from 90 to 120 days. The industry insiders termed it also an obstacle to export growth. Unlike the EU and the US, Russia has some stringent customs rules, said Md Modasser Pasha, marketing director of Renaissance Group, which closely works with Russian customers. Packaging accuracy is very important in shipment of goods to Russia, he said. The Russian customs forfeit a big amount of money, even if they find the slightest deviation from the packing lists, he explained. The banking system in Russia is also complicated and the local exporters are yet to cope with it, said Fazlul Hoque, former president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), though he admitted, “No doubt, Russia is a big and very potential market for locally-made apparel products. “Russia, currently has limited interest in sourcing products from Bangladesh, according to a recent meeting that we had with the Russian Chamber of Commerce in Moscow,” said Rubana Huq, managing director of Mohammadi Group. Turkey being an apparel producing country took safeguard measures to protect its domestic manufacturers to the detriment of apparel export from Bangladesh. “Our experience with Turkey was disastrous. The buyers’ expectations were not easy to match, last minute changes, discount demands etc clouded our relationship,” Ms Huq opined. Mohammad Hatem, former vice president of BKMEA, said the fall in apparel export to Brazil, a $ 2.38 billion apparel market, is mainly due to high duty while recession in the country also put a negative impact on its demand. “There have not been sustained efforts, both from the government and the businesses, for exploring the non-traditional markets, especially those in China, South Korea and Japan,” said Mr Hoque, also managing director of Plummy Fashions Ltd. Faruque Hassan, senior vice president of BGMEA, said currency devaluation against the US dollar in the importing countries, third-party sourcing of products from Bangladesh to Russia, and lack of visa processing facility for the Latin American countries, are hindering the exploration of new export destinations. Mistrust among the local makers about the Indian buyers after the Liliput incident and non-tariff barriers are among the main obstacles to exporting apparels to India, an exporter said. However, BGMEA president Md Siddiqur Rahman said the cash incentives, offered to the exporters by the government, encouraged them to explore the new destinations. He pleaded for raising the cash support to five per cent cash from the existing three per cent to boost new market exploration. Regarding poor performance in some Eastern European countries, Abdus Salam Murshedy, managing director of Envoy Group, said local makers have less networking with buyers of those countries. Exporters, however, opined that European buyers and retailers who source products from Bangladesh might have fewer stores in those regions. Centre for Policy Dialogue (CPD) additional research director Khondaker Golam Moazzem said Bangladesh has potentiality to raise the volume of exports to the prospective non-traditional markets. The growth in recent years in these markets was also positive. “But exports are not increasing up to the expected level due to some obstacles, including high duty, rules of origin in markets including those in China, Australia and South Korea,” he said. Bangladesh failed to do well in countries like Russia, South Africa, South America, Brazil and India also because of their regional trade agreements, he added. The government is taking steps, including providing cash incentive that is helpful on a limited scale, he said recommending long-term external steps to boost exports. The government needs to take measures to get high rates of duty reduced, regional and bilateral agreements to get preferential tariff access and the rules of origin eased in some importing countries, he said. Though in some countries, Bangladesh enjoys duty benefits, exports are not increasing much due to the rules of origin, he added. Language is a barrier in few countries including China, he said adding both entrepreneurs and the government should exchange delegations, develop networking and make the buyers familiar with the local products and organise and attend single-country and product-wise fairs. Regarding East European countries, he said they might import relatively a low volume and be dependent on intra-European Union import. He recommended market and product-wise research to identify the problems and the ways out to explore those markets and raise earnings. RMG manufacturers had started diversifying the markets in the face of falling demand for local items during the 2007-2008 global recession. To grab the new markets and increase exports to Eastern parts of Europe, government-to government negotiation is a must, industry people said. The government should strengthen commercial wings of the foreign missions in the non-traditional markets to help maintain the higher export growth.
