Bangladesh’s exports of apparel items to the European Union remained sluggish in fiscal 2016-17 mainly due to Brexit, national elections in major European countries, depreciation of the euro against the dollar, prolonged labour unrest at home and poor port services.Exports to the EU grew only 3.49 percent year-on-year to $17.75 billion in fiscal 2016-17, while the growth was 11.66 percent in the year before, according to Bangladesh Export Promotion Bureau (EPB) data.Against this backdrop, Commerce Minister Tofail Ahmed is scheduled to sit with EU diplomats and businesses at the third business climate dialogue between Bangladesh and EU in the ministry today to discuss investment and export.Riding on a duty-free privilege, Bangladesh’s garment export to the EU has been maintaining an annual growth rate of more than 10 percent over the last 15 years. However, this growth was the lowest in 2016-17 as per exporters.The Brexit in June last year was mainly responsible for the slowdown in garment export to the EU, where nearly 60 percent of garment items are shipped in a year.Last fiscal year, garment export to the UK declined 5.97 percent to $3.31 billion. It was $3.52 billion in the year before, registering a 21.37 percent year-on-year growth rate.The UK is the third largest garment export destination for Bangladesh. However, it has been suffering from high inflation stemming from the freefall of the pound against the euro and US dollar.The rising cost of foreign package holidays and imported computer games pushed the UK inflation rate up to 2.9 percent last month from 2.7 percent in April.The latest inflation rate is the highest since June 2013 and above the Bank of England’s target of 2 percent.The fall in the value of the pound since the Brexit referendum has increased the cost of imports which has been one of the key factors behind the rise in inflation.The Retail Prices Index measure of inflation increased to 3.7 percent in June, up from 3.5 percent the month before, according to BBC.Garment export to some major EU members increased slightly between 3 and 5 percent year-on-year.To Germany, the second largest export destination for Bangladesh, export amounted to $5.14 billion in fiscal 2016-17. Export earnings from France, Spain and Italy were nearly $2 billion each in the last fiscal year, according to EPB data.This year was of elections for the major economies of the EU. France, the Netherlands and the UK have already had theirs while Germany is going to hold it on September 24.During such periods, retailers and consumers tend to wait for the new government’s policy decisions, so it has a negative impact on business activities, said exporters.Bangladesh logged in $34.83 billion in export receipts for fiscal 2016-17, up 1.69 percent year-on-year.Had there been favourable exchange rates, the earnings could have been at least $3 billion more as the volume of shipments from the country increased. But the receipts belied it.In August 2016, one euro was exchanged for $1.135. It came down to $1.045 in December. The trend continued until June this year before reversing. In the first week of July, one euro was exchanged for $1.140.A massive labour unrest in December 2016 at the garment manufacturing hub of Ashulia forced owners to stop production in nearly 100 factories for more than one month.Production was badly hampered for the closure, intended to avoid a spillover of vandalism by workers for a raise in salary.Poor services at Chittagong port, where the release of goods takes nearly 15 days, was another major cause of concern for exporters, said Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association.“We need to reduce the lead-time drastically amid fierce competition of the apparel business,” he said. Previously, retailers and brands gave 90 days’ lead-time but now they reduced it to 70 days, he said.Competing countries like China, Vietnam, Cambodia and India can supply to retailers and brands at a shorter lead-time but Bangladesh is still lagging behind due to lower productivity, port congestion and poor infrastructure, Rahman said.On the prospects of Bangladeshi apparel in the EU, Kurt Salmon Global Sourcing Reference, a European research firm, stated in a study that Bangladesh was gaining the market share with regard to sourcing by both Europe and North America.It is still mainly focused on less complex products but it has the potential to further strengthen its relative position if production capabilities can evolve and quality can be improved, while ensuring social and environmental compliance standards, the study said.
