Value addition in the country’s readymade garments sector dropped by 3.31 percentage points in the July-September quarter of this fiscal year of 2019-20 compared with that in last fiscal year as the country’s exporters were losing competitive edge due to overvalued local currency and increasing cost of doing business. According to a Bangladesh Bank review on the RMG sector, the value addition in the sector dropped to 61.01 per cent in July-September of FY20 from 64.32 per cent in FY19. The sector’s value addition, however, was 60.44 per cent in July-September of FY19. Economists and exporters said a slowdown in the global economy due to the US-China trade war also resulted in a slump in consumption of RMG products. The consumption fall also forced the country’s exporters to lower prices, they said. Although economists and exporters have been demanding an immediate devaluation of the taka, finance minister AHM Mustafa Kamal recently announced that the local currency would not be devalued against the US dollar. The country’s RMG manufacturers imported raw materials worth $3.14 billion in July-September of FY20 against export of $8.06 billion in the period. The RMG sector imported raw cotton, synthetic or viscose fibre, synthetic or mixed yarn, cotton yarn and textile fabrics, and accessories for garments as inputs for the production. The import of raw materials represents 38.99 per cent of the country’s export value. In FY19, the country’s export earnings of the RMG sector were $34.13 billion. For the production of the export items, the sector imported raw materials worth $12.18 billion, representing 35.68 per cent of the RMG export value. Mentioning the RMG sector’s 83.52 per cent contribution to the country’s overall export earnings, the BB report said, ‘We need product diversification in our export basket.’ ‘Some of our competing countries have already succeeded in product diversification in last decade. Vietnam emphasised electronics and other value-added export products,’ it said. Due to Bangladesh’s high dependency on RMG in export basket, any instability in this sector in future could result in huge unemployment and trade deficit in the country, the BB report said. The central bank also suggested medium- and long-term measures to tackle challenges in the sector. ‘Factory to port communication should be developed to reduce lead time domestically,’ it said, adding, ‘We have to ensure utilities supply with reasonable price along with one stop service in trade procedure and documentation in product transaction.’ ‘Moreover, for continued progress in RMG export earnings, we can try to expand our market in emerging countries along with the prevailing markets,’ the central bank report said. Due to the global slowdown, the country’s export earnings fell for the fourth consecutive month in November of the current fiscal year. In July-November of FY20, the country’s export earnings fell by 7.59 per cent to $15.77 billion from $17.07 billion in the same period of FY19. Of the total export earnings, volume of RMG exports fell by 7.74 per cent to $13.09 billion from $14.18 billion in the same period of FY19. ‘The EPB data spots another dent in the export growth curve. Such continuing negative growth (for four months in a row) last happened in the March-June period of FY12,’ Bangladesh Garment Manufacturers and Exporters Association president Rubana Huq said recently. She said such decline testified that the competitiveness of the RMG industry in Bangladesh was really in danger and the country was not aligned at all with the global competitive scenario; particularly the exchange rate movement of the taka against the competing currencies remained inconsistent. Rubana also said that shutting down of factories in recent months especially after the minimum wage hike in December in 2018 was taking its toll on the export industry. ‘The latest data from the official source of the US and the EU show that Bangladesh is significantly lagging behind our competitors in terms of growth during the third quarter of 2019, i.e. July-September 2019. During this period, Bangladesh registered 1.70 per cent growth in the US whereas Vietnam grew by 14.23 per cent, India 3.93 per cent, Cambodia 15.56 per cent and Pakistan 6.58 per cent,’ she said.
