Exporters are thinking about setting minimum prices for the five most exported products — trousers, t-shirts, sweaters, shirts, and underwear
Apparel exporters are thinking about setting minimum prices for ready-made garment (RMG) products and taking initiatives to ensure fair prices to survive the intense competition and meet rising production costs.
Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said in a statement on Saturday that the increase in the prices of yarn, chemicals and other raw materials in the global supply chain has pushed up the production costs in garment manufacturing.
“In such a context, we urge the brands and retailers to increase prices as nobody can justify a lower price to produce socially fair goods,” he added.
Industry insiders said entrepreneurs have been complaining about not getting a fair price for apparel items for a long time.
The competition among entrepreneurs within countries has further made buyers indifferent to paying fair prices, they added.
In order to compete amongst themselves, exporters have installed machinery with higher production capacities than the demand in the international market. And in the absence of sufficient export orders, exporters have to take orders at any rate due to the pressure of paying wages and utility bills.
They also said that foreign buyers are taking advantage of this and the whole industry is having to pay the price.
The cost of production in the garment industry has risen significantly in recent months due to the rising price of fuel in the international and domestic markets, the LNG crisis, rising cotton and yarn prices, and rising freight rates.
In this situation, it has become necessary to set a base ceiling for export items to keep pace with the rising production costs, said exporters.
Moreover, Bangladesh is observing a revolution of building green factories with the aim of ensuring ethical prices.
According to the BGMEA, the country now has 150 USGBC LEED certified green factories in all categories, with another 500 factories awaiting approval.
Even if the order increases due to this, the prices are not increasing. From this point of view, setting the minimum price has become urgent, they also said.
Shahidullah Azim, vice-president of the BGMEA, said that they have to work on the fair price issue.
“Now the situation is that the more orders we get, the more debt we owe. Due to the cost of doing business, profit margins have dropped significantly — to nearly zero in some cases,” he added.
Azim also said that once buyers tactfully began negotiations with a lack of infrastructure, long lead times, and the weakness of political instability in order to mentally weaken entrepreneurs in bargaining.
“They also linked tragedies like the Rana Plaza collapse and Tazreen Fashions fire. But we have improved the situation successfully by maintaining compliance, and both the national and international situation is now favorable for Bangladesh,” he added.
He also said that Bangladesh is getting lots of export orders, so the BGMEA advised the entrepreneurs to be strict in matters of pricing.
“We have advised them not to compromise on fair prices during discussions with buyers. Moreover, the recent rise in the fuel prices and a number of pre-existing factors have led to a significant increase in production costs,” he added.
Speaking to Dhaka Tribune, Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said that the product, which is now in production, was ordered six or seven months ago.
“In the meantime, oil prices, container fares, and yarn prices have risen significantly, which will increase the cost of production at a visible rate,” he added.
But now there is no opportunity to adjust the price anew, meaning that they have to export products at very low profit or zero profit, only to survive in the market, he added.
“However, during the next season’s orders, each factory should consult with their buyers to ensure fair prices,” he added.
He also said that they have spoken about price with buyers at different times but that the talks ended without any favorable outcome.
“Prices of everything in the world market have gone up, now buyers should buy products at fair prices. Entrepreneurs in this sector are carrying out production in compliance with all their conditions, this time they should also pay attention,” he added.
According to the BGMEA and the BKMEA, Bangladesh currently exports 227 apparel items in the form of six digits of the Harmonized System (HS) — the code of common method in international import-export trade.
Among these, the exporters are thinking about setting minimum prices for the five most exported products — trousers, t-shirts, sweaters, shirts, and underwear.
