Bangladesh’s apparel exporters are now in a spot of bother with work orders for the Russian market, which are in pre- or post-production processes, as shipping lines have started suspending container bookings to Moscow.
Despite assurance from Russian buyers, the garment makers are uncertain about getting payments after they complete manufacturing of the ordered goods as they will not be able to send goods to the buyers as Black Sea waterways have been shut to Russian ships and the European Union also closed airspace to the country.
Moreover, the Russian banks’ possible cut-off from the main international payment system, SWIFT, will further make it difficult for the Bangladeshi exporters to get payments.
In this situation, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has asked exporters not to accept any new orders for the Russian market.
There are more than 100 apparel makers that supply clothing for Russia directly or through a third country.
For example, Renaissance Group, a leading apparel exporter, has work orders worth $15 million for Russia – some goods are under production, while there are inventories too.
Its director Saiful Alam told The Business Standard, ” We have been doing business with Russia for the last few years. Our annual export to the country amounts to about $30 million.”
Saiful Alam said the production process of some clothing items will be completed on time and they also have a big inventory that they will keep unused for the time being.
He also said two courier service providers – DHL and FedEx – have already informed them that they will not accept any parcel for Russia, while Orient Overseas Container Line also denied to accept any goods for this destination.
BGMEA vice-president Shahiduallah Azim said, “We are worried about getting payments for the goods that have already been shipped to Russian buyers as Russian banks might be cut off from SWIFT but every payment requires its clearance.”
On the other hand, US allies imposed sanctions on Russian companies, he noted.
Shahiduallah Azim said the BGMEA suggested its members observe the situation and do not receive any new orders.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) executive president Mohammad Hatem said they have also advised their members not to accept direct orders from Russian buyers.
About 80% of Russian clothing imports happen through third countries. Those who are doing business this way may continue taking orders, he added.
A Bangladesh exporter, who is close to him, exported $2 million worth of goods to Russia through Turkey and it already received payments after having done shipments, he noted.
The exporter also has $2 million worth of goods in the production process.
BKMEA Vice-President Fazlee Shamim Ehsan said if Russian banks are removed from SWIFT, they may find an alternative way.
Another apparel exporter Kamrul Huda, director of 4H group based in Chattogram, said they have exported $1 million worth of T-shirts for children and $5 million worth of the clothing is in the manufacturing process.
The company is doing business with Russia through Italy; it ships goods to Russia and gets payments from Italy, he noted.
“We have reached out to our buyers. They assured us that we may not face any trouble due to this war” Kamrul Huda added.
Shahidullah Azim said, “Russia is one of emerging markets for our apparel exporters. We have planned to organise a roadshow this year to explore the Russian market, which is also uncertain.”
Shams Mahmud, managing director of Shasha denim Mills Ltd, in the short run, RMG exports from Bangladesh may be affected, overall, it will not be a problem as buyers would want to sell goods at a price point, which will be within consumers’ purchasing power and they will also cut down their costs of manufacturing.
Bangladesh has established itself as an ideal destination for the sourcing of world class products at competitive prices. “During Covid-19, we have seen that order flows actually increased. So, there is no reason to forecast a downtrend in the long run,” he added.
According to the Export Promotion Bureau, Bangladesh exported $665.32 million to Russia in the fiscal year 2020-2021, of which, $607 million came from apparel and textile exports.
