The net earnings from readymade garments exports in the January-March period of fiscal 2021-22 fell by 3.89 percent, or $243.82 million, to $6.02 billion from $6.26 billion in the October-December period due to price hike of raw materials in the global market.
According to Bangladesh Bank (BB) data, the value addition in RMG products dropped to a record low of 52.24 percent in the third quarter of FY22.
Earlier the RMG sector recorded the lowest value addition of 53.42 percent in the June-August period (the first quarter of fiscal 2021-22. The value addition in RMG products in the third quarter of FY 2020-21 was 57.61 percent, the BB data showed.
Exporters said the prices of raw materials continued rising on the global market and at the same time the demand for RMG products was decreasing as inflation went up in countries all over the world due to the Russia-Ukraine war.
The BB data shows the import value of raw materials was $5.50 billion in the January-March of FY22, accounting for 47.76 percent of the total RMG export earnings.
So, the net exports from the RMG sector totaled at $6.02 billion in the third quarter, 3.89 percent down from the previous quarter, but 31.62 percent higher on the same period the previous year, the central bank said in its quarterly report.
The high cost of imported raw materials caused a drop in the net exports for the quarter, it said.
‘A variety of supportive measures, such as ensuring the supply of raw materials at reduced prices, reducing the lead time, improving the ease of doing business, and diversifying products instead of basic and low-priced products, etc, must be strengthened to maintain the growth momentum of this sector,’ the central bank said in the report.
The BB data shows that the value addition in apparel products in the third quarter of FY22 fell by 5.56 percentage points from 57.80 percent from the previous quarter.
‘We are facing two global crises – the Covid pandemic and the Russia-Ukraine war. Both of the crises are fuelling inflation worldwide and increasing the prices of raw materials and cost of production,’ Md Shahidullah Azim, vice-president of BGMEA told The Daily Observer on Monday.
He said the value addition or net export earnings from RMG products decreased due to the high prices of raw materials. Azim said that inflation went up in the European countries due to the ongoing Russia-Ukraine war and the demand for apparel products became slow in the market.
He said Bangladesh’s RMG exports might decrease in the coming months in the EU market due to high inflation caused by the Russia-Ukraine war.
According to Azim, in the first 22 days of April 2022, RMG products worth $2.7 billion were shipped whereas the products worth $1.7 billion were shipped in the first 22 days of May.
According to the BB data, the value addition in RMG products has started declining since the financial year 2019-20. The value addition in FY20 decreased to 56.84 per cent from 64.32 per cent in FY19.
To calculate import value of raw materials, the BB considers the value of components like raw cotton, synthetic/viscose fibre, synthetic/mixed yarn, cotton yarn and textile fabrics and accessories for garments instead of back-to-back letters of credit’s raw materials.
