The export industry of Bangladesh demonstrated its strength in 2022 despite the devastation caused by the war between Russia and Ukraine, extraordinary freight prices, the energy crisis, record inflation, and the possibility of a recession that lingered throughout the preceding year.
Even after the war broke out in February and increased fuel prices, energy shortages, and power outages pushed up the cost of production at home, the sector got off to a good start in January as the coronavirus situation improved in a significant portion of the world. The momentum continued until August even though the momentum continued even after the war broke out. Shipments, on the other hand, fell throughout the months of September and October before beginning to recover in November as a result of increased demand from international clients. In general, the export industry was one of the few bright spots for Bangladesh in what was otherwise a difficult year.
On the strength of solid development in apparel shipment, the country’s total export earnings surpassed $5 billion for the first time in its history in November of the previous year, which was a first in the country’s history.
In point of fact, the year marked a number of significant peaks. The total value of all items exported in January was $4.85 billion, representing a year-on-year increase of 41.13 percent. It reached a record high of $4.908 billion in June, the most it had ever been before November, when it brought in $5.09 billion.
The shipping of clothes, which accounts for around 85 percent of total national export receipts, skyrocketed 42.5% to $4.09 billion in the very first month of the year. In November, it had already reached $5.09 billion in value. The earliest sign of trouble following the outbreak of hostilities was the imposition of a ban across Europe on the use of the Society for Worldwide Interbank Financial Telecommunications. The possibility for Bangladesh to increase its market share in Russia began to slip away almost immediately. After local exporters began using alternative channels to send items to Russia and began collecting earnings in Chinese currency rather than in US dollars, only then did the shipment to Russia begin to recover. Another blow was dealt to the export industry as a result of the increase in freight costs, which was greater than 500 percent. Meanwhile, the record climb in the exchange rate, which occurred concurrently with the rapid depletion of foreign currency reserves, drove the price of the US dollar to as high as Tk 110.
Exporters continue to express frustration that the lower currency rate they obtain when cashing in export revenues causes them to lose money and makes it more difficult for them to compete on international markets. The record inflation in the European Union and the United States, which together account for more than 80 percent of Bangladesh’s export earnings, hit exporters hard because consumers tightened their purse strings as a recession loomed over them. Bangladesh’s export earnings are primarily derived from the European Union and the United States.
As a result of the decline in demand, a significant number of multinational merchants and brands were left with apparel goods in their inventory that were unsold. Because of the war and increased freight costs, the price of cotton went up, which led to an increase in the price of yarn on the local market. As a result of the recent drop in the global price of cotton, local textile firms are sitting on a stockpile of yarn worth three billion dollars.
The government of Bangladesh took action in July to implement load-shedding in order to protect the country’s forex reserves. As a result of Bangladesh’s requirement to import the fuels necessary to generate electricity, factory-level productivity decreased as a direct result of the frequent power outages. As a result of the temporary halt in the purchase of liquefied natural gas from global spot markets, the government was compelled to temporarily shut down a large number of power facilities, which made the existing crisis in the power supply even more severe.
In August, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), which serves as a forum for clothing exporters, declared its ambition to increase apparel shipment to $100 billion by the year 2030. This goal was set despite the bleak state of the world economy. Bangladesh continued to hold its position as the world’s second-largest exporter of garments in the year 2022, behind only China.
Even though there is more inflation in Europe, there is still a very high demand for locally created apparel products, according to Senior Commerce Secretary Tapan Kanti Ghosh, who made this statement earlier. The trade war between the United States and China, competitive prices, and recent improvements in workplace safety conditions are the factors that analysts believe are responsible for the spectacular success of exports.
This year, Bangladesh also solidified its position as a reliable supplier of apparel items. Since the coronavirus pandemic began sweeping the globe in March 2020, Bangladesh has been one of the few countries that has managed to keep its factories operational, making it one of the few countries in the world to do so. According to Faruque Hassan, president of the Bangladesh Manufacturers and Exporters Association (BGMEA), “Bangladeshi exporters are resilient, and they know how to live in the harsh weather circumstances.”
During the entirety of the financial crisis, local suppliers increased their exports to non-traditional markets such as India, China, Japan, and Russia, in addition to traditional destinations such as the European Union (EU), the United States of America (USA), and Canada.
Bangladesh is also well on its way to become a worldwide manufacturing powerhouse for value-added high-end textile items. This is an opportunity that has the potential to assist the country increase its revenue from exports in the future.
Hassan predicted that Bangladesh’s current proportion of the global clothing market would increase to 7.5% by the end of the current year. This would be an increase from the country’s present share of 6.4%.
Despite this, the shipment of some potentially lucrative industries, with the exception of leather and leather goods, was unable to live up to expectations. For instance, frozen foods, agricultural products, handicrafts, jute and jute items, specialised textiles, and carpets did poorly because of the reduction in demand in the global markets as a result of the unstable global economy. This was due to the fact that the global economy is unpredictable.
The failure of the sector to increase exports was attributed by the president of the Bangladesh Jute Mills Association, Md Abul Hossain, on the higher price of raw jute in the local market. “As a result of the rise in the cost of living, customers are not prepared to pay a higher price for products made of jute. Alternatives are becoming more appealing to consumers.”
According to Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry, there has been a significant increase in the amount of items being shipped. “International merchants and brands are relocating their operations away from China and into other countries like Bangladesh, Vietnam, and Cambodia,”
“Sales centring Christmas are exhibiting improved performance as customers are going to enjoy the holiday in a large way for the first time in three years,” the author writes. “The last time this happened was three years ago.” According to M A Razzaque, the research director of the Policy Research Institute of Bangladesh, the year 2022 is expected to be a turbulent one for the export industry.
“Export expanded over the first half of the year, but then saw some moderation during the second half of the year.” It was anticipated that the severe depreciation of the local currency in relation to the dollar would be beneficial to the exporters. The economist explained that this was impossible due to the fact that several banks have predetermined exchange rates for the American greenback. “The benefits that the currency decline has brought have been completely nullified by this.”
