The readymade garments (RMG) industry is facing a crisis in the current global situation due to the Russia-Ukraine war. Although the production cost is increasing with the rising electricity costs, buyers are reducing the price. The demand in the global market has also declined.
To survive in this situation, the industry needs government policy support for the next six months. At the same time, buyers should also adopt an ethical buying policy.
We have been getting fewer export orders at the present situation as the buyers are placing 40-60% less orders and we do not see any possibility of improvement very soon.
In the last two months, in November and December, products worth $5 billion were exported. However, despite this record amount, we must say that the internal situation of the industry is not good. If this continues, exports might decline in three to four months.
There are other problems too. Sometimes the buyers do not make the payment even after receiving the export orders. They even decline to receive the shipment and delay the export schedule. In such a situation, we are not able to pay the liabilities of back-to-back LCs (letters of credit). As a result, banks are not opening back-to-back LCs.
The Bangladesh Bank has issued a circular mentioning that if anyone delays the back-to-back LC payments even for a single day, the central bank will take action against those concerned and cancel the authorised dealer (AD) licence of that bank. Therefore banks have become more conservative after this circular.
The banks are also creating forced loans due to the failure of back-to-back LC payments and there is an unusual interest rate on those forced loans. It is also an unwanted liability which is imposing a burden. The situation is so severe that we are expecting that several factories may close in the next few weeks.
To overcome the situation, we need cooperation from the buyers but the fact is they are not helping us. They are practising unethical buying policies. They are reducing prices in every season which is reducing the cost of making. It means that we are not being able to get the money needed to pay the wages of the workers and other expenses.
However, we are still taking orders because, otherwise, we would lose those buyers. For this, we have to compromise with the unethical pressures of the buyers. We have raised the issue many times in international forums. We are providing various facilities to the workers to comply with the international rules, but we are not getting any cooperation from buyers.
Although at various international forums, various organisations say that buyers will come forward in this regard, it did not happen. The international agencies that are working with us always talk about ethical practices, but they are not concerned about the practice of ethical buying. They are always creating pressure on us but they do not talk about fair prices.
Meanwhile, the issue of forming the wage board is now being raised. As per the rules, a new wage board should be formulated every five years. The workers’ demand for a new wage board is also justified as we are facing inflation. But from our perspective, it will be a huge burden for us; our condition should also be considered.
Photo: TBS
If the buyers further try to decrease the prices of our products, it will be the final nail in the coffin. We need government policy support in this situation. We have requested the Bangladesh Bank not to classify any organisation till next June. We need this help to survive in this crisis moment.
The commodity prices have gone beyond the purchasing capacity of the workers. We are requesting the government to arrange a rationing system for the workers. The government is already giving rations to around 1 crore people. It will not put much pressure if they add 25-30 lakh people to the rationing system. It will ease the struggle of the workers in the inflation time.
At the beginning of last year and the previous year, we were having a lot of export orders. We were going to expand the existing factories. Some new investments were also coming into the sector. However, that has been stopped in the current situation. The gas and electricity crisis is also a matter of concern for us.
The shortage of gas and electricity is not being felt severely amid the winter season. However, it will intensify after March. We do not think that there will be much investment amid the situation.
The National Board of Revenue (NBR) has not provided any reasonable explanation for fixing our Advance Income Tax (AIT) from 0.5% to 1%. We demand to take the AIT to the previous rate. It will be a great support for our survival.
We also need to ease the policy barriers to imports.
Earlier, the government suspended the interest and repayment schedule during the Covid-19 period. We request the authorities to take this initiative again for the next six months.
If the Russia-Ukraine war stops, then we expect the situation to improve after six months. The end of the war along with a solution to the current gas-electricity crisis will again help us to achieve growth.
The author is the executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA)
