For the readymade garment (RMG) sector in Bangladesh, the year 2023 was the year of turbulence and optimism as the sector faced a bunch of challenges along with some achievements.
This year marked labour issues, shrinking global economic growth, lukewarm orders, domestic issues like gas and electricity shortage as well as the reserve crunch.
However, the sector also witnessed some achievements including a sustained growth despite global economic turmoil, circularity and green movement, value addition, and export rise in the new markets.
Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said that the sector faced multifaceted challenges in 2023.
However, the sector had tried its best to sustain the growth despite global economic turmoil and faced less challenges than its competitors.
Export earnings
The apparel sector is responsible for more than 83% of the total export earnings of the country.
According to the Export Promotion Bureau (EPB), Bangladesh earned $42.83 billion in the January-November of 2023, fetching a growth of 4.35% from $40.97 billion in 2022.
Despite the economic headwinds, as per the “World Trade Statistical Review” published by WTO in 2023, Bangladesh has regained its ranking as the second largest apparel exporter in the world with a 7.87% share of the global market.
Moreover, Bangladesh has already become the top denim-sourcing country for the US and EU, and now in close competition with the largest apparel exporter in China in the EU market.
Orders slowdown
“The global economic slowdown caused by the Russia-Ukraine war became more visible this year. Interest rates have been raised in our destination countries, which affects their purchasing power. As a result, the order also decreases,” said BGMEA president Faruque Hassan.
Due to all these reasons, the exports to major export destinations have fluctuated throughout 2023.
According to the exporters, most of the factories ran at 60% to 70% of their capacity and orders declined about 15% to 30%.
The escalation of inflation has hit a record with 8.8% in 2022 which was 4.7% in 2021. The impact of this inflation continued into 2023 with 6.8%, affecting consumer demand for apparel in the US and Europe.
In the first nine months of 2023, the overall import of the European countries declined by 12.08%, which has been recorded as 22.71% for the United States in January to October 2023.
“Consequently, Bangladesh faced a 15.87% decrease in EU’s import and 24.75% decrease in the US market. This pressure exerted a significant impact in the pricing dynamics of major clothing items, resulting in a notable 7%-9% decrease in our average unit prices,” said Mohiuddin Rubel, director of the BGMEA.
Domestic turbulence
Challenges also persisted throughout the year, as the sector encountered increased electricity and gas prices, and a decrease in foreign currency reserves.
“Interrupted gas and electricity supply affected us more though the price increased up to 150%. We didn’t not get uninterrupted gas and electricity services, resulting in disruption of production and increase in cost of production,” said Faruque Hassan.
Due to the shortage of reserves, the exporters have to face some kind of uncertainty in the import of raw materials, said the exporters.
Moreover, the existing problems at customs appeared as a major hindrance to the ease of doing business and also a great threat to meet the export target of $100 billion.
Minimum wage and labour issues
The fixing of the minimum wages for the RMG sector and the labour issues that emerged in alignment with the minimum wages were hot topics throughout the year.
Labour movement for increasing minimum wages started and then turned into violent unrest in the last quarter of the year which claimed the lives of four labours in various incidents.
On November 7, the government set Tk12,500 as the minimum wages for the RMG workers.
Regarding the new minimum wage, Faruque Hassan said: “We have raised the minimum wages in our sector at a significant rate despite considerable pressure. The focus of the international community was here, but we managed to handle it successfully.”
He also urged the support of all stakeholders in implementing this wage.
Some external issues
Moreover, the US Presidential Memorandum on Advancing Worker Empowerment, Rights, and High Labor Standards Globally, which will allow the country to impose sanctions, penalties and visa restrictions was another headwind.
The global attention on US disclosures and European labor regulation has created additional pressure.
“However, we want to emphasize that even in the face of such challenges, we are taking all-out steps to make the industry sustainable and to take better care of our workers and community,” said Mohiuddin Rubel.
Regarding the issue, Faruque Hassan said that they fully comply with labour rights obligations and there is no pressure on them.
“At a time when bilateral relations are strained over labour rights issues from the US, the news of increasing the number of our LEED-certified garment factories has brightened our image globally,” he added.
Major achievements in 2023
One of the achievements of this year is the value addition of ready-made garments, meaning that the same product can fetch higher prices than before. This has also come up in the various reports of Bangladesh Bank.
“Moreover, our commitment to circularity, sustainability and the environment continues. We now have 206 USGBC certified green factories and 24 of them received certification in 2023 with the world’s highest rated factory,” said Faruque Hassan.
There is a sluggishness in the global economy, where Bangladesh is still doing somewhat better.
“According to WTO 2022 data, we are the second largest exporter. When the WTO 2023 data is released, we hope that our growth may pick up slightly or remain flat, with most countries experiencing negative growth,” he added.
However, if the supply of gas and electricity would have been normal, then the situation might have been a little better.
“We still have existing problems at customs which is a major hindrance to ease of doing business. It is important to solve the problems to meet the export target of $100 billion,” he added.
The sector also keeps the wheels of the economy moving by creating employment and making women financially self-reliant.
“We care more about labor rights now than ever before,” he added.
A green 2024
“We will focus more on recycling, circularity, market diversification, value addition, and clean and green energy in 2024,” said Faruque Hassan.
He also said that they will also continue their work for a safer and secure workplace for the workers and to ensure workers’ rights and well-being.
Mohiuddin Rubel said that going forward, not only in 2024 but also in the next decade.
“We must continue the momentum of our achievements. We need to develop our capacity in backward and forward linkage industries. At the same time, we need to focus on innovation, technological up-gradation, design and skill development, and overall business capabilities,” he added.
Initiatives towards green transformation must be accelerated and supported. Going global is the next agenda, where virtual marketplace can serve as a strategic avenue, particularly for the SMEs.
“In a highly volatile world market economic slowdown, geo-political crisis, global trade policy shifts, climate action and ESG priorities, disruptive technologies and supply chain or inventory management may continue to be the major issues in the coming year. For us the strategy for the next decade should be investment in backward linkages, technology, complex skills development, and continuing the sustainability momentum,” he added.
Faruque Hassan called for uninterrupted supply of gas, electricity, and efficient customs for growth in 2024. News Sources :dhakatribune
