The ready-made garment sector saw only 57% value addition in the April-June quarter of FY24 – lowest in the past 21 months – mainly due to higher import costs of fabrics as continuing gas crisis hampered domestic spinning output, according to Bangladesh Bank data.
The RMG last experienced such a significant dip in value addition, or net export, at 51% during the July-September quarter of FY23.
The central bank report, published yesterday, stated that net export during the January-March quarter of FY24 was notably higher at 72.20%.
Stakeholders have questioned the Bangladesh Bank’s comparing the April-June data with the previous quarter’s “inflated” figure.
When asked about the sudden decline in net exports, Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told The Business Standard that exports reported in the April-June period were relatively accurate.
“However, we don’t think the January-March export data is accurate and reflects actual export activity. This is because our exporters did not export as much during that period,” he said.
“So, while net exports appear to have dropped significantly, we don’t believe the decline was as severe as reported,” he added.
According to the BB report, the import cost of raw materials – including cotton, synthetic/viscose fibre, synthetic/mixed yarn, cotton yarn, textile fabrics and garment accessories – amounted to $3.8 billion in the April-June quarter, making up 43% of the total RMG export earnings.
As a result, net exports from this sector stood at $5.04 billion during the period, which was 14% lower than that of the preceding quarter ($5.89 billion) as well as 10% lower than that of April-June FY23 ($5.61 billion), the report states.
Total export earnings from Readymade Garments (RMG) stood at $8.84 billion in April-June which was 36% lower than that of the previous quarter ($11.77 billion) and 1.38% lower than the same quarter of the previous year ($8.96 billion).
Central bank export data show that net export was in the 50% range in the April-June quarters of FY21 and FY22.
The BKMEA president also mentioned that exports may decline in the coming months.
“So far, I don’t see any possibility of RMG export growth in the coming months. Due to a prevailing nationwide instability, orders for products typically in demand for Europe’s winter, late winter, and early summer seasons have significantly dropped over the past three months.
“As export orders continue to decrease, exports are naturally expected to decline over the next few months.”
Commenting on rising imports of raw materials for the RMG sector, Mohammad Hatem said, “Due to the gas crisis, we are unable to produce fabric domestically.”
He added that the reduction in incentives has also impacted the production of local raw materials like yarn. “As a result, the industry will need to import these items, which will inevitably increase total import costs,” he said.
The Bangladesh Bank report also highlighted that despite the global economic slowdown caused by geopolitical conflicts, the RMG sector performed relatively well due to the devaluation of the Taka.
However, RMG exports performance dropped in April-June of FY24 compared to previous year, reflecting weak global demand, the report states, adding that woven garments accounted for 38% of total export earnings.
The primary export markets for Bangladesh RMG were the US, Germany, the UK, and other European nations, which collectively generated $6.98 billion in revenue in the April-June period, though these markets saw a 6.56% and 2.43% drop compared to the previous quarter and the same quarter of the previous year, respectively, according to the report.
The BKMEA president noted that the previous Awami League government based various policies on inaccurate information, which led to the cancellation of several incentives under the pretence of Bangladesh graduating from the LDC list.
He emphasised that the current government should review and rectify these matters. Additionally, he stressed the need to ensure uninterrupted gas and electricity supply for export-oriented factories so they can maintain continuous production.
