Despite enjoying incredible growths in November and December, the apparel industry owners are worried that exports may dip in January amid a global economic crisis.
Faruque Hassan, the president of the Bangladesh Garment Manufacturers and Exporters Association, said the worries were rooted in the declining purchase orders over the past four months.
Bangladesh had sufficient orders in June last year but the shortage of gas stymied production followed by a fall in exports in September and October compared to the previous year.
The industry shipped out products of $3.9 billion in September and $3.5 billion in October, registering a 6.25 percent and 7.85 percent year-on-year fall, respectively.
But against all odds, exports skyrocketed to $5.09 billion in November and $5.36 billion in December, recording a 26 percent and 9.33 percent year-on-year growth.
The exports in December were the highest in a month in Bangladesh’s history, though it came as a surprise to industry owners. Faruque was quite certain that the upward trend would be broken in January.
“It’s because we ship orders three to four months after receiving them. We’d been saying for four months that the orders slowed down and its effects would be felt in January.”
Faruque thinks the absence of logjams at Chattogram port is a sign of the drop in orders and volumes of exports.
“The jetties in Chattogram port are empty. There’s no logjam. This does not bode well. We had ships waiting at the port for five to seven days beforehand. That’s no longer the case. The ships sail off the same day they arrive.”
He could not confirm how much orders have decreased, but said it could be around 30 percent.
Faruque, who is the managing director of Giant Group, believes shipping of expensive products helped Bangladesh rack up record exports in December, but the volume decreased.
“The prices of raw materials, cotton, in particular, have risen over the past six months. The higher cost of raw materials led to a rise in the prices of clothing as well. This is why exports seemed more in value.”
Mohammad Hatem, the president of the Bangladesh Knitwear Manufacturers and Exporters Association, said shipments stalled in September and October due to the war in Europe and global economic downturn were delivered in November and December, thus the record exports in the past two months.
However, Kazi Iftekhar Hossain, the president of the Bangladesh Garments Buying House Association, thinks the shrinking purchase orders were no cause for concern.
“The factories were working on subcontracts along with their orders over the past few months. These subcontracts might have stopped. Besides this, the orders will soon return to normal.”
BGMEA SEEKS BUYERS’ SUPPORT
The BGMEA sent out a letter to foreign buyers and brands for assistance citing higher gas, electricity and production costs.
The garment exporters’ group asked them to relax terms on buying fabrics and other accessories from specific companies in their orders.
The gas price for industrial units of all sizes was set at a flat rate of Tk 30 per cubic metre last week. In November, the government raised electricity prices by 5 percent per unit recently.
Apparel industry owners alleged the government “broke the promise it made to business leaders about raising gas prices ”. They had proposed that prices be raised to Tk 25 per unit for captive power plants only.
BGMEA Vice President Shahidullah Azim thinks the higher cost of gas might raise the overall production cost by up to 15 percent.