entrepreneurs of apparel sector: Happy with orders sad with gas crisis

Al Amin :
Despite the surge in export orders in second quarter (October-December) of the current fiscal year, the entrepreneurs of the country’s apparel sector are worrying over the ongoing energy crisis, insiders said.

Based on the number of Utilisation Declarations (UD) issued by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), which indicates the export order trend, the apparel sector posted a 6.59 percent year-on-year order surge in the three-month period.

The BGMEA issued 6,771 UDs to the apparel exporters during the time, while the number was 6,352 in the corresponding period of last fiscal year (2022-23).

The rise in shipment orders amid persisting global economic shocks has created hope among the local exporters, the entrepreneurs said.

Many buyers have also adjusted and increased prices in line with the new wage structure for the sector’s workers, which was implemented in December last year, they added.

The sector has been facing order shortage crisis for a long time, and due to that, in the second quarter (October-December) of FY24, it witnessed straight negative export earning growths of 13.95 percent, 7.45 percent and 2.35 percent on those three months, respectively.

But, the trend is now changing and order rates are increasing day by day thanks to the recovering drift of the economy of key export destinations like USA and EU.

Exporters hope that considering the ongoing buyers’ queries, the UD growth is likely to touch two digits in the third quarter of FY24.
BGMEA President Faruque Hassan told The New Nation, “We are in a better position in receiving orders compared to our competitors amid global economic shocks.”

He further said that the RMG sector’s key export destinations have been facing severe high inflation for a while now and their government increased interest rates to bring the situation under control. The move heavily reduced consumers’ purchase capacity and the brands were left with a big stock in their warehouses.

That is why the US and EU’s sourcing rate from the global market was reduced in the past year. But most of the countries, especially the US, which is the single largest export destination for Bangladesh, were able to bring inflation under control in recent months.

“So, I can predict that orders will increase in the coming days and it will be visible from the last quarter’s export data.

To cash in on this opportunity, we need uninterrupted gas and electricity supply to the factories as soon as possible,” said Faruque. He, however,
expressed concern over the ongoing crises in the Middle East and the Red Sea as they are impacting the global economic pattern, and said that many buyers would be forced to go for price cuts to adjust to the increased freight fare.

The RMG sector is currently receiving a good number of orders from the US, the UK and EU markets, as the brands in these countries were able to sell most of their stocks during the holiday season at the end of 2023.

But the prices are not up to the mark yet and buyers are pressuring to maintain lead time as much as possible as the Red Sea crisis is wasting weeks per shipment delivery.

According to the EU, the eurozone’s annual inflation rate was 2.4 percent in November last year, down from 2.9 percent in October. But the rate went higher to 3.4 percent in December as a result of the ongoing Russia-Ukraine war and the ongoing Middle East crisis.