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Demand falls around 20pc

RMG sector loses bargaining power

09 August 2022

Al Amin :
The domestic apparel industry is going to lose price bargaining power as demand has fallen significantly in major economic countries, despite production cost has increased drastically, according to sector insiders.  
The industry has witnessed a downtrend in purchasing orders from global buyers in recent times, posing a threat to the country's export growth.
"Growing inflation and possible recession in major economies caused by the Russia-Ukraine war is mainly the reason for downtrend of apparel demand," said BGMEA Vice-President Shahidullah Azim.
"We received orders aplenty after post-lockdown period from its European and US markets to cater to consumer needs. But now we getting at least 20-per cent less orders," he added.
The declining trend is also reflected in the issuance of Utilisation Declaration (UD) by two apparel trade bodies -- Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
On an average, both BGMEA and BKMEA issued 20-per cent less UD last month and the issuance is declining gradually this month (August).
The BGMEA issued some 690 UD in July 1-7, which has declined to 583 in same period of the current month.
On the other hand, issuance of UD by the BKMEA was 13 per cent less than the previous month and 16 per cent less till August 7, sources said.
However, as per the OTEXA data for the month of June, apparel export to US market has increased by more than 60 per cent.
But the apparel exporters said that these orders were placed in March, April and May when the global situation was not as volatile as now.
"This growth is just a short term phenomena, not a sustainable one and we are already getting an impression from the

global brands and buyers in favor of that. The revenge shopping which popped up among the US customers have already been declining," Md Mohiuddin Rubel, told The New Nation on Monday.
"All are well aware of the fact that due to the aftermath of Covid-19 and geopolitical crisis, global trade and economy are going through a dire situation right now. High fuel price and shortage of supply is portraying a negative impact on global economy," he said.
Production cost has increased by 40-45 per cent in last 5 years as price of yarn increased by 62 per cent in last 1.5 year, freight cost increased by 500 per cent, dyes, chemical cost increased by almost 60 per cent and minimum wages increased by 7.5 per cent in the beginning of the last year.
Along with that, productivity and efficiency is a major concern for the apparel sector. Average productivity in Bangladesh is around 45 per cent, while productivity in Vietnam is 55 per cent and in Turkey around 70 per cent.
Fazle Ehsan Shamim, Vice-President of BKMEA, said "We have lost price bargaining power as apparel demand falls significantly in recent time, despite production has increased by 45 per cent."
Keep factory operational, we taking orders at minimum price, he said.

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