BGMEA rings alarm bells over future RMG export

A steep fall in garment export to major destinations over the last few months indicates that an alarming situation will come about in the near future, said a top leader of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) yesterday. 

Although garment export earnings had been on a positive trend up until February, imports by both the US and European Union (EU) were on a negative trend, said BGMEA President Faruque Hassan.

The growth in earnings from garment shipments in March and April of this year was alarmingly negative and this may continue in May, he said.

"Such kind of negative trend is really indicating an alarming situation," Hassan said at a press conference on the current situation of the garment sector organised by the BGMEA on its premises in Dhaka.

In terms of US dollars, garment exports to the US from Bangladesh declined by 12.65 per cent year-on-year between November 2022 and April 2023, according to the BGMEA.

Meanwhile, in terms of quantity, the decline has been by about 25.95 per cent. However, the value per unit of the garment items increased by 17.94 per cent.

International clothing retailers and brands have increased the unit price as an adjustment to soaring prices of raw materials in international markets and high freight charges.

In comparison, garment shipments to the EU in terms of US dollars increased by 7.10 per cent.

However, in terms of quantity, it was a decline of 4.12 per cent.

The growth in earnings from garment shipments in March and April of this year was alarmingly negative and this may continue in May

— Faruque Hassan BGMEA president

But the value per unit of the garment items increased by 11.70 per cent.

International retailers and brands which are members of Buyers Forum in a meeting with the BGMEA on Tuesday could not deliver a good message for the sector, Hassan said.

This is due to the presence of a lot of old inventory in stores and supply chain constraints, he said.  Citing International Monetary Fund data on global economic growth expected to decline to 2.8 per cent in 2023 from 3.4 per cent last year, Hassan said the prospect were also gloomy for global trade growth.

The growth of international trade will decline to 1.7 per cent from 2.7 per cent last year.

Hassan demanded that the government reduce source tax to 0.5 per cent from 1 per cent through the upcoming budget scheduled to be proposed for the next fiscal year.

The BGMEA chief also demanded that the government reduce corporate tax on incomes from subcontracting to 12 per cent from 30 per cent.

He also demanded that the government withdraw a 10 per cent tax on receipts of cash incentives on export earnings.

Hassan also urged the government to provide a special 10 per cent stimulus on export of garments made from manmade fibres (MMF) through the next budget.

In this regard, he said Bangladesh wants to diversify the types of garment items it exports.

For instance, currently of all the garment items exported, some 76 per cent are made of cotton but of all garment items sold around the world, 75 per cent is made from non-cotton fibres, he said.

So, the data indicates that the demand for non-cotton items is high globally, he said.

So, the incentive on export of garment items made out of MMF will encourage local investors to put in more money into MMF-based garment items to grab a bigger share of the global garment market, he said.

Currently, the local garment factories produce five lakh tonnes of "jhoot" or scrap in a year but most of those are exported at lower prices, said Hassan.

Last year, Bangladesh exported $400 million-worth jhoot. However, if it had been recycled and reused to make garment items, the export value could have been worth $5 billion.

So, he demanded that the government keep all raw products and services of recycling of the jhoot out of tax and VAT in the next budget.