RMG exports to Russia withstand war headwinds

Russian importers are also placing higher number of orders with Bangladesh to fill up the vacuum created after some large American and European retailers pulled out

Despite the Russia-Ukraine war and a ban on some banks on the use of global payments messaging network SWIFT, apparel shipment from Bangladesh to Russia has largely remained unscathed because of the use of alternative routes and payment channels, exporters say. 

When the war broke out on February 24, it was largely anticipated that Bangladesh's garment export to the emerging country would come to a halt owing to supply chain disruptions.

The uncertainty deepened when the European Union excluded seven Russian banks from the SWIFT (Society for Worldwide Interbank Financial Telecommunication). The US has also announced sanctions on some large Russian banks.

What is more, SWIFT asked Bangladesh's banks to suspend transactions with the Russian lenders since they are facing sanctions from the US and the EU over Moscow's invasion of Ukraine.

But the garment export has not faced any major disruption since shipments are being made via alternative routes such as China and Hong Kong and the suppliers are receiving payments from China in the renminbi, the Chinese currency.

There is no ban on exports to Russia. However, most of the shipments now going to Russia have been against the orders placed before the beginning of the conflict.

Russian importers are also placing a higher number of orders with Bangladesh to fill up the vacuum created after some large American and European retailers and brands pulled out of the market. 

Russian buyers are making advance payments to Bangladeshi garment exporters as well as the demand for apparel items has increased in the market.

Only seven Russian banks have been brought under the purview of the SWIFT ban and the country's buyers are making payments to Bangladeshi sellers through other lenders.

Besides, most of the liaison offices of major retailers and brands in Russia are making payments from their offices in Hong Kong, China, and Turkey.

"We are sending goods to Russia as we booked the orders before the war. We have also received some payments in advance," said an exporter, asking not to be named.

"However, the goods are being sent via different routes. China and Hong Kong are our new routes," he said, adding that Russian buyers are paying him through alternative channels like a telegraphic transfer.

The exporter has shipped goods worth $1.2 million. His buyer is yet to pay him $0.35 million. Still, he has continued shipping woven shirts and tops of ladies.

"A new opportunity has opened up for Bangladeshi garment items in the Russian market," he said.

Asif Ashraf, managing director of Urmi Group, says he does not send goods to Russia directly. The products are rather shipped through some international buyers.

A payment of nearly $1 million is on hold as buyers are taking time to make the payment, he said. "If the buyers agree, I may send goods to Russia in the future."

Shahidul Islam, managing director of Rupa Group, has received a payment of $30,000 recently and is waiting to get another $1.5 lakh from a Russian buyer by April 15.

"The shipments of garments to Russia are not fully shut," said Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association.

Many exporters are sending goods to Russia as they have a warm relationship with the buyers, he said.

"Many Russian banks are not facing the SWIFT ban, so buyers are paying directly to the local exporters through banking channels."

Officially, Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, doesn't suggest local garment exporters ship products to Russia.

He also urged the suppliers to be careful so that payment does not get stuck.

"Although Russia is a very promising market for us, the payment is a big challenge because of the SWIFT ban."

Nearly 150 suppliers export garment items to Russia.

Apparel shipment fetched $600 million last fiscal year, up 36 per cent. The export value may go up to $1 billion in the current fiscal year ending in June.

Export receipts from garment shipments to the country registered 35.30 per cent year-on-year growth at $481.23 million during the July-February period, the latest for which data from the Export Promotion Bureau is available.