Higher work orders, prices barely bring profit

With improvements in the pandemic situation, local garment suppliers have been receiving higher prices and more work orders from international retailers and brands but making a profit has become difficult as business costs have increased.

At the same time, apparel manufacturers are apprehending a return of the crisis in the global apparel supply chain as the rate of Covid-19 infections has been spiking in different countries in Europe.

"So, please do not negotiate the prices of apparel items below the production cost anymore," said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

"We are receiving an adequate number of work orders but there is a fear of the resurgence of the crisis in the supply chain," he told a press conference at the Amari Dhaka hotel.

Buyers are paying higher prices because of a hike of raw material prices and freight charges, he said.

But the latter have gone up to such as extent that the percentage increase per unit paid by buyers is not adequate to offset the higher cost of production and enable making a profit, Hassan said.

For instance, yarn prices increased by 60 per cent, container freight charge 350 per cent to 500 per cent over the past year, dyes and chemical prices 40 per cent and electricity 13 per cent, he said.

The price of gas has also increased during this time, said Hassan.

The overall cost of production has increased, which has been affecting profitability, said the BGMEA president.

He demanded that the international retailers and brands be more sensitive in paying better prices considering the price hikes of raw materials and other accessories in local and international markets.

Many local suppliers last year accepted work order prices below that permissible by their production cost, mainly to continue business amidst the pandemic even if it meant incurring losses, he said.

However, times have changed for the garment trade, turning better for the business, but the higher cost of production is still having a detrimental effect, he said.

The latest 23 per cent diesel price hike by the government on November 4 has also raised production cost by 4 per cent to 5 per cent, he said.

Fuel prices have a direct relation to the cost of transportation of goods, power production by generators, services charges and accessories of garment items, he added.

Hassan reiterated that Bangladesh's garment shipments would not be affected by the United Nations status graduation from a least developed to a developing country in 2026.

This is because Bangladesh already has a very strong presence of apparel's backward linkage industry, he said.

On another note, he said the BGMEA has been awarded the "WITSA Global ICT Excellence Awards" at a 25th World Congress on Information Technology for implementing a "Biometric Identity and Worker Information Management System".

The BGMEA has been preparing the biometric database of garment workers since 2013 and it was completed in 2021.

Every day the new biometric database is used by 2,500 active garment factories who have the BGMEA membership. Some 4 million workers have been brought under the biometric database, Hassan also said.

Hassan also announced that the 37th international convention of global platform International Apparel Federation (IAF) will be held in Dhaka in November next year.

The IAF convention will be accompanied by a third apparel summit, fashion festival, exposition and some award presentation events, he said.

Regarding carbon emissions of Bangladeshi suppliers and scopes for carbon trading, Hassan said Bangladesh accounts for 0.5 per cent of global emissions whereas that of other garment producing countries were at nearly 10 per cent.

Still, Bangladesh has been bearing the brunt of carbon emissions, he said. Hassan said carbon trading was a very complex trade, so it could take more time for Bangladesh to be a global player.

The coming year is very important for Bangladesh and the sector as a lot of international events will take place here with improvements in the pandemic situation, he said.

This will also be an opportunity for turning the country into an important hub for garment sourcing for international retailers and brands, Hassan said.