Apparel orders fall as EU debt crisis lingers
Garment exports from Bangladesh to its largest destination in the Eurozone have been facing a slowdown as the cautious EU buyers are deferring or placing reduced number of orders due to a prolonged debt crisis there, said major exporters.
With the persistent crisis in Greece, Italy, Spain and Portugal, the overall purchasing power of the consumers in the entire Eurozone has also declined.
Apart from a demand drop, the buyers are also offering lower prices, the exporters said.
More than 60 percent of Bangladesh's garment items go to the EU, which turned into the main market for Bangladesh by offering duty-free benefits.
Garment exporters are now focusing on the recently-explored markets such as Japan, Russia, China, India, South Korea, Malaysia, Mexico, Brazil and South Africa.
The garment makers said they are also increasing dependency on the US market due to the shrinking orders from the EU buyers.
According to Export Promotion Bureau (EPB), Bangladesh exported garments worth $10.28 billion to the EU in the first eleven months of the current fiscal year, 10.06 percent higher from $9.24 billion in the same period last year.
Of the total amount earned during the period, $6.27 billion came from knitwear and $4.01 billion from woven items from the EU-27, which is the European Union of 27 member states, according to the EPB.
During the July-May period of the current fiscal year, the total amount of knitwear exports was at $8.58 billion, while woven earned $8.70 billion.
The overall growth in the two segments was 46.35 percent in the first eleven months of last fiscal year for the EU-27 countries.
The garment makers said the number of orders is declining and in some cases the buyers are deferring orders for one or two months to observe the situation.
The situation in June last year was better than this June, they said, adding that the second spell of recession is taking a toll on exports.
In some cases, the impact of discount sales by major retail chains in the EU is pulling down the prices of exportable products of Bangladesh.
The European retailers are now selling products at handsome discounts. As a result, the buyers are offering the discount rates for the Bangladeshi products as well, affecting their profitability.
However, exports of some products such as sportswear from Bangladesh to the EU market increased to some extent due to the upcoming Olympic Games in London.
Similarly, garment export to Germany is still going strong riding on a good economic condition there.
“But, the hope is that the buyers' sentiment is still very positive about Bangladesh as the prices of garment items in China have gone up due to higher cost of production,” said Ahsan Kabir Khan, managing director of Gazipur-based Interfab Shirts Manufacturing Ltd.
As a strategy, the company has already started exporting garment items to China and South Africa to reduce dependency on the EU.
“It's a backup. I have taken preparations so that my exports are not hampered,” he said.
But, the EU buyers are deferring orders by one or two months, which has affected the company's total export earnings, he added.
He said, a few months ago a major EU clothing brand, which outsources from his company, reduced its annual buying quantity as a temporary measure.
Of his total $42 million exports last year, 65 percent were sent to the EU.
“We are also diversifying our products so that exports remain unhurt during any financial meltdown,” he said. If the crisis in the EU prolongs, the makers have the ready markets in India, China and South Korea, he added.
Shahriar Alam, managing director of Interstoff Apparels Ltd, said exports to the EU have slowed due to the debt crisis. “The buyers are now taking a lot of time to place orders,” said Alam who sends 80 percent of his products to the EU.
“Now, I am exploring new export destinations such as Japan, China and Korea,” he said.
Managing Director of Mahin Group Abdullah Al Mahmud Mahin said the country's apparel industry has a bright prospect as the buyers are still flocking here. He sees the EU crisis as a temporary problem for the industry.