Rupee slide rattles exporters
Garment workers, left, make clothes. The RMG industry will suffer if export orders are diverted to India in the wake of a slide in the rupee.
Local exporters fear over 20 percent depreciation of the Indian rupee against dollar would cost them badly.
They say the global buyers may now divert to the neighbouring country because of the possible reduction in the prices of products there.
The Reserve Bank of India in its latest move depreciated the currency further 0.28 percent against US dollar to 50.09 rupees yesterday.
The exchange rate was 49.95 rupees a dollar on Friday, the last working day before the two-day weekend. It was 40 rupees a dollar six months back.
“Global buyers may shift to India because of a sharp fall in the prices of goods there,” said
Nasiruddin, chairman and managing director of Pacific Jeans, one of the major local RMG exporters.
He also pointed out the devaluation of currencies by Bangladesh's competitors such as India, China, Pakistan and Vietnam, which, he believes, would cut down the country's competitive edge.
A foreign buyer expressed a similar view.
“Definitely, buyers will shift to India because of its currency depreciation against the US dollar,” said Bivek Gogia, the country representative of Allstar International Trading Co Ltd, a Germany-based buying house.
He said currency depreciation has made Indian products cheaper than any time.
Experts say Bangladesh's RMG exporters would feel the pinch of such currency depreciation at a time when these exporters are getting prepared to face the fallout from the current global financial crisis. The Asians like many European countries are not immune to the US credit crunch, according to them.
Bangladesh fetched $10.59 billion from RMG exports last fiscal (2007-08), while the total export earning was $14.11 billion.
“As many as eight foreign buyers, who were Bangladesh's customers, have already placed their 75 percent orders to Indian manufacturers,” said Anwar-Ul Alam Chowdhury Parvez, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Shafiqul Islam, senior executive at SKL Trading, a South Korea-based buyer, said export orders for Bangladesh's woven products have already declined by 40 percent in 2008, compared to the volume a year earlier.
Professor Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD), suggested the government help reduce expenses of the manufacturers through subsidising their gas and electricity bills, rather than depreciating the taka.
However, he said, “Depreciation of the Indian rupee will help Bangladesh benefit from imports. The move will reduce inflationary pressures on consumers.”
Comments