Helped by resurgence of exports and resumption of economic activities, businesses in Bangladesh are making a strong recovery from the fallout of the Coronavirus pandemic!
This is not an observation but findings of the recent survey by the South Asian Network on Economic Modeling or SANEM, carried out between October 10 and 27, amongst 500 firms to gauge the business confidence, as per which, businesses made a stride in terms of recovery in the third quarter of 2021 even as it found that the present business status index (PBSI) jumped to 52.31 in the July-September quarter from that of 42.57 a quarter ago — the survey measured business confidence on a scale of 0 to 100 with a score above 50 points marking improvement — even if the overall PBSI has crossed the 50-point mark for the first time since the survey was launched in July 2020, indicating business activities are improving.
“There have been some visible recoveries in business activities. The improvement is visible in most of the sub-indicators of the PBSI,” underlined SANEM Executive Director Selim Raihan, presenting the findings of the survey at a recent webinar, adding, “All economic activities have resumed. The COVID-19 situation has also improved, powering recovery in business activities,” while adding that faster recovery was observed in the garment and textile sectors apart from light engineering and others with the overall business confidence improving to 60.67 in the October-December period from 49.74 in the previous quarter with firms in RMG, textile, etc., expressing greater confidence, reflecting their optimism about better prospects in the near future, underlined the SANEM Executive Director.
There’s no denying the fact that after a prolonged lull, apparel exports made a strong recovery, which is evident from the increased export proceedings of the last few months and now with the overall business confidence also improving, it cannot get any better and, as has rightly been pointed out, there’s a sense of optimism about better prospect in the coming days, amongst the garment makers!
However, notwithstanding the positive outlook, there’s also a sense of uncertainty somewhere still, which stems from a slew of developments, which somehow belies this positivity. Dig a little deeper, and you know why.
EU angle to industry’s concerns…
To start with, even if retailers have started operating in the West in full-swing, which augurs well as they gear up for the festive season and new year, which is just round the corner even if at the same time many countries, especially in the Europe (Bangladesh sends over 50 per cent of its exportable goods to the EU market), are reporting fresh cases of COVID-19.
As per recent media reports, the Coronavirus situation has deteriorated in some major EU countries like Germany, Netherlands, France, Poland and also in the UK, which though no longer a part of the EU but is an export stronghold of Bangladesh nonetheless even if Netherlands has reportedly returned to a partial lockdown after the Government ordered restaurants and shops to close early and barred spectators from major sporting events in an effort to contain a rapid surge in COVID-19 cases. In Germany, which is the largest export destination of Bangladeshi goods among EU countries, the country’s seven-day incidence rate hit a new all-time high at the time of writing this report even as the number of patients requiring treatment in intensive care units also kept climbing.
“We will contribute to making all the necessary decisions so that we can keep the infection situation well under control,” stated Olaf Scholz of the Social Democratic Party (SPD) speaking to the media.
If one would remember, the export sector of Bangladesh suffered heavily during the April-June period of the last year as countries in the EU, Canada, Australia went under lockdown even if the current spread of Coronavirus turns out to be matter of big concern to the garment makers, which has now led the Government to sit with the stakeholders to review the export market and possible impact of the resurgence of Coronavirus cases in the EU again, even as speaking to the media, a top official of the country’s Export Promotion Bureau (EPB) reportedly underlined they will soon meet with leaders of BGMEA, BKMEA, Bangladesh Textile Mills Association (BTMA) apart from the office bearers of Bangladesh Leather Goods Manufacturers and Exporters Association, Bangladesh Ceramic Manufacturers and Exporters Association, etc., while BGMEA President Faruque Hassan has also expressed his concerns about the current spread of Coronavirus in the EU.
Then there’s the issue of GSP Plus, which is also emerging as a major concern area after the Head of Delegation of the European Union in Bangladesh, Charles Whiteley, recently dropped a broad hint that for Bangladesh achieving the GSP-plus trade facility would be a challenging task.
“This will not be picnic…,” reportedly stated Charles Whiteley while explaining the challenges Bangladesh may face in negotiating with the EU under the new trading system after graduating from the LDC status even as the top diplomat of the bloc noted that Bangladesh’s aspiration for the GSP-plus would require to be matched with a series of tough do’s, including compliance with regulations on human rights, environmental rights and labour rights.
He made the observations while interacting with members of the Diplomatic Correspondents’ Association of Bangladesh (DCAB) in Dhaka recently, while appreciating the efforts of Bangladesh in addressing the challenges even as he pledged EU support to Bangladesh in achieving the facility but also made it clear that the Union is closely monitoring the implementation process of the conditions binding the trade-preference facility.
And even if Bangladesh manages to attain the GSP Plus facility, many believe it won’t benefit much, more so in light of the proposed GSP Plus scheme, as part of which the EU said if the value of a particular garment item from a country eligible for duty-free export benefit under the bloc’s Everything But Arms (EBA) facility crosses 6 per cent of the total imported value of apparel, the zero duty facility will not be applicable for the product even if the GSP Plus status is granted while the value of the total imported apparel from Bangladesh to EU countries has already gone past the threshold and now stands at more than 9.74 per cent if the import value of clothing items in 2019 is considered.
“We will launch an intense negotiation with the EU about the 6 per cent safeguard measure,” maintained Commerce Secretary Tapan Kanti Ghosh.
All’s not well at home too even as rising input costs adds to the woes!
If such efforts will bear fruits, remains to be seen. Even though the industry or the Government, do not have much of a control on external developments but many new developments within the country are enough to hit the new-found confidence of the industry, subsequent to the export rebound.
Take for example the recent transporters strike, which almost brought the supply chain to a standstill, which led the Government to intervene while also justify the transporters’ demand for increased carrying charges in view of the hike in fuel cost. However, even as the Government is yet to come out with any revised rates, the goods transporters are allegedly charging fares unreasonably.
Speaking to the media, BKMEA Director Mohammed Shamsul Azam said, “The average cost for transporting goods from the Chittagong Port to Dhaka was Taka 15,000, but recently it increased to Taka 25,000 – Taka 30,000. In some cases, the transport owners are demanding even more. This has increased the cost of garment production,” adding, “There should be a fixed fare rate according to the routes of transportation. Otherwise, it will be difficult for Bangladesh to survive in competition with other countries including Vietnam in garment exports.”
Increase in overall input cost in view of the fuel cost hike, adding to the already skyrocketing raw material prices as global cotton prices is going through the roof even if disruption of factory activities in China, which is a prime supplier of raw materials to Bangladesh garment industry, has allegedly further made life difficult for the garment makers.
Already reeling under faltering profit margins, garment makers are now mulling setting minimum prices for apparel products and rightly so as ensuring fair prices has become a must in the ever-evolving business atmosphere and to survive the competition while also meet rising production costs.
Faruque Hassan, President of the BGMEA, underlined the same while adding the increase in the prices of yarn, chemicals and other raw materials in the global supply chain has pushed up the production costs in garment manufacturing.
“In such a context, we urge the brands and retailers to increase prices as nobody can justify a lower price to produce socially fair goods,” said the BGMEA President while industry insiders said entrepreneurs have been complaining about not getting a fair price for apparel items for a long time but to no avail.
The competition among entrepreneurs within countries has further made buyers indifferent to paying fair prices, Faruque added even as garment makers underlined that in order to compete amongst themselves, exporters have installed machinery with higher production capacities than the demand in the international market and, in the absence of sufficient export orders, they have to now take orders at any rate due to the pressure of paying wages and utility bills, while adding
foreign buyers are taking advantage of this and the whole industry is having to pay the price.
Now the situation is that the more orders we get, the more debt we owe; due to the cost of doing business, profit margins have dropped significantly — to nearly zero in some cases, stated BGMEA Vice-President Shahidullah Azim, which is indication enough that even if exports are on rebound and business confidence has also got a shot in the arm subsequent to resumption of economic activities and rising demand of apparels globally, challenges and concerns still remain for the industry and quite a few, so it seems!
