Published in The Financial Express on Wednesday, 16 July 2014.
Non-RMG sector loses sheen as shipment shrinks
Jasim Uddin Haroon
Most sectors barring the clothing performed poorly as stronger local currency and trouble-torn destinations bit into their export proceeds in the fiscal year just gone by.
Analysts and sector insiders said appreciation of Taka is one of the key reasons behind the poor performance of the non-RMG products.
The non-RMG sector pulled in US$5.68 billion in 2013-14 fiscal year in export earnings against the target of $6.35 billion.
The shortfall in non-RMG export earnings came from jute, home textile, terry-towel, building materials, petroleum by-products, frozen fish, fruits, cement, printed materials, cut-flower and cosmetics sectors.
By contrast, apparel products–both woven and knitwear–surged by 13.85 per cent in the last fiscal year.
The non-RMG goods and products had at times dominated the country’s export sector in terms of growth.
Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI) said the clothing sector being organised can tide over any trouble, which is difficult for other industries.
“The appreciation of local currency has contributed to the erosion of competitiveness of the sector (non-RMG),” Dr Mansur said.
Bangladesh Taka (BDT) had appreciated at least 5.0 per cent against US dollar over the last one year.
Mr. Mansur said restive politics had caused problems for many fast- growing export-oriented sectors such as bicycle exports.
Dr Khandker Golam Moazzem, additional director at the Centre for Policy Dialogue (CPD), said: “Depreciation of Indian currency was a key concern for us as some of our non-RMG products were destined to the neighbouring country.”
“Look, export of jute and jute products in India, the export was much slow in the last fiscal year,” Dr Moazzem said.
Dr Moazzem said non-RMG products hardly get incentives for penetrating new markets while the RMG products get at least 1.0 per cent extra for new destinations.
“There are many export products which need nursing for a sustained boost,” he added.
Kaihan N Rahman, deputy managing director at Pubali Jute Mills Ltd., said export of jute goods fell substantially in the last fiscal year as almost all its destinations were beset with either tension or political problems.
He said export to Syria and Egypt remained almost halted for long due to what was known as “Arab Spring”.
He said weaker Indian currency made Indian products cheaper to the global buyers leading to fall in orders for Bangladesh-made goods.
Mr Rahman said US sanctions on Iran had affected shipment of Bangladesh jute goods to the sanction-hit significantly.
According to the EPB, jute and jute goods sector fell by more than 29 per cent against its target for the last fiscal year. It fetched only US$824 million against its target of $1.16 billion for 2013-14.
Md Nurul Islam, chairman of Noman Group, a major exporter of home textile products, said offering generalised system of preference (GSP) to Pakistan by the European Union (EU) affected export of Bangladesh-made products.
The EU granted GSP plus facilities to Pakistan until 2017 from January last.
The GSP Plus status will allow almost 20 per cent of Pakistani exports to enter the EU market at zero tariff and 70 per cent at preferential rates.
Mr. Islam said Pakistan is the reputed home textile producer in the global market and allowing GSP helped the country grab the market share fast.
M Anisuzzaman, managing director of the Global Fabrics noted that appreciation of local currency against the US dollar was responsible for erosion in competitiveness of Bangladesh-made products.
“Bangladesh Taka appreciation made Indian products much cheaper and our many orders were diverted there,” Mr. Anisuzzaman told the FE.
He said recent labour wage hike in the country has led to loss of efficiency in terms of prices.
“Our competitiveness lies with cheap labour as we import almost cent per cent raw materials for manufacturing terry towel products,” he said.
“We cannot compete when labour prices go up,” he added.
Currently, Bangladesh has 70 terry towel plants and its export target for the July-June fiscal was at $67 million against $86 million, nearly 22 per cent fall than that of target.
However, there are some non-RMG products which grew much. These are agricultural and processed products in the ethnic market.