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Professor Mustafizur Rahman on RMG and market competitiveness

“Bangladesh cannot remain competitive in the global markets if the manufacturers fail to reduce per unit cost through increasing the productivity.” He said the RMG makers started focusing on upmarket products with fashions and designs as they saw “price correction in low-end products.” He also suggested exploring new markets and the government considering general incentives for the sector as the eurozone crisis and devaluation of euro was causing a gap between value and volume of exports.

 

Published in Dhaka Tribune on Monday, 7 September 2015.

RMG export shines in volume, pales in value

Ibrahim Hossain Ovi

Bangladesh’s RMG export in terms of volume has registered over 58% rise in last fiscal year, but the value was affected by retailers’ low price offer and devaluation of euro.

According to Export Promotion Bureau data, the country exported 1.57bn units of apparel products to global market in FY2014-15 with 58.17% up from 993m units a year ago.

Of the total RMG exports, woven products were 757m units compared 485m in the previous year and knitwear products amounted to 815m units compared to 508.67m units a year ago.

The value to total RMG exports last fiscal was $25.49bn posting 4% surge from the previous year’s $24.49bn.

The knitwear exports were valued at $12.43bn, up by 3.13% from the previous fiscal’s $12.05bn and the woven products $13.06bn making 5% growth over the previous year’s $12.44bn.

“RMG export earnings did not increase as per the increase of volume due to low price offers from buyers and devaluation of euro,” BGMEA Vice-President Reaz Bin Mahmood told the Dhaka Tribune.

He said they were losing competitiveness due to increase of production cost, which was another reason behind the fall of price.

According to the study conducted by Mark Anner, associate professor at Penn State University, prices of men and boys cotton trousers exported to the US market declined by 40.89% over the last 14 years. He blamed “monopsony” of the buyers for cutting prices.

Shahidullah Azim, another BGMEA vice-president, believes improvement of productivity is a must to tackle the pricing issues.

“We have to concentrate on introduction of production engineering along with latest technology to minimise cost,” he said. Azim also stressed the need of uninterrupted gas and electricity supplies to the factories.

Abdus Salam Murshedy, president of Exporters Association of Bangladesh, said after the collapse of Rana Plaza building, the sector had to spend “a lot of money to meet the prescription of global buyers regarding compliace.”

“We have installed fire doors, sprinklers and continued to implement corrective action plans outlined by the Accord and Alliance, but the buyers are still unwilling to increase prices.”

He said before launching the inspection programme to improve safety standards in the RMG sector, the global buyers had promised to raise prices of apparel products.

“But they (buyers) have not kept their words, rather taken the opportunity to buy products at reduced prices. This is very an unfortunate situation for the sector.”

Professor Mustafizur Rahman, executive director of the Centre for Policy Dialogue, said “Bangladesh cannot remain competitive in the global markets if the manufacturers fail to reduce per unit cost through increasing the productivity.”

He said the RMG makers started focusing on upmarket products with fashions and designs as they saw “price correction in low-end products.”

Mustafizur Rahman also suggested exploring new markets and the government considering general incentives for the sector as the eurozone crisis and devaluation of euro was causing a gap between value and volume of exports.

Bangladesh earns 60.28% of its total RMG export figure from the EU market. The euro was devalued by 22% against US dollar while Bangladesh receives export payments in the greenback.

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