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Euro devaluation against US dollar affects our knitwear export: Dr Moazzem

Published in The Financial Express on Sunday, 26 June 2016 

Knitwear exports to EU countries face setback

Sluggish demand, devaluation of currencies to blame

Monira Munni

Bangladesh’s knitwear exports to a number of European Union (EU) member-countries and some other non-traditional markets have been facing a setback in recent times.

Exporters and experts have attributed this to a sluggish demand, change of rules of origin and devaluation of currencies in importing countries.

Of 27 EU countries, knitwear exports to 10 including Denmark, Ireland, the Netherlands and Sweden witnessed a negative growth.

Growth in exports to four other countries – Belgium, France, Germany and Romania – was slow, less than 4.0 per cent, during the first 11 months of the current fiscal year, according to official data.

Export earnings from knitwear during July-May period of Fiscal Year (FY) 2015-16 registered a 3.60 per cent growth with earnings of $2.35 billion in Germany, the single largest market for knitwear, data revealed.

Out of $11.92 billion export earnings from knitwear in July-May period of the current fiscal, $8.39 billion came from the EU markets. This accounted for 70.39 per cent of total knitwear earnings.

Knitwear exports registered a 5.46 per cent growth in EU markets during the same period. In FY 2013-14 and FY 2014-15, earnings from knitwear grew by 17.38 per cent and 1.90 per cent respectively.

Export earnings from non-traditional markets also faced setback as knitted items recorded negative growth by 38.79 per cent in Brazil, 4.98 per cent in China and 8.85 per cent in Turkey during the first 11 months of the current fiscal.

During the period, 5.92 per cent and 3.91 per cent slow growth persisted in Russia and South Africa respectively, according to data.

The country fetched $1.90 billion from knitwear exports from non-traditional markets including Australia, Brazil, Chile, China, India and Japan during the July-May period.

Knitwear makers, however, attributed the slow export growth to revised rules of origin by the EU, its sluggish economic trend and depreciation of euro against US dollar. Safeguard duty and high duty imposed by Turkey and Brazil also hindered exports.

Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, “The EU economies are yet to become stronger in recent years resulting in a declining trend in retail business there.”

The sluggish demand has an adverse impact on our exports, he said.

Regarding China, Mr Hoque said business communication is not well established while there is also a lack of confidence.

Md Hatem, managing director of MB Knit Fashions Ltd, said, in recent times, prices of knit items declined in Europe.

The currencies in importing countries continued to depreciate while local currency is appreciating against US dollar. This also severely affected our competitive edge, he noted.

Moreover, severe energy crisis at home is also hampering production, he added.

Dr Khondaker Golam Moazzem additional research director of Centre for Policy Dialogue (CPD) said euro devaluation against US dollar affects mostly the knitwear makers as they use local raw materials like yarn and fabric.

The EU’s revised rules of origin, an advantage for woven makers, have brought disadvantages for the local knitwear makers as it allows duty-free access for garment exporters even when they use imported fabrics.

The local knitwear makers are facing stiff competition with their competitors due to the EU revised rules of origin, he noted.

Mr Moazzem recommended exploring markets where rules of origin are still in favour of Bangladesh.

Political problem, economic recession and high duty in Brazil are responsible for the negative growth of garment exports, both knit and woven, in that market, said Shahidullah Azim a former leader of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

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