RMG export earnings have seen a 7.74 percent negative growth from August to November this year due to lack of global demand
With slowing global demand, the Bangladeshi readymade garment (RMG) industry is facing unexpected hurdles in meeting the $50 billion export target by 2021, said apparel export leaders on Wednesday.
The failure to diversify products and explore new markets are proving to be major factors in losing competitiveness with other exporting countries like Vietnam, Cambodia, India and Pakistan, they added.
The local currency is growing stronger against the US dollar, which is also a major reason for losing competitiveness in the global market, they further said. They were speaking at a workshop on 'Study on Supply Chain Resilience of RMG Sector in Bangladesh,' at the Bangabandhu International Conference Center in Dhaka on Wednesday.
The National Resilience Programme of the Bangladesh Planning Commission organised the event with the support of the United Nations Development Programme, UK Aid, Sweden Sverige, United Nations Women and United Nations Office for Project Services.
The country's RMG export earnings have seen a 7.74 percent negative growth from August to November this year due to decreasing of global demand, according to the Export Promotion Bureau (EPB).
In the first five months (July-November) of the current fiscal year, exports fell by 7.59 percent to $15.77 billion.
The earnings in the five months were $12.59 billion short of the government target of $18 billion.
Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said "I do not agree with the $50 billion target for RMG exports by 2021. It is not feasible."
She pointed out that the export target had been set in 2013 to encourage exporters in the aftermath of the Rana Plaza incident.
It is necessary to set such targets to boost confidence, she said.
Questioning the export target, Rubana said, "The World Trade Organization has also dropped down the consumption target from 1.8 percent to 1.2 percent, considering the current situation of the global market.
"The target should be to add value. Why just a number? Numbers only create trouble," she said.
There was over six percent negative growth in the sector in the last five months. That means, we have reached a crisis point, she said.
When asked, the BGMEA president also reiterated the need for product diversification, as well as shifting attention to manmade fibers from cotton items.
"We are focusing on 5 items which occupy over 80 percent of the capacity. This shows we have more capacity on low value items."
To overcome the downtrend in growth, the sector should diversify in four areas – product, process, skills and markets, added Rubana.
She suggested exporting to growing Asian markets such as Japan.
"The global market trend is changing very quickly, but entrepreneurs failed to recognise that in time," said Rubana. She added that "Todays buyers such as Amazon look for a small volume of orders. But we have the capacity to produce in large quantities."
She further said Bangladesh is not ready to handle such small buy orders, which may dominate the industry in the future.
Speaking to The Business Standard over the phone, former BGMEA President Siddiqur Rahman said the global economy is going through a slowdown, which has had adverse effects on the apparel sector.
Once buyers shift their sourcing country, they do not return to the previous country again, said Siddiqur, who is also the chairman of Sterling Group.
"We are not aligned at all with the global competitive scenario. Particularly, when the exchange rate movement of the taka against competing currencies remains inconsistent," he added.
While briefing the press after a meeting on Wednesday, Finance Minister AHM Mustafa Kamal said the government has no plan to devalue the Bangladeshi Taka. "We had no such plans in the current budget. We will not have any such plans in the next budget either."
He explained that Bangladesh is an import dependent country. "Devaluing the currency will not result in exports exceeding imports. Then why should we devalue our currency and harm the economy?" Mustafa Kamal further said.
Newage Group Vice Chairman Asif Ibrahim said, "We have failed to determine the trend of global markets, that is why we are losing our market share."
He also said that some entrepreneurs in this sector should overcome weakness in negotiations and pricing.
Asif Ibrahim expressed concern over the survival of a number of factories due to the current slowing down of global RMG demand.
"The sector may take 5 to 6 years to bounce back," he added.