Apparel leads export recovery

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Bangladesh had witnessed a steep fall in exports in April this season as the ongoing coronavirus pandemic has already established an unprecedented influence on both local and global economy.

Throughout that month, the country's overall export earnings reached an archive low of $0.52 billion, which the apparel sector contributed $0.37 billion.

The work market was subsequently jolted and a few thousand employees were terminated when the factories where they worked at either halted production or shuttered their businesses altogether due to the Covid-19 fallouts.

In a bid to curb the spread of Covid-19 within Bangladesh, the federal government enforced a two-month 'general holiday', beginning on March 26, where all economic activities were turn off while public movement was limited aswell.

However, in April, May and the first fourteen days of June earlier this year, thousands of workers brought out processions and set up barricades on roads and highways to demand security because of their jobs.

As the major retailers and brands of western markets commenced to slowly reopen their stores midway through June, local factory owners also started resuming production. This ensured that not as many personnel would lose their jobs as previously thought.

A big relief came for the garment sector, which typically contributes a lot more than 84 per cent of the national exports in a year, when international retailers and brands started to slowly but surely accept their cancelled work orders.

In April and May alone, international retailers and brands solely in the garment sector cancelled work orders worth $3.18 billion, putting local suppliers in a good spot.

The government's generous spoon-feeding programme for exporters, especially those in the garment sector, also helped a whole lot in this crisis time.

The federal government provided a Tk 10,500 crore stimulus package for export-oriented sectors, specially the apparel industry, in order that they could pay their workers' wages from April to July beneath the scheme with only 2 per cent service charge.

So after a perilous journey, the country's exports started recovering and like previous times, the garment sector is again leading the recovery.

Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said exports have recovered to some extent but it isn't exactly what it had been through the pre-pandemic era.

This is as the virus is making a comeback in many countries, such as for example Germany, Italy and Spain, which are in the EU, among Bangladesh's main export destinations.

About 58 per cent of Bangladesh's total exports are destined for the EU while a walloping 64 per cent of the country's garment shipments head for the same area.

Therefore, the EU's financial recovery is a significant factor for the recovery of Bangladesh's economy, employment and export receipts, Mansur said.

Since the EU and US markets are slowly time for normal, so is Bangladesh's export, he added.

But although the garment sector is rebounding well, all of those other economy is trying to do the same. Imports also have increased, albeit gradually.

Bangladesh now imports $6 billion worth of goods each month but happens to be struggling to bring it back off to $3.5 billion.

MA Jabbar, managing director of DBL Group, a respected garment exporter, said that usually August-September is a lean period for the garment sector.

It was not similar this year for DBL though as buyers asked the factory management to keep production to be able to cover the losses which were incurred in April and could because of the pandemic.

"We've definitely recovered, although not fully. Price is quite low. But we aren't considering prices now. It really is our priority to perform our business now," Jabbar told The Daily Star over the telephone.

"Full recovery running a business will not take place this season. Our strategy is to stay alive. Buyers are also struggling," Jabbar said. By the end of the existing fiscal year, DBL's total export could possibly be only 15 % less than their target, which Jabbar declined to reveal.

Currently, his factories are running at 75 % capacity nonetheless it is expected that capacity will reach 90 to 95 % by November or December this season.

Jabbar also commenced recruiting new personnel for a fresh unit which is inaugurated soon.

"So, I am hopeful that exports will go back to its previous position soon as the vaccine is also likely to arrive shortly," he said.

Mahmud Hasan Khan Babu, managing director of Rising Group and former vice-president of the Bangladesh Garment Manufacturers and Exporters Association, said a gradual recovery is occurring in the garment sector since mid-June this year.

For a complete recovery, we will have to wait until January or February next year. Most buyers are reissuing cancelled work orders, which is wonderful for the sector.

"It may even take twelve months to fulfil all of the cancelled work orders, which is preferable to if indeed they remained cancelled. We appreciate the buyers who are taking back their cancelled work orders," Babu said.

"To sustain our recovery in garment exports, we must await Christmas sales under western culture and US election in November," Babu added.

Leather goods exports are not recovering as fast as the garment sector because leather goods aren't basic items, they are luxury items, said Saiful Islam, president of the Leather and Leather goods Manufacturers and Exporters Association of Bangladesh.

Globally, the intake of leather goods has decreased by 35 per cent as a result of pandemic, Islam also said.

Moreover, the production of tanned hides in non-compliant tanneries at Savar is another perennial problem for leather goods. The manufacturers of leather goods cannot procure tanned leather from local tanneries as those are processed in non-compliant factories.

Moreover, the intake of imported raw materials by the neighborhood leather goods manufacturers has truly gone down because of a restriction imposed by the National Board of Revenue (NBR), he said.

Due to this fact, local leather goods exporters have already been facing challenges in availing recycleables.

"We've not terminated any workers until now from the leather goods manufacturing units. The inquiries are coming from the buyers slowly but surely in this sector," Islam told The Daily Star over the telephone.

"Work orders are returning now. My factory's recovery started back June, when my UK, German, Canadian and French buyers started inserting orders for winter clothing items," said Mostafa Sobhan Rubel, managing director Dragon Sweaters.

Usually, shipments of winter clothes stay in September but this year, the factories are running at full swing even now as the buyers extended the timeframe in consideration of the Covid-19 situation, he said.

So, the shipments of winter clothes will continue up to October this year, based on the managing director, who exported sweaters and other garment items worth $30 million this past year.

Rubel expects to earn about $29 million from exports by the finish of this year aswell.

"But I am not unhappy to export significantly less than $1 million by the finish of the year as that is an emergency time when people do not have work or jobs and so are undergoing financial hardship," said Rubel.

Kazi Belayet Hossain, president of the Bangladesh Frozen Foods Exporters Association, said frozen foods shipments is increasing steadily as buyers are returning with a whole lot of work orders.

Buyer response is way better now than what it had been in April-May as they are offering lower charges for frozen foods, he said.

Frozen shrimp is an extravagance food item and so the buyers are offering just $1 less per kilogramme because incomes of almost all of western customers was also reduced as a result of Covid-19 fallout, Hossain added.

Mohammed Monsur, general secretary of the Bangladesh Fruits, Vegetables and Allied Products Exporters Association, said the situation is almost normal in his sector as a lot more than 500 tonnes of perishable goods are shipped from the Hazrat Shahjalal International Airport in Dhaka every day.

Before Covid-19 emerged, a lot more than 700 tonnes of perishable items were shipped by different airlines, he said.

In the April-May period, shipment were almost zero and the local vegetable exporters were just passing time idly. However, shipments gained pace from mid-June, when the western world started reopening their economies.

Monsur, however, said that the caliber of goods deteriorates as a result of scanning delays at airports. Sometimes, vegetables can't be shipped promptly and skip the flights because of this, he added.  
Source: https://www.thedailystar.net

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