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Bangladesh’s RMG sector facing tough times

Siddiqur Rahman, President-Bangladesh Garment Manufacturers and Exporters Association (BGMEA), says the RMG sector in Bangladesh is facing a hard time but the picture will change soon and the situation will improve gradually. Rising production costs, lower prices from buyers and decreasing international demand have resulted in the readymade garment sector not being able to meet expected growth targets. BGMEA says the cost of production has increased nearly 18 per cent since the last two years.

During this period, the prices of two markets in Europe and the US fell by around 7 per cent. Last year, clothing prices in the EU fell by 4.77 per cent, and in the US, 3.71 per cent. A recent study by the World Trade Organisation (WTO) reports global apparel consumption has slowed down in the last two years. The global market for garment products came down to $444 billion in 2016, from $450 billion in 2015, while consumption in the US decreased by 5.23 per cent.

Although consumption and prices are on the decline, Bangladesh is seeing an increase in the cost of production, for which the mid-range entrepreneurs are just able to sustain operations, smaller players are beginning to shut down operations. Industry insiders say the cost of electricity increased around 15 per cent, gas price 7.44 per cent last year and the cost of clearing and forwarding (C & F) has risen about 40 per cent.

Numerous apparel traders have appealed to the government to improve transportation facilities, including improvement of sea port facilities to reduce production costs. They claim they often lose export orders from buyers as they cannot supply on time due to transportation issues. Sources within the BGMEA reveal they have cancelled membership of 550 factories due to lack of regular production after 2013. Besides, some 500 factory owners listed with the BGMEA or BKMEA have shut down their factories for not being able to keep pace with income and expenditure.