Low prices cut into RMG export growth: analysts

From The Daily Star
A drastic reduction in prices of cotton, yarn and fabrics has slowed down export growth, analysts and exporters said.
As the prices of raw materials are low, the products have become cheaper and the buyers now pay less for their garment purchase, they said.
According to Export Promotion Bureau (EPB) statistics, overall exports grew by only 2.4 percent in November this year compared to the same month in the previous year. The growth was 15.44 percent in October and 2.29 percent in September.
But the fiscal 2011-12 started with a high hope -- 28.7 percent growth in export in July, the first month of the year, and 32.4 percent in August.
“We’re getting a lot of orders. The buyers now want to place orders for the next six months at a time to cash in on the present market price,” said Mahmud Hasan Khan, managing director of Rising Group that has both apparel and spinning business.
The prices of raw materials such as cotton, yarn and fabrics have come down by 50-60 percent now from that of January this year, he said.
The price of widely consumed 30-count yarn has come down to $3.2 a kg now from $5.5 in January.
“As the prices of raw materials went down significantly, growth in export in terms of value also slowed down,” said Khan.
Exports of knitwear and woven, which account for the country’s two-third of $22.93 billion export earnings per year, lag behind the strategic export target for July-November this fiscal year.
Bangladesh’s knitwear export was $3.99 billion during July-November of 2011-12, down by $105 million than the target for the same period. Similarly, woven export was less by $66 million than the target.
Mustafizur Rahman, executive director of Centre for Policy Dialogue (CPD), said this year’s export growth in terms of value would show a downtrend due to a sharp fall in the prices of raw materials.
“Depressed raw material market this year compared to last year could be a reason for a slowdown in export growth,” said Rahman. He said the prices of cotton and yarn were 60 percent up last year than their present value.
Still he sees challenges for Bangladesh’s exports due to the global economic situation.
“The current Euro debt crisis is likely to have adverse implications for Bangladesh’s exports in general, and exports of apparels in particular, in the EU. The first sign of this is already there,” said Rahman.
The CPD boss, however, forecasts a double digit growth at the end of this fiscal year.
The analysis found 10 major export sectors that earned $22.18 billion or about 97 percent of Bangladesh’s $22.93 billion worth of exports in fiscal 2010-11 are combinedly lagging behind the target so far this fiscal year.
The major export drivers are knitwear, woven, jute and jute goods, home textiles, frozen foods, agriculture products, engineering products, footwear, leather and specialised textiles.
The strategic target for these sectors for July-November period of the current fiscal year was set at $9.52 billion, but they combinedly earned less than $9.25 billion.
Jute and jute goods export was less than nearly 20 percent of the target, home textiles 21 percent and specialised textiles nearly 18 percent.