Ongoing energy crisis coupled with rising operating costs and shipment delays have led to a 25-40 per cent decline in orders for apparel exporters in Bangladesh. This is also resulting in factories operating well below their capacities.
Production costs in Bangladesh have risen by 20–33 per cent increase. Yet, manufacturers continue to decline export orders as international buyers are offering up to 20 per cent lower rates. This price disparity is prompting buyers to shift from Bangladesh to competitor nations like India, Pakistan, and Sri Lanka, where advantageous exchange rates and quicker shipping allow them to accept lower pricing.
The country’s largest export sector is bracing for a 7 per cent drop in sales during this year’s peak winter season in the West. This comes at a time when government incentives have been cut, and revised data has revealed that the last 10 months’ export figures were overstated by about $11 billion.
Mesbah Uddin Khan, Managing Director, Windy Group, notes, buyers are proposing prices 15–20 per cent below production costs. His group too could not secure 20 per cent of orders for August and September this year, with the time to secure orders for the Autumn Holiday season expiring, he adds.
Shovon Islam, Managing Director, Sparrow Group, echoes, declining demand in major markets and the low prices offered by buyers is causing a slowdown in order placements. Besides wage increases and rising of gas and power prices, Red Sea tensions are also increasing production costs. However, buyers fail to match these with their offers, making it difficult for most manufacturers to schedule orders based on their production capacity. Small and medium-sized manufacturers are struggling more than larger factories to book orders, emphasises Islam.
This is resulting in buyers moving to India and Sri Lanka, which offer stronger competitive advantages through better incentives and favorable exchange rates. Concerns over timely shipments are also leading to top buyers relocating their orders to Vietnam, India, and Sri Lanka, highlights Islam, also a director of the Bangladesh Garments Manufacturers and Exporters Association (BGMEA).
Siddiqur Rahman, Former President, BGMEA, points out, potential geopolitical instability due to wars could affect consumer confidence. Reduced monetary incentives amidst persistent gas and energy shortages is already causing delays in shipments and higher manufacturing costs, impacting exporters’ competitiveness. To help maintain their competitiveness in the global market, he urges the government to reinstate the cash incentive for exporters.
