The country’s merchandise exports have continued to plunge as work orders are shifting to competing economies, causing the exporters to lose the competitive edge to their rivals.
Export earnings dropped by 7.3% to $2.92 billion in September, the second consecutive month to face negative growth, amid a sharp decline in apparel exports.
While the country’s export has been experiencing slowdown for months, its major competitor Vietnam's textile and apparel export posted a 2.2% growth to $3.37 billion in August.
According to Apparel Promotion Council (India), RMG exports were to the tune of $1.26 billion in August, with a decline of 2.44% against the corresponding month of August 2018 which was $1.29 billion.
In August, the second month of the current fiscal year, Bangladesh earned $2.84 billion from exporting goods, down by 11.49% compared to the same period last year.
According to the Export Promotion Bureau (EPB) data released yesterday, Bangladesh earned $2.92 billion in September, down by 7.30% from the same month of last year.
However, the export earnings during July-September, the first quarter of the current fiscal year, plunged by 2.94% to $9.65 billion.
The apparel sector, which accounts for 84% of total exports, witnessed a 4.70% decline to $2.34 billion in September.
As per the data, knitwear products earned $1.25 billion, down by 3.45%, while woven goods fetched $1.09 billion, posting a 6.09% fall.
In the first quarter, exports from the RMG sector declined by 1.64% to $8.06 billion.
PERFORMANCE OF OTHER MAJOR EXPORT SECTORS
Among other major sectors, agricultural products registered a negative growth by 10% to $267 million during the period.
Export earnings from the leather and leather goods also declined by 5.06% to$354.39 million, while home textile exports saw an 11.67% fall to $179 million.
Specialized textile sector saw a marginal 0.64% rise to $33.24 million, while plastic exports rose by 18.01% to $31.51 million during the month.
Besides, export earnings from the pharmaceuticals sector rose by 16.93% to $35 million, while live fish export grew by 12.91% to $3.41 billion but the exports of frozen fish declined by 8.870% to $10.48 million.
WHY EXPORTS CONTINUE TO SLIDE
For the bleak export performance, trade analysts and manufacturers have blamed appreciation of the taka against the US dollar and slower order flow from the buyers.
“Work orders are less and next couple of months the trend would probably be low,” says BGMEA President Rubana Huq.“Sustained growth is not easy at this point. Vietnam is getting fair share of orders. Orders are being diverted to Pakistan and India as these countries are offering incentives and privileges to boost their exports,” added Rubana.
Elaborating the state of affairs, she said the perception about Bangladesh was that we had been doing well and growing. If we took years compound annual growth rate, the growth was already dipping, she claimed.
“Apparel exporters are losing competitiveness to its competitors such as China, India, Pakistan and Vietnam. This is because of the devaluation of their currencies against the US dollar, while Bangladeshi Taka is very strong against the US dollar,” said Md. MoshiulAzamShajal, vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
In the face of the sharp appreciation of the Taka and rise in production cost due to implementation of new wage structure from last December, export earnings from the apparel sector were showing continuous fall, said the association leader.
On the other hand, ease of doing business was another key factor for the export-oriented businesses and deficiency to this was helping shift work orders to our competing countries, said Shajal, also Managing Director, Fame Sweaters Ltd.
As per the Real Effective Exchange Rate (REER), Bangladeshi Taka was around 6% overvalued against the US dollar, which cast a negative impact on export earnings, said former World Bank Dhaka office lead economist, Dr Zahid Hussain.
It was said that Bangladesh gained from the US-China Trade war, which diverted work orders to Bangladesh, he mentioned, adding, “But the current export performance does not reflect it. It is assumed that diverted orders are not coming to Bangladesh.”
WHAT’S THE WAY FORWARD?
"Devaluation of the Taka could affect import adversely. Keeping the overall situation in mind, we could ask for policy cooperation," said RubanaHuq, also managing director of Mohammadi Group.
In absence of policy supports, export would dip and factory closures continue, she added.
“The downward trend in export earnings is likely to continue till December, while there is a possibility of a turnaround by the first quarter of next year. To prop up the export earnings, the government should devalue currency to make exporters competitive in the global markets,” said Mohammad Hatem, first vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
He also urged the government to introduce a separate exchange rate for the export oriented sector to attain the export target of $50 billion from the sector by 2021.