Order booking season for RMG industry-buyers are demanding more at less price

Akhi Akter       
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From the beginning of the establishment, Bangladesh Ready Made Garment (RMG) industry is observing a rapid growth rate in exporting and until now export is increasing as the country is providing quality RMG products to the global buyers. RMG millers, local and international buying houses, located in the country, have been getting more and more orders from the world’s buyers including United States, United Kingdom and European Union for last 2-3 decades. Recently the industry is facing a sluggish growth. Recent reports of Export Promotion Bureau (EPB) Bangladesh shows that the growth rate is going down significantly. In first ten months of the financial year 2016-17, the country exported 23.14 billion USD, which is only 2.26 percent higher than the export of the same period of the previous year. It is most likely that the country will miss the target of current fiscal year. In the first ten months of the FY, export was 6.06 percent short of the target. Even for the first time the country is fearing of having negative growth by the end of this financial year.

Order booking season for RMG industry-buyers are demanding more at less price

Figure: Order booking season for RMG industry-buyers are demanding more at less price

However amid this fear, the RMG sector is passing out a vital time through this June-July period. By this time only most of the buyers put their global orders. Bangladeshi companies have been trying hard to win more and more orders.

In this perspective, a question has come into the frontline- are Bangladesh RMG millers or buying houses getting sufficient orders from the foreign buyers for the next financial year? Many around the sector would think that order could be declined because of terror attack in a restaurant in Gulshan, Dhaka.  To know the real situation Textile Today reporter talked with many responsible officials of RMG mills and buying houses.

Orders are not increasing significantly

Most of the RMG factory and buying houses are getting more orders than the previous year. However some has expressed opposite trend. Over the past few years, order quantity is growing 10 to 23 percent. Hafiz Ahamed Shohel, Managing Director, JSK Knitwear BD Ltd. said, “Basically we work with German, Japanese and UK Buyers. We have got more order than last year.”

On the other hand Ashfaque Ahmed, Director, Promoda Textiles told that “Order trend is not good, we have got around 10 percent less order this year than that of previous year.”

As we are doing regularly the research and development work, so buyers are issuing more order. In FY 2015-2016 and FY2016-2017, our business is increasing almost 15 to 25 percent, said Mohammad Mahbub Hossain, Manager Merchandising, Tex-Ebo International Pte Ltd.

June-July is the transition period and for this season, order is somewhat less now, however, world buyers are not much interested to source from China, which creates an opportunity for Bangladesh, he added.

Quality product vs. low price

Though order is increasing, RMG executives are facing a great problem in product pricing. Foreign Buyers want quality product with a low price. For various reasons, including energy crisis and factory remediation cost, production cost has increased by 18 percent, according to Bangladesh Garment Manufacturers and Exporters Association (BGMEA). However, the garments product price of Bangladesh has declined to 40 percent in last 15 years, according to the research of Pennsylvania University and Colorado University.

Our customers always demand good product but offer low price. If we can survive in this low price then order will increase, said Nurul Mahmood Tuhin, Country manager of Golden Touch Import Ltd.

“At present yarn cost high, government added more tax and Accord Alliance pushing continuous pressure. So the Govt, BGMEA, BKMEA should take proper step in price issue as day by day production cost is increasing,” said Mahbub Hossain and Mahmood Tuhin.

The prices should be good enough to maintain a sustainable business, industry insiders told. They further opined that taking order at price which is not profitable has no meaning for the industry. There are allegations that some companies specially having big volume capacities are taking orders at such low price which is literally impossible to be profitable. This is putting unhealthy trend in the sector and hampering whole country. People are working heard, valuable resources are being burnt and the country is hardly retaining anything, opined industry insiders.

Issues of concern

There is no way to deny the impact of last year’s terror attack in Gulshan on RMG industry. Sazedul Islam Sishir, Merchandising Manager of Fashion Direct Bd Ltd informed that their woven business observed a great negative impact for that unexpected incident. On the other hand, Mr. Hossain said, after Holey Artisan some problem was occurred in my factory as an EU order was cancelled and till now buyer does not come to Bangladesh for safety concerns. Therefore, every year we go abroad to meet with buyer and confirm higher volume order and to search new buyer.

Many officials of RMG mills and buying houses said that the terror attack does not have impact on ‘order’ quantity, but foreign buyers do not feel secured to come to Bangladesh and for this reason officials from Bangladesh meet buyers in their chosen places out of Bangladesh.

Ashfaque Ahmed told that “After the terrorist attack at Holy Artisan, order quantity declined. Air cargos from Bangladesh could not land to many countries and in future it even land to countries in European Union’s. This is causing huge in fast fashion business”

Mr. Ahmed further added that Bangladesh is getting strong competition from Vietnam and India. He identified some reasons why orders are not coming to Bangladesh and told, “For several reasons including recent visit of USA president to Vietnam, increasing incentive for the sector in India, are responsible for decreasing order quantity, and I think Bangladesh is not doing good in political race also.”

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