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Russian market at stake

According to Export Promotion Bureau (EPB) data, in the 2021 period, Bangladesh exported $687.81 million worth of apparel in the Russian market. Which experienced 45.25% year-on-year growth in 2021.

Russian-market-Bangladesh-garment-challenge
Figure: If Russia is cut off from SWIFT – it will be challenging to continue the transaction with it. And Bangladesh’s RMG export to the country will be in a tight position.

While in FY 2020, Bangladesh exported $593.66 million worth of apparel items to Russia. Since the government started giving an additional 4% cash incentive on non-traditional markets in FY 2009-10 – the Russian market has been growing quite impressively. The EPB data also showed for the last 5 years the apparel export in the Russian market has been steadily rising.

On the other hand, the western governments – mainly USA, EU, UK, and Canada said they would oust some Russian banks from SWIFT, a global financial messaging service, and ‘immobilize’ the assets of Russia’s central bank – have initiated numerous rounds of sanctions against Russia. The punishments mark the core of the Russian financial system and this creates a headache for Bangladesh’s bilateral trade and especially the readymade garment (RMG) export in Russia.

If Russia is cut off from SWIFT – it will be challenging to continue the transaction with it. And Bangladesh’s RMG export to the country will be in a tight position.

At the same time, the conflict already increased global fuel prices and per barrel oil is priced more than a $100. Similarly, the price of LNG will increase rapidly as Russia is a major gas supplier.

With the generation of electricity running more and more on heavy fuel oil and diesel, thus increasing the price of making electricity. Which will increase overall transportation costs. Hurting the local industries more, economists say.

Bangladesh-5-years-apparel-export-Russia

On the other hand, in the Ukraine market, Bangladesh exported $31.78 million worth of textile, apparel items in July-January of FY 2021-22 Period, according to EPB data.

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said to the media, “We have already directed our members to stop shipments of garment items to Russia as the war is going on there and for the potential ban on the SWIFT use.”

“We are worried about the Russian and Ukrainian markets. Uncertainty has been created in the payment and shipment following the outbreak of the war,” Faruque Hassan added.

The BGMEA has instructed its members not to accept any new work orders from Russia to avoid any hassles in payments.

“Russian buyers should clear payments as soon as possible so that they do not fall into any uncertainty in the time of Covid-19,” Hassan said.

Mohammad Hatem, Executive President of the Bangladesh Knitwear Manufacturers and Exporters Association, said they are worried about the payment problem due to the uncertainty over the use of SWIFT in Russia.

“We are not getting work orders from Russian buyers since the western nation agreed to ban some Russian banks from using the SWIFT system. It will create a major barrier for us in the Russian markets,” Hatem added.

Fazlee Shamim Ehsan, Vice-President of Bangladesh Knitwear Manufacturers and Exporters Association said to the media, “If SWIFT cuts the entire Russian banking system, the UAE also won’t be able to make a transaction with Russia. In that case, our payment will be uncertain.”

“As we know, the UAE agreed to continue business with Russia through an alternative channel. It is our point of hope but we do not feel secure. So I urge exporters not to make any shipment before payment is guaranteed,” Ehsan added.

Although textile and apparel export in Ukraine is relatively small nevertheless it will be hugely impacted.

Having said that, if the conflict is spread out in Europe – for Bangladesh’s biggest apparel export destination – then this can create a devastating impact on overall Bangladesh’s economy.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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