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Apparel value-addition depreciated due to high raw material price, energy crisis

The just-ended fiscal year (FY) 2021-22 has witnessed a depreciation in Bangladesh’s readymade garment (RMG) – the backbone of the country’s economy as it contributes around 84% of total export earning – export value addition.

In FY 2021-22, Bangladesh’s RMG exports earned $42.61 billion. While according to Bangladesh Bank data, the textile and apparel industry imported $19.43 billion worth of raw materials in the period. Thus, Bangladesh’s net RMG export stood at $23.22 billion in FY 2021-22, presenting a 54.50% value addition.

Bangladesh-RMG-value-addition

Faruque Hassan, President, BGMEA said, “Last year after coming out of COVID – global freight charges has gone up abnormally. Coupled with higher prices of other raw materials. Which led to a decrease in our apparel value addition.”

Shovon Islam, Director, BGMEA and Managing Director, Sparrow Group said to Textile Today, “First of all, there is no doubt that our apparel export volume has increased. Also, our export FoB value per garment has improved.”

“On the contrary, the export per garments FoB value increase has not improved in the actual increase of apparel value-addition – be it in costing, CM, or in the wash.”

Bangladesh RMG value addition trend

“The cost increase happened globally due to higher raw material price like textile dyes and chemicals, yarn-fabric, petrochemicals and freight cost jumped significantly. At the same time, cotton prices soared ominously. Especially, from January to June the raw material costs have gone up significantly (minimum 10% to 15% increase) due to China’s zero COVID policy – as most of our raw materials are imported from China –prices were high,” said Shovon Islam.

“We manufacturers have to bear the higher transportation charge of raw materials. While the buyers paid the increased cost per garment’s FoB value. Bangladeshi RMG makers got the increased cost from buyers and we did not have to pay it.”

“We manufacturers have to bear the higher transportation charge of raw materials. While the buyers paid the increased cost per garment’s FoB value. Bangladeshi RMG makers got the increased cost from buyers and we did not have to pay it.”

Shovon Islam, Director, BGMEA and Managing Director, Sparrow Group

“So, if we deduct the 10% to 15% cost increase from our $42.61 billion RMG exports earning, $4 to $6 billion will be eaten up. Our net RMG (in per unit garment) export earning is around $38 billion. Which we have been highlighting from the beginning.”

“If we see the last 5-6 years apparel export trend, we will see that every year Bangladesh’s annual apparel export continuously grew by 10% to 15% even after adjusting the raw material import cost. Overall, our RMG shipment growth has not grown steeply. Rather it maintained the pre-COVID growth trend. As the global fashion market saw a hike in demand coming out of the pandemic – our RMG shipment grew in parallel.”

“Thanks to the apparel entrepreneurs’ resilience. We bounced back from the pandemic woes and surpassed the pre-COVID level growth trend.”

“Yes, our apparel value-addition percentage decreased. Normally our raw material import cost is around 60% and we add 35% to 40% value. This time around, it is a bit more due to overall import cost increase has surpassed the RMG value-addition.”

“Another critical aspect is the overall transformation of fashion taste among the global consumers. As fashion consumers are not anymore into plain cotton-made garments. Rather, they are preferring a more cotton blend – like lycra/poly-based knit fabric. While bottoms are completely into blend. And Bangladesh’s backward linkage industry does not produce and manufacturers needed to import at higher prices. This is another reason for decreased value-addition.”

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

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