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RMG value addition getting squeezed

Due to the higher production cost and other global issues Bangladesh readymade garments (RMG) industry value addition share is getting hampered. As per the Bangladesh Bank data, in the first quarter (July-September) of the financial year (FY) 23, RMG product value addition plunged to 51.39%. In the period, the sector exported $10.274 billion – while imported $4.98 billion worth raw materials. Thus value addition stands around 51.39%.

Bangladesh-garments-value addition

Analyzing the Bangladesh Bank data it showed in the first quarter of FY22, the sector’s export growth was 53.42% or $9.059 billion, while the raw material import cost was $4.219 billion.

Apparel leaders opined that prices of raw materials in the global market have increased significantly which leads to less value addition in readymade garment products.

The sector enjoyed a 64.98% value addition during the first quarter of fiscal 2020-21, the highest since 2012-13, data from the Bangladesh Bank show.

According to top apparel leaders, the value addition decreased due to increased prices of raw materials in the global market. However, the comparison between data of the same quarter was not justified, according to the apparel leaders. The industry imports raw materials a minimum of 45 days to a maximum of 120 days before shipments.

 

Bangladesh-APPAREL-value addition-scenario

They also mentioned that in cases of repeat orders, they used to import some raw materials long ahead of shipments.

Akhter Hossain Apurbo, Vice President, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said, “The drastic fall in value addition of apparel items was due to the price hike of raw materials, especially yarn which had almost doubled in price, but buyers had not increased product prices in line with that.”

Apurbo said, “If we can run factories at full capacity that may help to regain the value addition as cotton prices come down.”

Sheikh H M Mustafiz, chairman of the Standing Committee on Sustainability, BGMEA (Bangladesh Garment Manufacturers and Exporters Association), said the industry was passing through a challenging time due to the ongoing Russia- Ukraine war.

“If we export the same value as last year, the overall industry export growth might be negative as we have to export a higher quantity of products to reach last year’s value,” he said.

Experts said that if Bangladesh can supply more raw materials locally, then the rate of local value addition will increase.

However, at present, the price of raw materials is a little low, so the clothes made from these raw materials will be exported in January and March, which is when the value addition rate may be higher.

To calculate import value of raw materials, the Bangladesh Bank considers the value of components like raw cotton, synthetic/viscose fibre, synthetic/mixed yarn, cotton yarn and textile fabrics and accessories for garments instead of back-to-back letters of credit’s raw materials.

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

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