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Depreciation of Indian currency a threat for Bangladesh RMG sector

As a global second largest exporter of clothing products, Bangladeshi apparel manufacturers are facing tougher competition in the export destinations due to the devaluation of currencies of all emerging countries against US Dollar.

The sharp depreciation of Indian rupees and other competitor’s countries against US Dollar will eat up Bangladesh’s apparel exporters’ competitiveness in the global export markets.

Depreciation of Indian currency a threat for Bangladesh RMG sector
Figure: As the currencies of India and China are seeing a downtrend against the US dollar, Bangladeshi RMG importers may face a tougher challenge against the competitors.

As a result, Bangladeshi exporters will see a tougher competition in European Union Countries as well as in the United States of American markets.

However, it may give a release to the importers, who import goods from the India and China, the two largest importing country of Bangladesh.

As of latest data, the Indian rupees ended at a record closing low of 73.34 per dollar on the back of strong demand for US dollar from importers amid of rising global oil prices.

On the other hand, the Bangladeshi Taka depreciated only by 1.26% against the US dollar, the only exchange means of exporters with the importing countries, in the current year.

According to Bangladesh Bank (BB) data as of October 17, 2018, Bangladeshi Taka stood at 83.83 per US Dollar.

According to Bloomberg, the Indian rupee depreciated by 10.04% against the dollar in the current year, while the Indonesian rupiah fell by 7.89% and the Chinese Yen depreciated by 4.85% in the year.

“As a global second largest exporter of clothing products, Bangladeshi apparel manufacturers are facing tougher competition in the export destinations due to the devaluation of currencies of all emerging countries against US Dollar. While Bangladeshi Taka is becoming strong against USD,” Former Finance Advisor to caretaker government Ab Mirza Azizul Islam said the Textile Today.

The sharp fall of currencies against the USD in competing countries would leave Bangladesh in tougher competition in the export markets, said Islam.

Exporter wants a separate exchange rate

Since India is an emerging strong competitor of Bangladesh in the global export markets especially for textile and apparel sector, the depreciation of Indian Rupees is very crucial for Bangladesh, opined industry people and trade analysts.

In the year 2017, Bangladesh is the second largest RMG exporter in the world with a 6.5% global market share of nearly $30 billion.

Bangladesh RMG sector already lost a competitive edge in the global markets due to rise in production cost as they have to spend a lot of money in improving the safety standard to ensure a safe workplace for the workers.

Faruq Hassan, senior vice-president, BGMEA

While China is the largest apparel exporter to the globe with 34.9% markets share of $158 billion. Vietnam is the third with its 5.9% market share of $27 billion.

India ranked fourth with $18 billion export earnings, which is increasing its global market share gradually.

In remaining competitive in the global markets as well as to compete with the closest competitors, the readymade garment manufacturers and exporters urged the government to come up with policy support.

They also called for a separate exchange rate for the exporters, which would give a cushion to the exporters as well as help the country top enlarge export volume.

“Depreciation of currencies of the competing countries is a threat for us in the global export destinations. Since India is arising in the global export markets and a close competitor of Bangladesh, it is more crucial for us,” Exporters Association of Bangladesh (EAB) president Abdus Salam Murshedy told the Textile Today terming the situation as a problematic factor for exporters.

In remaining strong in the global market, the government should introduce a special exchange rate for the export-oriented sector. Otherwise, the exports earnings may face downtrend in the coming months, said Salam, a former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“Bangladesh RMG sector already lost a competitive edge in the global markets due to rise in production cost as they have to spend a lot of money in improving the safety standard to ensure a safe workplace for the workers,” BGMEA senior vice-president Faruq Hassan told the Textile Today.

While the manufacturers will; have to implement the new wage structure from December. So, it’s an urgent call from the manufacturers to come up with the policy support to reduce the burden of manufacturers, said Hassan.

If the government does not pay heed to the situation, it may lead to create a bad situation for the apparel industry, said Hassan, also Managing Director of Giant Group, he added.

According to the data of the Export Promotion Bureau (EPB), the country’s overall exports grew 5.81 percent in the outgoing fiscal year 2017-18 (FY18) to $36.67 billion from $34.65 billion of the fiscal year 2016-17 (FY17) riding on the higher shipment of garment products.

The amount of export earnings in the FY18 is $84 million lower than the government set target of $37.5 billion for the financial year.

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

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