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RMG export driven by volume while price stagnates: CPD study

Bangladesh’s readymade garment (RMG) in 2021 has shown an impressive recovery despite the COVID-19 fear. But a recent study of the Centre for Policy Dialogue (CPD) finds that this growth is mainly compelled by volume, as the apparel price increase rate has been really low with regularity coming into being in the global supply chain after the pandemic led nosedive. The CPD study focused on two main export destinations of Bangladesh – the USA accounts for 24% and the EU accounts for 64% of Bangladesh’s RMG export.

CPD disclosed this in its study Independent Review of Bangladesh’s Development (IRBD) at its office in Dhaka recently. The CPD study showed that apparel export to both markets grew between July and October of FY2021 compared to the same period of FY2020.

USA market

As the first infographic shows, the country exported 23.8 percent RMG in the US market – mostly compelled by volume, which rose by 19.8 percent, whereas the price per garment only rose by 3.3 percent.

Bangladesh-RMG-price-increase-percentage-USA-market-July-Oct-2021

Whereas, per woven product export value grew by 13.2% – mainly driven by growth in the volume of 11.1% of the woven garment. In contrast, the price rose by only 1.9% from July to October 2021 period.

According to the study, the scenario of knit products is a bit better. Knit garments export value increased by 13.2 percent – while export earnings rose by 44.6 percent, with average prices growing by 14.3 percent while the export volume rose by 26.5% of the knitwear items to the USA markets.

EU market

Likewise according to the CPD study, in the EU markets export incomes grew by 8.9 percent against the setting of an increase in the volume of 7.9 percent as against the growth in price of a trivial 0.9 percent to the EU in July and October of FY 2021 compared with the same period of the FY 2020.

Bangladesh-RMG-price-increase-percentage-EU-market-July-Oct-2021

The IRBD study showed in the EU markets, the knitwear apparel items value per kg augmented by 13.6 percent and volume grew by 10.3 percent nonetheless the price grew only by 3 percent in July and October of FY2021 compared with the same period of FY2020.

Woven items in EU markets value enlarged 0.8 percent and volume grew by 3 percent and the price of per kg woven clothing items in fact dropped by 2.2 percent, the study also said.

The CPD said, among the two main types of clothing, the trend of volume-driven growth is more protruding for woven paralleled to knit. Adding that it would be fitting to say that where local value addition was higher, competitive strength and negotiating power of exporters are, to that degree, stronger.

The IRBD study also designates that brands and buyers had only slightly engrossed the rise in the costs of RMG production.

Although the 24.3% export growth is really remarkable during the first 5 months of FY22 while the base effect of low growth in FY20 is an issue.

The study pointed that the export performance is no doubt hopeful as the growth of export earnings during July to November of FY22 surpassed the strategic annual target of 12.2 percent set out for FY22.

Mainly this growth has been attached to the high increase of export earnings from the RMG at 23 percent. The growth of non-RMG export earnings was also an impressive 30 percent during this tenure.

CPD study stressed that due to this low price apparel makers are losing profit margins. Also, this is also likely to affect workers who are perhaps having to meet greater production targets.

It said a rise in work order is not proportionately given rise to higher prices, though it is aiding Bangladesh’s RMG to remain viable. This also has significant effects on workers’ wages, the CPD said.

This is also likely to have implications for workers who are possibly having to meet higher production targets, it said.

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

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