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RMG value addition declines by 7.83% in FY20

Value addition in the country’s readymade garments sector dropped by 7.83 percentage points year-on-year in the fiscal year of 2019-2020. Supply chain disruption due to the global outbreak of coronavirus was the reason behind the drop.

A Bangladesh Bank review on the RMG sector showed that the value addition in the RMG sector dropped to 56.49 percent in FY20 in the context of raw material import from 64.32 percent in FY19.

Bangladesh-garment-industry
Figure: The value addition in the RMG sector dropped to 56.49 percent in FY20 in the context of raw material import from 64.32 percent in FY19.

The country’s RMG manufacturers imported raw materials worth $12.16 billion in the immediate past fiscal year against export worth $27.95 billion in the period.

The sector’s value addition was 60.94 percent in FY18.

Bangladesh Garments Manufacturers and Exporters Association Director Asif Ibrahim mentioned that many apparel industries faced order cancellation or suspension due to the outbreak of coronavirus even after the import of raw materials against the export orders.

“So, a significant portion of raw materials remained stuck at the backward linkage stage that resulted in a decline in value addition in the apparel sector,” said Asif, also Vice-Chairman of Newage Group of Industries.

Some experts said that if the raw materials remained stuck at the supply chain stage in the last fiscal year, the value addition in the RMG sector would increase in the current fiscal year.

Mentioning the RMG sector’s 83 percent contribution to the country’s overall export earnings, the BB report said, “We need product diversification in our export basket.”

During the worldwide coronavirus pandemic Bangladesh has been troubled with less RMG production and exports order from the buyers, the BB report said.

Countries like Bangladesh need to follow different strategies to hold the market share and lost customers with increased productivity and competitive pricing.

The RMG sector imported raw cotton, synthetic or viscose fibre, synthetic or mixed yarn, cotton yarn and textile fabrics, and accessories for garments as inputs for the production.

In FY20, the import of raw materials represents 43.51 percent of the country’s export value while the ratio was 35.68 percent in the previous fiscal year.

The situation would improve and the value addition in the RMG sector would grow when the global trade and business would become normal.

To support export-oriented industries including the RMG sector, the government immediately after the outbreak of coronavirus announced a special stimulus package for the sector.

So far, such businesses have received Tk 10,500 crore as stimulus loans for the payment of their workers’ salary at the cost of 2 percent service charge.

 

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