RMG value addition drops by 7.83pts in FY20 Says Bangladesh Bank report

New Age

HM Murtuza |  Sep 17,2020

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 amid supply chain disruption due to the global outbreak of coronavirus.

A Bangladesh Bank review on the RMG sector showed that the value addition in the RMG sector dropped to 56.49 per cent in FY20 in the context of raw material import from 64.32 per cent 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 per cent in FY18.

Asked, Bangladesh Garments Manufacturers and Exporters Association director Asif Ibrahim told New Age that many appeal industries faced order cancellation 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.

Policy Research Institute executive director Ahsan H Mansur told New Age, ‘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 per cent 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.

‘There seems to be a shuffle in global export chain in post-coronavirus period,’ it said, adding, ‘Countries like Bangladesh need to follow different strategies to grab the market share and lost customers with increased productivity and competitive pricing.’

‘To compete in post-coronavirus period, RMG producers should consider diversifying and converting their product range from low-end to mid- and high-end market,’ the BB report said.

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 per cent of the country’s export value while the ratio was 35.68 per cent in the previous fiscal year.

RMG businesses, however, said that 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 per cent service charge.

In FY20, the country’s export earnings declined by 16.93 per cent, or $6.86 billion, to $33.67 billion from $40.53 billion in the previous fiscal year.

As per the EPB data, the country’s export earnings in FY20 were the lowest since financial year 2014-2015 when the earnings were $31.21 billion.

The situation, however, started rebounding gradually with the country’s export earnings posting 2.17 per cent growth in the first two months of the current fiscal year.

The earnings increased to $6.88 billion in July-August of FY21 from $6.73 billion in the same period of FY20.

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