The Bangladesh’s export-oriented apparel sector is heading for a gloomy situation due to the production disruption amid severe supply shortage of gas and electricity. According to the Export Promotion Bureau, Bangladesh’s RMG exports fell 7.52 per cent in September for the first time in 13 months, with exporters and experts predicting a further decline due to production disruption. If Bangladesh cannot produce and deliver the current orders on time, the confidence of international buyers will also decline amid falling demand for textile products in the global market, they said. Exporters reported that production in many RMG factories had dropped by at least 40 per cent after the gas and electricity supply situation deteriorated sharply in recent weeks. ‘We are worried over the gradual deterioration of the energy situation as most of the exporters are facing trouble producing the existing orders due to the shortage of electricity,’ said Bangladesh Garment Manufacturers and Exporters Association vice-president Md Shahidullah Azim. He said that the situation was particularly worrisome for the industry as businesses were not getting any assurance from the government when the crisis would be over. ‘As per the government direction, we have continued staggered holidays for industrial hubs and we have also announced two weekly holidays, but the supply situation of electricity and gas did not improve,’ Azim said. He anticipated that both export earnings and foreign reserves would fall amid the uncertainty over gas and electricity.
Bangladesh’s export earnings in the financial year 2021-22 stood at $52.08 billion, and the ready-made garments sector accounted for 82 per cent, or $42.61 billion, of the total earnings. In the midst of the slide in foreign currency reserves, both the export earnings and the remittance inflow decreased significantly in September 2022. Exporters said that export earnings witnessed negative growth in September after more than a year as demand for apparel products decreased in the global market due to the high inflation caused by Russia’s invasion of Ukraine. Remittance inflows fell 10.84 per cent to $1.53 billion in September, the third month of the current financial year, from $1.72 billion in the previous year. They also said that Bangladesh’s manufacturers had been failing to produce and ship the orders due to the shortage of electricity and gas, even though the global buyers had decreased their orders by 20–30 per cent due to inflationary pressure. On October 2, BGMEA president Faruque Hassan sent separate letters to the prime minister and state minister for power, energy, and mineral resources demanding a supply of uninterrupted gas and diesel at a reduced price for the apparel sector. The BGMEA president requested the prime minister to readjust the diesel price on the local market in line with the price fall of the item in the international market. Faruque said that the demand for diesel was increasing in the readymade garment sector as factory owners were forced to use generators to keep production uninterrupted in their units amid frequent and prolonged power cuts. The price of diesel was Tk 80 a litre in 2021, which was raised to Tk 109 a litre in 2022, the letter said.
Considering the continuation of employment generation, foreign currency earnings, and economic development, the trade body demanded the supply of diesel at the readjusted price for the export-oriented RMG factories. In his separate letter to the state minister for power, energy and mineral resources, the BGMEA president said that production in the export-oriented factories had been severely affected due to a severe shortage of gas. He said that exporters had failed to maintain shipment deadlines and were facing costly air shipments to maintain them. The BGMEA president demanded an uninterrupted supply of gas for the RMG sector. ‘The shortage of gas and electricity hit the production of the RMG sector hard. The situation has deteriorated more in the past couple of weeks and many of the factories have been forced to announce holidays for two to three days in a week,’ Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, said. He said that exporters had been failing to produce the existing orders. Hatem said that production in his own factory was suspended for four days in the past week due to the lack of fabrics.
Production in spinning and dyeing mills decreased by more than 50 per cent in the recent time which created a shortage of fabric for the knitwear sector, he said. ‘Export earnings in September decreased due to fewer orders from global buyers, but the earnings would decrease more in the coming months due to the production disruption caused by the shortage of electricity and gas,’ Hatem said. He also feared labour unrest due to the shortage of electricity and gas, saying that many of the workers in the knitwear sector do their job on a piece-rate basis and their earnings would fall if production fell. Hatem also said that the earnings of other workers had also decreased as the energy shortage squeezed the scope for overtime duty. ‘Factory owners are also worried over the payment of workers’ wages in the coming months amid the production disruption,’ he added. Amid the weak demand in the global market for apparel products, supply disruption would also create problems for the country’s RMG sector, former World Bank Dhaka office chief economist Zahid Hussain said. He said that the government should make it its priority to keep industrial production uninterrupted as the disruption would lower the level of confidence of global buyers. Zahid said that if the shortage of gas and electricity in the industry continues, Bangladesh will lose its share of orders being diverted from China. ‘Though the ongoing uncertainty is global, the situation will affect the economy and employment in Bangladesh,’ he said. The confidence of export-oriented industries will be boosted if the government announces its initiative to make all the power plants fully operational, the economist said. ‘We do not see any hope to run textile businesses smoothly in the near future in the country as we are not getting assurance from the government that the crisis will end soon,’ Md Fazlul Hoque, senior vice-president of the Bangladesh Textile Mills Association, said. He said that the production in spinning mills decreased by 60 per cent and spinners were failing to ship their existing orders. ‘We request the government to give the textile sector businesses an exit policy as it is not possible to survive with no gas and no production for months,’ Fazlul added.