July 2020 was perhaps the month that everyone had been eagerly waiting for! After month-long, protracted export reversals, Bangladesh’s export earnings made a rebound this July with around 0.59 per year-on-year growth.
As per figures provided by the country’s Export Promotion Bureau (EPB), in July 2019, Bangladesh’s export earnings were US $ 3.88 billion which in this July stood at US $ 3.91 billion.
The export earning this July is also around 44 per cent more than that of June.
Further, apparel export raked in US $ 3.2 billion, which was 14.1 per cent more than the target set for July by the Commerce Ministry.
However, it was less than the earnings of US $ 3.3 billion registered in July last year.
Earnings from the knit items clocked a 4.30 per cent growth to touch US $ 1.75 billion, but receipts from woven items suffered a decline of around 8.43 per cent to US $ 1.49 billion during the month under review.
It may be mentioned here that export revenue in the apparel industry witnessed a year-on-year decline of 18.29 per cent in March, 82.85 per cent in April and 61.57 per cent in May, as economies the world over went under lockdowns in a bid to curb the spread of the coronavirus pandemic. However, as things started looking up a bit, restrictions were lifted and a state of normalcy returned to the global supply chain, when export earnings again picked up with receipts from apparel exports reaching US $ 2.71 billion in June, which was just 2.5 per cent less than what it was during the same period of the previous year.
A turnaround just the corner was perhaps even more evident from the earnings of the first 18 days of the month after Bangladesh’s garment exports between 1 July and 18 July stood at US $ 1.57 billion.
Many within the industry attributed this to the revival of cancelled orders by the global buyers.
“The export trend in July is encouraging, as exporters are feeling pressure for additional shipments this month due to the upcoming Eid-ul-Azha vacation,” underlined Ahsan H. Mansur, Executive Director of Policy Research Institute of Bangladesh then, adding, “We should be happy if we could run our RMG factories with 70-80 per cent capacity up to September.”
And by the end of July, the results are here for all to see.
After decline in 4 consecutive months since February, July’s export data ‘comes as a big relief’, felt Zahid Hussain, former lead economist of the World Bank’s Dhaka office.
“It is a remarkable achievement given the disruptions to production and trade caused by the virus,” said Zahid Hussain, while Ahsan H. Mansur, on his part, maintained “This much recovery amidst the pandemic was unexpected.”
As expected, the turnaround was led again by the garment sector, which coincidentally accounts for about 84 per cent of the country’s total export earnings. And such has been the surge in shipments lately that Chittagong Port, which is responsible for handling the country’s lion’s share of overseas shipments, witnessed almost 50 per cent jump in exports.
As per reports, exports in July jumped to 72,359 TEU from 49,000 TEU in June and 30,000 TEU in May.
Chittagong Port typically handled 45,000 to 55,000 TEU in monthly exports prior to COVID-19-related disruptions.
The 20-foot equivalent unit (TEU) is an inexact unit of cargo capacity often used to describe the capacity of container ships and container terminals.
According to many in the industry, the surge in shipments in July, to a large extent, can be attributed to the reinstatement of the cancelled/suspended orders by the buyers, the shipments for many of ready orders of which were sent early in view of the Eid holidays.
Apparel manufacturers say western buyers have cancelled or suspended some US $ 4 billion worth of work orders since March, but have since restored some of the orders.
“Our export trend depends on the recovery of the USA and European markets. Many major American companies are lately filing for bankruptcy being COVID-19 victims,” underlined Siddiqur Rahman, ex-President, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), while speaking to the media.
Siddiqur, who is also the Chairman of Bando Design Limited, felt the sudden rise in exports is predominantly due to the buyers taking delayed and scheduled deliveries together in July.
“August and September are lean periods for exports,” he said, adding, “Besides, a week-long factory shutdown due to Eid may also cause exports to fall.”
Had the sector’s export earnings soared 25 per cent or more, we could have said it had performed well, the acting President of BGMEA, Mohammad Abdus Salam commented on July’s export performance, adding shipments that were stuck between April and May for the lockdown all over the world were dispatched in the last 2 months, which also need to be taken into account.
Nevertheless, considering Bangladesh’s inherent strength in basic garment, demand for which is rising in the Western world amidst the pandemic, which coupled with gradual opening of stores by brands and retailers gives hope that exports could increase in the coming days as well, he opined.
Exports to European and non-traditional markets appear to have played the dominant role in the rebound, Hussain said, adding that retail sales in the eurozone have recovered significantly since May to near pre-lockdown levels.
“Governments in Europe have spent billions to limit the damage to employment. The good news is France, Germany, and most of Europe have extended short-term work support schemes through the rest of 2020. This will help sustain the recovery in consumer spending,” said Hussain who went on to add that credit should also go to the Bangladesh Government, which through the subsidised credit for wage payments, helped keep the supply chains flowing and exporting enterprises afloat.
Another piece of interesting development in this direction is that a large chunk of US fashion brands has plans to increase sourcing from Bangladesh in the coming days, which could further give a fillip to apparel exports from the country.
As per the ‘2020 Fashion Industry Benchmarking Study’, around 55 per cent of fashion brands in the United States have expressed their interest to expand sourcing from Bangladesh in the next 2 years. The study further added that despite the changing business environment due to COVID-19, Asia’s position as the dominant sourcing base for the US fashion companies remained ‘unshakeable’.
The fashion industry benchmark study of the US Fashion Industry Association identified that this year, Bangladesh gained its position as a third top sourcing destination for the US fashion companies with an 85.7 per cent usage rate among respondents, up from 60 per cent in 2019.
Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware, conducted the survey between April and June of 2020.
Apparel ‘Made in Bangladesh’ enjoyed a prominent price advantage over many other Asian suppliers mainly due to the low cost of labour, the study observed, adding, ‘Made in Bangladesh’ demonstrated a notable price advantage for cotton apparel items, which accounted for nearly 77 per cent of the country’s total apparel exports to the US in 2019.
Other than the factor of labour cost, the strong capacity in cotton yarn and fabric production locally (mainly for knit apparel) rather than relying on imports has contributed to the cost advantage of ‘Made in Bangladesh’, the study found, while highlighting that man-made fibre apparels could be a potential new growth engine for Bangladesh’s exports, as the US fashion companies were eager to diversify sourcing from China, and the sourcing capacity in Vietnam was not available.
Considering the keenness of the US-based fashion companies to increase sourcing from Bangladesh, coupled with the opening of retail outlets in the West and demands showing signs of increasing again, it would not be surprising if Bangladesh manages to maintain the good show on the export front going forward, which seems to have already started from July.