What is the actual earning from apparel export?

A full fiscal year ended in June after the Russia-Ukraine war began. Apparel exports, according to the government, increased by 10 per cent during this period. Yet, work orders dropped and 20-30 per cent of the capacity of majority of factories remains unused. As a result, readymade garment (RMG) industry entrepreneurs are not finding similarities between export growth and reality.

Several medium-and-large-size RMG factories are clients of United Commercial Bank (UCB), a private bank. Apparel of USD 3.57 billion were exported through UCB in 2021-22 fiscal. But the export fell by 11.20 per cent to US $3.17 billion in the 2022-23 fiscal.

Urmi Group has four factories in the garments and apparel sector. This Group exported products of about $95 million in January-June in 2022, which has fallen by about $10 million as the export amount stands at $85 million in the first six months of this year.

Amid this circumstance, the Export Promotion Bureau (EPB) said in the beginning of July that earnings from exports stood at $55.56 billion in the 2022-23 fiscal. Apparel accounted for 84.57 per cent or $46.99 billion of total exports. Overall, the export of goods grew by 6.67 per cent in the 2022-23 fiscal, which was 34 per cent in the preceding fiscal. According to the EPB data, only the RMG sector saw a rise in export among the top six sectors, which earn from export.

Several apparel industry entrepreneurs have openly or personally been doubting the data on the RMG sector for several months. They argued inflation rose in the US and the European Union countries following the beginning of Russia-Ukraine war, and consumers decrease their purchasing of non-essential products, resulting in a drop in sales of apparel. Besides, most of the factories were operated at 20-30 per cent less than their capacity at the end of last year. Gas and electricity crisis also disrupted production.

Prothom Alo talked to top executives of seven banks and at least 10 big-and-medium-sized RMG exporting companies formally to understand the actual scenarios of RMG export in the last fiscal.

Banks said apparel exports of their client companies decreased gradually in February-March while a few clients saw a little rise in June. On the other hand, an entrepreneur of one of those 10 companies said their apparel export increased by 4 per cent, two of the entrepreneurs said export remained unchanged and seven of them said their export fell by 10-20 per cent.

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) executive president Mohammad Hatem told Prothom Alo, “We are finding no similarities between the data of EPB and the reality. Export fell by 50 per cent at my company in last fiscal year and export of all companies near my factory in the BSCIC area of Narayanganj also dropped.

On average, goods of $300 million used to be exported a month through Southeast Bank, which has fallen to $150-$200 million. As a result, payment of the bank’s import liability decreased and the bank has already transferred about Tk 45 billion to forced loan.

Goods of $240 million were exported per month through City Bank, which decreased to $180 million in April and $200 million in May. Local Shahjalal Islami Bank and foreign banks are also in a similar situation.

Goods of $140-$150 million were exported a month through Dhaka Bank, which dropped to $100 million in April. Dhaka Bank managing director Emranul Huq told Prothom Alo that export decreased by more than 30 per cent. Buyers couldn’t sale the products that they took previously, and for this reason, buyers are reluctant to take products now despite placing work orders.

After securing work orders, member companies apply to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and knitwear factory owners’ organisation, BKMEA, for a utilisation declaration (UD) certification to import raw materials under a duty-free facility. As companies import raw materials under the duty-free facility against this certification, the situation of RMG work orders can be understood by the number of UD certifications.

BKMEA said their member companies took UDs for 6.30 billion pieces of apparel, which had an export value of $13.90 billion in the 2022-23 fiscal, and UDs for 8.29 billion pieces of apparel, which had an export value of $17.33 billion in the previous fiscal. That means net export of apparel fell by 23 per cent and earnings by 20 per cent.

Besides, BGMEA said it provided 22,352 UD certifications in the 2022-23 fiscal and 24,794 UDs in the 2021-22 fiscal. This means issuance of UDs fell by 10 per cent in the last fiscal.

Earnings of knit factory, Plummy Fashions Limited in Narayanganj, from apparel export decreased by 10-12 per cent and the amount of export by 12-15 per cent in the 2022-23 fiscal. Managing director Fazlul Haque said, “Since our company produced the premium segment of apparels, our situation is not that bad. Export of many other factories decreased more, work order also fell. On the other hand, price of cotton has also decreased. As a result, it is not unusual that export of apparel fell.”

Alps Apparels Group operates two factories in Zirabo area of Ashulia. The Group exported apparel of $30 million in the 2021-22 fiscal, which fell by 30 per cent to $21 million in the 2022-23 fiscal.

Alps Apparels Group managing director Khan Monirul Alam confirmed the matter to Prothom Alo. He said, “There were 2,700 workers at our two factories at the end of December in 2022. Usually, several workers quit their job every month. But recruitment remains halted since January due to decreased work orders. Workers need not work overtime for many days. Currently, there are a little over 2,200 workers at our factories.”

A top apparel export company exported 36.2 million pieces of apparel worth $285.7 million in the first six months of this year. This company exported 49.1 million pieces of apparel worth $373.9 million in the same period last year. That means their export earnings fell by 23 per cent during this period. The managing director of the company said on condition of anonymity that their export fell by about 20 per cent in the last fiscal.

The EPB collects data on RMG export from the National Board of Revenue (NBR) and releases it. However, data from NBR does not match with the EPB’s data.

According to the NBR, RMG export increased by 10.69 per cent in terms of taka and decreased by 4 per cent in terms of the US dollar in the last fiscal. There is a discrepancy of $8.47 billion in the data of EPB and NBR.

Data from NBR shows earnings from the export of apparel products was Tk 3.83 trillion in the 2022-23 fiscal. According to EPB, the average exchange rate was Tk 99.45 a dollar in that fiscal. That means earnings from RMG export, according to NBR, were $38.52 billion. Yet, the EPB said earnings from apparel export were $46.99 billion.

According to NBR, earnings from apparel export were Tk 3.46 trillion in 2021-22 fiscal. According to EPB, the average exchange rate was Tk 86.30 a dollar in that fiscal. This means earnings from RMG export, according to NBR, were $40.16 billion but the EPB said earnings from apparel export were $42.61 billion.

Asked on the real scenario of apparel export, BGMEA vice president Shahidullah Azim told Prothom Alo there is no similarity between the reality and the export data released by EPB. At present, most of the factories are passing difficult times. Work orders have also decreased significantly in terms of the amount. Export price of woven garments rise slightly due to rise in the prices of imported cloth and accessories, but that does not give any chance to increase export, he added.

In the meantime, several billion US dollars from export proceeds in the RMG sector are not repatriated to the country every year, and it has been rising for the past couple of years.

According to data from Bangladesh Bank, apparel of $42.61 billion were exported in the 2021-22 fiscal, but the country received $32.69 billion, and apparel of $31.84 billion was exported in 2020-21 fiscal, but the country received $25.01 billion. In that case, doubt on money laundering looms large.

Centre for Policy Dialogue (CPD) research director Khondaker Golam Moazzem told Prothom Alo there has long been a big inconsistency in the export data and the repatriation of export proceeds. This has increased recently. This difference in the data of NBR, EPB and Bangladesh Bank may create confusion on the government’s current account or reserve. This tendency to hide the actual scenario of export makes it default to face the delicate time of the economy, he added.

Golam Moazzem further said, in other words, the opportunity of money laundering increases once the actual data and information are not published, and that creates pressure on foreign reserves. In this circumstance, Bangladesh Bank needs to look into the matters of LC (letter of credit) opening and LC settlement and take punitive measures if any inconsistency is found, he added.

* This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Hasanul Banna