Bangladesh has felt the impact of the ongoing war between Russia and Ukraine. However, it somehow managed to continue its readymade garment (RMG) exports to the invading nation, Russia, and the exporters are now receiving payments without any hassle. However, the export volume almost halved during the war.
Some traders, who regularly export RMG items to Russia from Bangladesh, told Prothom Alo that they have reduced orders from the Russian buyers due to the prevailing uncertainty triggered by the war.
In many cases, they are demanding an advance payment of around 30 to 50 per cent from the Russian buyers, in addition to the regular requirement of letter of credit (LC) opening. If a buyer complies with these terms and conditions, the local traders start production in their factories.
Russia launched an invasion on Ukraine on 24 February, which prompted the western countries, including the United States, to impose multiple bans on it. Even Russian banks were axed from Swift, the global financial artery that allows the smooth and rapid transfer of money across borders. Added to that, the international carriers stopped shipping products to the transcontinental nation, which made trade from and to the nation more difficult.
According to the Export Promotion Bureau (EPB), the total exports to Russia in the first eight months of the financial year 2021-22 were worth $480 million. This implies that the monthly exports were $60 million. The exports would be worth $57 million if the following two months (March and April) after declaration of war are taken into account.
The Green Life Knittex, a RMG exporter, shipped different sorts of clothing worth $0.2 million to Russia on 23 February, just a day ahead of the war. It encountered complexities while sending required documents to the designated Russian bank, Alpha Bank, which triggered an uncertainty over the payment.
However, after a wait of several weeks, the RMG company received the payment before the Eid-ul Fitr, said its managing director (MD) Halim Biswas.
He further said that they still have a small order – worth USD 0.15 million -- pending from a Russian buyer for 10,000 jackets. Prior to starting production, they asked the buyer to make 50 per cent payment in advance through TT, a method of payment where products are arranged for shipment after payment is made to the stipulated bank account.
Fashion.com, another exporter, has been facing hazards to receive the payment against its exports to a Russian company due to war. However, it was paid $17,000 after a delay of around 170 days, which downsized the due payment to $10,000.
The company then suspended a Russian order of $0.3 million and started production once the arrear payment is made.
Khan Monirul Alam, managing director of Fashion.com, said they started production as per the Russian buyer’s requirement after receiving 50 per cent of the payment. The issues regarding bank payment were also fixed and they are now receiving export payment in dollars.
The managing director of leading exporter Tuska Group, Arshad Jamal, said they are avoiding new orders from Russian buyers due to the prevailing situation.
“You can say that we are walking cautiously. We are receiving some orders if there is no alternative way. But there is no hassle in receiving export income,” he said.
The Tuska Group MD sees no problem even if the leading brands, including H&M, Zara, Burberry, stop their businesses as some small buyers are emerging at the same time.
However, he noted that the development would not benefit Bangladesh to a significant extent as it is quite impossible for the new buyers to achieve the ability of buying RMG products from the international market.
“They have to import the products through intermediaries. Besides, there are issues over language and banking,” said Arshad Jamal.
Like Russia, the exports to Ukraine also continuing, though on a limited scale. The total exports to Ukraine in the first eight months of FY22 stood at USD1.8 million. The amount is estimated at USD 0.15 million if the last two months are taken into account.
Shahidullah Azim, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), described the continuance of exports to Russia as a positive thing for Bangladesh.
“Their domestic demands registered a significant fall due to the war. But we expect that we will be able to reclaim the Russian market after the war,” he said.