Low price worries RMG exporters

A low price now being offered for apparels from international buyers has become a concern for Bangladesh exporters, on the back of ongoing global financial meltdown and higher costs of doing business.

The exporters lament they are offered a price that is 10 percent lower than they were offered before the recession, for which they could hardly make any profit.

However, some exporters see the new buyers’ leaning towards Bangladesh as a positive side. A considerable number of buyers arrive here to place export orders because they find the RMG prices in other countries higher.

Reazuddin Al-Mamoon, managing director of Epyllion Group, a leading exporter, pointed to the fact that every year buyers are cutting prices of Bangladesh made readymade garment (RMG) products, although raw material prices are on the rise.

“We must improve our negotiation capacity with foreign buyers in fixing the RMG prices. Otherwise, we will continuously be denied fair prices of our products,” Mamoon said.

Meanwhile, Export Promotion Bureau data show a 0.22 percent decline in the price index of all products, including RMG, in March, while the February decline was 2.29 percent.

In the case of primary products, the price index declined to 4.90 percent in July-March period, compared to the 14.08 percent in the first eight months of the outgoing fiscal year.

In the case of manufactured goods, the price index declined to 0.50 percent in the first nine months of this fiscal, while the July-February decline was 1.62 percent.

“We are really worried about RMG price cut. We are just losing our competitiveness,” said Ghulam Faruque, chairman of SQ Group, a leading sweater and garment manufacturer.

“As a result, we can hardly make profit after paying workers’ wage and other business costs,” Faruque said.

Despite around 20 percent rise in the cost of doing business last year, an intense competition in the sector meant producers had been unable to pass the higher costs on to buyers, industry insiders said.

Erratic gas and power supply, higher cost of fund, higher freight charges–both in local and international markets, yarn price hike, implementation of the minimum wage for workers, higher transport costs, weak infrastructures and higher prices of capital machinery caused such a higher cost of doing business.

Iqbal Latif, managing director of Design World International, a local buying house, said the local manufacturers are just running their factories for survival, as they get low prices.

The knitwear trade body chief also expressed despair over the present situation.

“It has become difficult to survive now for a price pressure from international buyers,” said Fazlul Hoque, president of the Bangladesh Knitwear Manufacturers and Exporters Association.

In this connection, Hoque pointed to the recent lending rate cut and said only 1 percent cut is very insignificant to tackle the situation stemming from global crisis.

The central bank capped the bank interest rate at 13 percent from its previous 14 percent.


The Daily Star, 02 June 2009


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