'We expected that the pandemic would phase out and the apparel sector could turn around. But with the surge of new variants, our buyers have again reduced orders'
Apparel manufacturers have once again requested the government to extend the repayment period of stimulus loans from the existing 18 months to 36 months, taken to pay workers' wages and allowances.
Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), made the call in a letter sent to the governor of Bangladesh Bank and the senior secretary of the Finance Department recently.
In the letter, the BGMEA president said that the export-oriented apparel sector was still passing through tough times prolonged by the Covid-19 pandemic, putting the country's economy in disarray.
“We expected that the pandemic would phase out and the apparel sector could turn around. But with the surge of new variants, our buyers have again reduced orders and are delaying payment of already-shipped goods,” he also said.
In this situation, the manufacturers are in a dire situation, anxious about the future of the industry, investment situation and other activities, including the wages of the workers, he added.
To overcome this situation, it is necessary to increase the repayment period of salary-related stimulus, he added.
Faruque Hassan also said that amid the extended lockdowns, apparel exporters shipped their product at much-lower prices, simply to retain buyers and workers.
Fortunately, it has increased the confidence of the buyers and the volume of export orders has also amplified. It will take a few more months to get payment against these export orders, while this will create a temporary liquidity crisis, he also said.
Following the Covid-19 outbreak in Bangladesh in March last year, the government extended the loan moratorium for apparel makers until September this year.
The repayment deadline was extended three times, finally set to September 30 this year.
Also asks not to classify loans till December
Mentioning the above reasons, Hassan, in another letter, also urged the central bank not to classify their bank loans till December 2021, should they fail to pay the installments.
Despite the pandemic, debt rescheduling is essential until December so that the country's readymade garments sector can sustain the growth and efficiency of their businesses, and keep creating jobs, said Hassan in the letter.
In another letter to the Ministry of Commerce, the BGMEA has sought a 4% cash incentive on export-oriented apparel items that are made from imported raw materials.
Currently, the government gives a 4% incentive against exports of apparel items which are made with yarn and fabrics produced in Bangladesh.
In the letter sent to Commerce Minister Tipu Munshi recently, the BGMEA president said that the local apparel sector is mainly dependent on imported raw materials though it is the second-largest exporter of apparel products.
He also said that Bangladesh's share in the international apparel market is only 6.8% but it can be doubled through motivating the procurement of raw materials from both international and domestic sources so that the country won’t miss any opportunities of export due to the insufficiency of raw materials.
Encouraging yarn imports will increase the supply of raw materials and motivate buyers to place more orders in Bangladesh, he added.
According to the BGMEA, the apparel sector sources about 70%-80% of required yarn from domestic millers. it is necessary to stimulate and facilitate yarn imports to increase capacity and diversify fabric production.
"Mills of the country mostly manufacture yarn of some definite categories. So,we have to rely heavily on imported yarn for manufacturing specialized fabrics, diversification, and innovation," he added.
He also said that a 4% cash incentive will increase the investment in knitting, weaving, processing, brushing, sewing, bleaching, dyeing, printing, washing and finishing industries, which will help Bangladesh retain market benefits after the LDC graduation.
BGMEA also seeks 10% incentive for non-cotton RMG exports
Moreover, the BGMEA further sought a 10% incentive for non-cotton garment exports in a separate letter to Commerce Minister Tipu Munshi recently.
Non-cotton fibre is the future of the export-oriented garment sector as most reputed brands and consumers are leaning towards man-made and recycled fibre to achieve sustainability, the letter said.
It also makes up 78% of the world's clothing, while the remaining 22% is made of cotton fibre.
However, garment exports from Bangladesh constitute 70% of natural cotton apparels, with only 30% made of synthetic fibre, according to ITMF data.
Furthermore, the global man-made apparel trade stood at around $150 billion in which Bangladesh held only 5% market share while competing Vietnam held 10% of the man-made apparel trade.