Export earnings surrounded by clouds despite over 30% growth

Infographic: TBS

With a strong rebound from pandemic shocks, Bangladesh's export earnings have continued to be buoyant having registered nearly 31% year-on-year growth in the first eight months of FY22, but a knock-on effect arising out of the ongoing Russia-Ukraine crisis is likely to dampen this hot streak.

However, exporters hope that the ongoing war will not be a big issue if it ends within the next two weeks even though the $665 million Russian market is going to run dry as Russian banks are cut off from SWIFT, the main international payment system.

In this situation, entrepreneurs urge the government to focus on the US market to capitalise on that country's current economic growth.

Bangladesh can replace China and Vietnam in the market and strengthen its foothold in the world of exports, they say.

The country earned about $34 billion in July-February, while the receipts during the same period in the last fiscal year amounted to $26 billion, according to data published by the Export Promotion Bureau (EPB) on Wednesday.

Earlier, the government had set the strategic target for export revenue at $29.05 billion for the period.

In February, export earnings witnessed a 34.54% year-on-year growth to $4.29 billion, while it was only $3.19 billion in the same month of the last fiscal year.

The highest earnings of $3.51 billion brought on by apparel shipments posted over 33.8% year-on-year growth last month. Of the receipts, $1,795 million came from woven shipments, while knitwear items fetched $1,716 million, according to the EPB.

The data mentioned that all sectors, except jute and jute goods, had been performing well in the first eight months of the current fiscal year.

However, jute and jute goods grew by 6.8% to $103 million year-on-year in February.

Two other major export sectors – agricultural and leather and leather products – also saw 42.4% growth to $104.2 million and 29.3% growth to $102.2 million respectively last month.

Fazlul Foque, a former president at the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told The Business Standard, "Our apparel exports for the Russian market are definitely under threat."

Exporters have fallen into deep uncertainty about getting their payments for the already shipped goods, while some are in trouble to ship ready goods. Besides, a number of exporters also have inventory of raw materials, he said.

Every month Bangladesh might lose about $50 million in exports due to the war as 30-40 garment makers export apparel items to Russia, he added.

If the war spreads across European countries, it will bring a disaster, said the BKMEA former president.

Poland is already under threat as Ukrainian refugees crossed into the country, which will take a toll on its economy, said Fazlul Foque.

He also said the apparel export earnings in February are satisfactory and encouraging. Such growth may continue in the next 2-3 months.

Sharif Zahir, managing director at Ananta group - one of the leading apparel exporters, said apparel exporters will face hurdles to get payments because Russian banks have been removed from SWIFT.

Talks are going on to get payments in another currency, but that is not possible as the Bangladesh Bank's current foreign currency policy will not allow that, he noted.

"The situation is changing every day. We have to wait at least a week or two to have a clear idea," Sharif Zahir, also said, adding, "We have an opportunity to enhance our share in the US market as their economy is doing better."

If the country's foreign policy focuses on boosting exports to the US, it will open up an opportunity of fetching another $10-20 billion in exports as a replacement for China and Vietnam.

BGMEA on impacts of Russia-Ukraine conflict on trade

The ongoing Russia-Ukraine conflict has emerged as a concern for the RMG sector of Bangladesh.

Russia, a potential and emerging market for Bangladesh RMG exports, has come under a wide range of sanctions imposed by a number of countries. Especially, blocking of Russian banks' access to the SWIFT international payment system appears to be a major challenge for our trade, according to a press release issued by the BGMEA on Wednesday.

"The BGMEA is closely observing the situation and we have advised our members to send us information with regard to buyers they are working with for exports to Russia, overdue payments and details of the concerned banks," BGMEA Secretary General Faizur Rahman said in an official statement.

"We also advised our members and exporters to be in touch with their buyers and lien banks and take necessary decisions based on discussions with them," he also said.