Bangladesh exports reported at US$4.63 billion for February 2023

Bangladesh export earnings were at US$4.63 billion in February 2023, the lowest in four months; although overall receipts rose 7.81%YoY led by apparel, leather and leather goods shipments.

Last month’s receipts took the total proceeds from the shipment of goods to US$32.44 billion during first eight months of the current financial year. The growth moderated to 9.56%.

The latest data comes at a time when apparel exporters are complaining about falling orders from global clothing retailers as high inflation erodes the purchasing capacity of consumers in Europe and the US, the two biggest export destinations for Bangladesh.

The impact of the weak global demand is already visible for other major sectors such as jute and jute goods, frozen fish and shrimp.

Garment exporters say the overall shipment in volume declined but receipts increased in value.

“We are getting orders for high-value clothes. This has helped us post positive growth in earnings,” said Faruque Hassan, President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“Once we were used to getting orders to make jackets worth US$15-US$20. Now we are receiving orders to make jackets that are sold at US$100. This is a very positive development.”

Earnings from apparel exports, which accounted for about 85% of national shipments in July-February, rose 14.06%YoY to US$31.36 billion.

Knitwear exports brought home US$17.06 billion, up 13.21% as compared to a year earlier. Woven shipment generated US$14.30 billion, a spike of 15.08%.

Bangladesh has performed well in new markets too, said the BGMEA chief.

“But overall export declined in quantity. If we take into account the expansion of factories in the past two years, we will see that a number of them are running below capacity,” said Hassan, also the Managing Director of Giant Textiles.

The war in Ukraine, geopolitical tension and high consumer prices has eroded the buying capacity of consumers in Europe and the US. “For this, we are worried,” he said.

“But the good news is a number of buyers have shown interest in placing higher orders. So, Bangladesh’s share in the global apparel market will increase in 2023.”

Leather and leather products exports rose 6% to US$832 million in eight months. Other major sectors – home textiles, jute and jute goods, frozen and live fish and agricultural products – suffered more than 20% decline in earnings.

Frozen fish and shrimp exporters recorded a nearly 22% decline and fetched US$318 million.

“The volume of exports has declined too. It has resulted in a stockpile as the shipment is not taking place as it should be,” said Md Amin Ullah, President of the Bangladesh Frozen Foods Exporter Association.

“Exporters are selling products at reduced rates in order to bear operational expenses.”

He expressed a hope for a rebound in export receipts from frozen fish and shrimp, grown mainly in the southwestern coastal region.

Amin said because of the falling imports, there will be a shortage of products in the western market.

“The demand will improve as people can’t stop eating despite the war. So, prices will rise.”

Helal Ahmed, Chief Operating Officer of Janata Jute Mills and Sadat Jute Industries Ltd, also expects a revival in export earnings in the second half of 2023.

Exports from jute and jute goods, one of the few sectors for which raw materials are locally available, plunged 24% to US$610 million in the eight months.

The sector suffered drops in shipment for the shrinking demand for jute yarn among carpet makers, the main user of jute yarn. The use of alternative yarn following a spiral in prices of jute in Bangladesh has also affected the export performance.

Ahmed said reduced prices of jute would lead to increased use of jute yarn, “The situation is expected to improve.”

A sharp depreciation of the taka against the US dollar has made exports from Bangladesh attractive in the global markets. The local currency has lost its value by about 25 per cent against the American greenback in the past one year.

“Besides, orders for garments from major markets will shift away from China. So, there is an opportunity to elevate garment shipments,” said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue.

He said the prices of cotton, yarn and other items have increased and the latest export earnings figure reflects the price effect of the garment items shipped.

“The growth is price-driven to some extent as the prices of raw materials have increased. Until now, the demand side remains depressed.”

The trade expert called for an increased focus on regional markets as demand is growing there.

“At the same time, productivity would have to be raised and the cost of doing business would have to be brought down.”

 

Likely facets of forthcoming Bangladesh Budget

Finance Minister of Bangladesh, Mustafa Kamal is scheduled to announce the budget for financial year 2019-20 in parliament on 13^th June 2019, a few days after the announcement of Pakistan's Budget for the next financial. I have just picked up news from a leading Bangladesh newspaper, which may give Pakistanis a chance to see what is being done there. 

Aiming to invigorate the promising export sector, an ailing stock market and cooling property markets, the upcoming budget is likely to announce a number of incentives to rekindle the business and investment environment, said sources involved in preparing this year’s national budget for parliamentary approval.

The incentives include enhanced subsidies, tax cuts and fiscal stimulus to take the economy to an 8.5% growth rate in financial year 2019-20.

Realtors and land developers have long been demanding a reduction of registration fees, including the Value Added Tax (VAT) and other taxes on the sale and transfer of property, like apartments or land, so as to stimulate the slowing real estate market. According to sources, the upcoming budget is likely to almost halve the current aforementioned costs.

Currently, total fees for flat registration are 14% to 16%, and 17% for land registration. The fee is imposed on the deed value of property.

A budgetary measure is also likely to be announced for the first time for the resale of existing (not new) flats.

National Board of Revenue (NBR) officials think a secondary property market boom would stimulate the economy further if registration fees for used flats were rationalized.

Presently, registration costs remain the same for both new and used flats.

The proposed budget is set to raise the tax-free income ceiling for cash dividend income from stocks to Tk50,000, up from the current ceiling of Tk25,000.

“The Finance Minister is serious about reviving the morale of stock investors in the upcoming budget. A number of budget incentives are in the offing to streamline capital markets,” said a top NBR official. “The market (capital market) will act positively after the announcement in the proposed budget,” he hoped.

Officials concerned at the finance division under the Ministry of Finance said the subsidy outlay in the budget would be around Tk45,000 crore for the next fiscal year, up from Tk38,500 crore earmarked for the current fiscal year.

The highest subsidy amount of Tk9,000 crore is likely to be allocated for the agricultural sector, with some allocation expected to be earmarked for farm mechanization.

The budget is also likely to announce a one percent export subsidy for the apparel sector, in addition to the 4% now applicable for receipts coming from non-traditional markets. The amount to be earmarked is likely to be Tk9,000 crore, which is now around Tk3,500 crore. Presently, 26 export-bound items, including apparel goods, get export subsidies of anywhere between 2% and 20%.

In the current budget, export sector subsidies amount to Tk5,000 crore. Of the total, Tk500 crore is allocated for jute and jute goods.

The power sector subsidy is likely to be earmarked at Tk10,000 crore, and the energy (including LNG) sector is likely to get Tk9,000 crore.

The proposed budget is reportedly set to announce an incentive for foreign exchange remitters, as the government is desperate for more remittances to handle the foreign exchange demand to manage rising import payments.

A subsidy of 2-3% is likely to be offered in the budget for remitters. Under the planned scheme, recipients of remittance will get 2-3% extra local currency on the remitted amount. For this purpose, an amount of Tk3,000 crore will be allocated in the budget.