Global recession hits Bangladesh

While thousands of Bangladeshi workers are being sent back from Malaysia, Singapore, United Arab Emirates and other Middle Eastern countries, causing tremendous negative impact on country's foreign exchange earnings, there is now fresh bad news from readymade garments and textile sector in Bangladesh.

President of Bangladesh Readymade Garment Manufacturers and Exporters Association [BGMEA] Salam Murshedi told reporters on Monday [March 16, 2009] that more than twenty-five per cent orders in country's readymade garment factories are already cancelled by the buyers, while 75 per cent of the factories are suffering from order crisis.

Murshedi said in January the quantity of RMG export orders declined by 4.98 percent compared to the corresponding period of the previous year. The decline was 17.58 percent in February. In addition to this, the prices of exportable garment items declined by 20 percent and for some factories prices declined by 30 percent due to the global recession, he added.

He said three major buyers of Bangladesh's RMG products, including UK-based Woolworth, became bankrupt recently, which indicates looming hard times for the sector.

"Bangladesh's apparel industry, in three decades of its history, has hardly faced such a severe challenge" Murshedi said.

BGMEA asked the government for 10 percent cash incentive for readymade garment [RMG] exporters and withdrawal of VAT from the sector to help it cope with the global economic meltdown. It also asked for rescheduling of bank loans and cutting the bank interest rate on loans.

The BGMEA's president argued that the need for the special exchange rate is urgent because sharp devaluation of Indian, Pakistani and Vietnamese currencies in recent months will enable the exporters of those countries to beat their Bangladeshi counterparts in competition.

The BGMEA has dropped the demand for devaluating the taka because of the adverse effect that such a move will have on Bangladesh's import-dominated foreign trade, said Murshedi.

In July-January period of this fiscal year, Bangladesh exported knitwear items worth $3.803 billion and woven items worth $3.389 billion, according to Export Promotion Bureau [EPB]. According to EPB data Bangladesh had earned $10.70 billion from the export of readymade garments in the previous fiscal year.

The global financial gloom sent the country's exports down by over 2.5 per cent until February although other Asian countries like India, China and Pakistan are facing sharper downturn in export.

The country's export growth fell to 15.38 per cent for the period of July-February from 18.16 per cent recorded between July and January in the current fiscal year.

The International Monetary Fund has wanted to know from the government the risks factors the country's economy might face because of the ongoing global recession and its fiscal projections for the next fiscal year.

Finance ministry officials said it is for the first time that the IMF has wanted in writing from an elected government, almost three months ahead of the budget announcement, a list of measures planned for the next fiscal year for facing the global financial crisis.

In a letter forwarded to the finance minister, AMA Muhith, the international lending agency that supports the government to maintain fiscal discipline has wanted to know how the government plans to face global recession, energy policy for fixing prices of petroleum products and planned subsidy for 2009-10 fiscal year.

The IMF, in the recent letter signed by its Asia-Pacific adviser Masato Miyazaki, has also sought to know about the key policy focuses of the next budget.

The agency is expecting an official reply to 32 inquiries before the planned visit of Miyazaki-led staff mission between March 30 and April 2, sources said.

Commenting on the adverse affect on country's foreign exchange earnings, which will ultimately hit the economic backbone, economists are suggesting urgent measures to be initiated by the present government in Bangladesh in order to cope with the crisis.

It may be mentioned here that only readymade garments sector employs more than 2.7 million workers in the country. Global recession may cause in loss of jobs for huge number of readymade garment workers, especially the females, which will not only put a tremendous economic adversity in the society, but may also forces thousands of unemployed female workers in entering illicit profession just because of poverty and necessity.

Bangladesh, being one of the Least Developed Countries [LDC] deserves special attention from the rich nations in addressing such serious economic disaster. Moreover, the government should also give strict instruction to financial institutions in simplifying the banking procedures. Port authorities and Customs should also be put on special alert to make all out efforts in extending all possible cooperation to the exporters and business community in escaping loss of time due to undue bureaucratic red-tapism.

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Global recession hits Bangladesh

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