The import of basic raw materials used to produce garment items in Bangladesh surged in the first six months of 2022 on the back of a rise in demand in the export markets, even contributing to the dollar crisis in the country. The imports of yarn, cotton, knitted and woven fabrics rocketed in such a way that their combined value in the January-June period this year almost equalled that of the entire 2021.
It came after global retailers and brands poured orders after they received an uninterrupted supply of goods from Bangladesh even during the peak of the coronavirus pandemic, which brought the global supply chain to a standstill.
Textile millers and garment exporters also bought raw materials in additional quantities thanks to a brighter outlook of the garment trade because of the global recovery from the severe fallout of Covid-19. But the Russia-Ukraine that broke out in February has put a damper on the projection.
Textile millers purchased yarn worth $2.66 bn in January-June, accounting for 76 percent of the total import value of $3.5 bn in 2021, data from the Bangladesh Textile Mills Association (BTMA) showed.
Knitters bought $1.29 bn worth of fabrics in the first half of 2022 from international sources, more than three-fifth of the $2 bn they spent throughout last year. Another $2.21 bn worth of woven fabrics was imported in the first half of this year, representing nearly 70 percent of the item procured in 2021. Millers imported raw cotton worth $2.26 billion in January-June of 2022. It was $3.8 bn in the last calendar year. Currently, local spinners can supply nearly 90 percent of the raw materials needed for the export-oriented knitwear sector and 40 percent to the woven sector.
Mohammad Hatem, Executive President of the Bangladesh Knitwear Manufacturers and Exporters Association, said the import value of raw materials surged in January-June because of the spike in their prices in the international markets.
“The prices of yarn, fabrics and cotton have almost doubled.”
The lower pressure of gas turned acute in January, February and March this year. As a result, textile millers were not able to run their factories in full swing to produce yarn and fabrics. The energy situation forced many garment manufacturers to import fabrics and even knitted fabrics from China to meet the increased demand.
Mohammad Ali Khokon, President of the BTMA, said cotton imports rose sharply in January-June because of the congestion that hit international ports last year as global economies recovered from the pandemic. The cotton that was supposed to arrive at the Chattogram port in December last year came in January or February because of the delay caused by container shortage globally, he said.
“As a result, cotton import in terms of both value and volume increased in the January-June half.”
“The increased price and higher volumes drove up raw materials imports,” said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue.
Cotton price escalated to $3.48 per kilogramme in the April-June quarter this year, up 71.48 percent from $2.03 in the identical period a year ago, commodities price data of the World Bank showed. Various studies suggest an investigation can be conducted to see whether money is being siphoned off through under-invoicing and over-invoicing during exports and imports, said Prof Rahman.
Because of the blistering imports, which include industrial raw materials, capital machinery, fuel and edible oil, and wheat, Bangladesh’s foreign currency reserves have slipped below $40 billion, sending the taka to a new low against the US dollar amid a shortage of the American greenback.
M A Razzaque, Research Director of the Policy Research Institute, accredited higher global inflation, the increase in raw materials prices and stockpiling of goods fearing supply disruption for the surge in the import value. However, the gloomy outlook on Europe and the US means the export boom may not continue in the current fiscal year, he said.
Garment shipment clocked 35.47 percent year-on-year growth in the last fiscal year that ended in June, netting $42.61 billion. Of the sum, $23.21 bn came from knitwear shipment, up 37 percent and $19.39 bn from woven item exports, an increase of 34 percent, data from the Export Promotion Bureau showed.
Although Bangladesh has attracted higher volumes of orders in recent months, it has not lived up to its expectation because of the war. Still, the country will be able to reach its garment export target of nearly $47 bn set for the current fiscal year, according to Hatem.
“The demand will not decline despite the war since Bangladesh produces basic and semi-high-end garment items. These products will always be high in demand.”