The New Nation - Internet Edition

UNB, Dhaka

The country's apparel industry is exposed to a new threat with the Taka strengthening against US dollar.

If the appreciation of Taka continues for long, it may weaken the recent rebound in apparel exports, exporters said.

They said the dollar fell by over 4 percent to an average of Tk 67 (depending on the terms of exports) at present, compared to Tk 70 plus they negotiated end of 2006.

The new challenge emerged after the exporters survived increased production cost, around 10-15 percent, due to rise in fuel price and of other inputs as a result.

Moreover, many of them are still struggling with how the wages for the workers can be increased from the already marginalised profits to at least support the price of rice that almost doubled in last one year.

"It will be extremely difficult to maintain the export growth if dollar falls further, even by only one taka," said Fazlul Hoque, president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

The main export sector suffered a negative growth in the first half of 2007-08 due to political unrest and anti-corruption drive, but recovered in the second half with gradual improvement in political situation and a weakening taka against dollar.

During July-May period of 2007-08, knitwear exports registered 21 percent growth to US$ 4.9 billion over the same period in previous fiscal year, while woven garments grew 11 percent to US$ 4.6 billion. The overall export growth was recorded at 16 percent to US$ 9.6 billion.

The productivity and efficiency of the industry, supported by absence of strikes and hartals as well as improved port efficiency, helped attain the growth, Hoque said.

Despite negative signals like slowdown in consumption in the major export destinations, he said the prospect for export growth was still bright with Chinese production becoming expensive. He was expecting a shift of orders from China to countries like Bangladesh.

Hoque, however, raised concerns about negative aspects like disruption in supply of gas and electricity to tap the potentials.

"Expansion of production capacity is being affected seriously for lack of uninterrupted gas and electricity supply," he said. "It's not possible to maintain export growth without increasing production capacity."

The knitwear sub-sector, comparatively strong, increased its capacity by 15 percent last year, improved efficiency by 5 percent simultaneously that helped the sector's export growth by 21 percent, the BKMEA president said.

He also raised another concern over economic slowdown in the countries of Bangladesh's export destination, while the exporters would have to offer better prices for apparel items, which would put further pressure on the profit margin.

"We'll have to be more efficient in negotiating the prices with the buyers," Hoque said.

Earlier, at a press conference, the BKMEA had announced that they would go for a minimum export price considering the increase in production costs.

Meanwhile, a money market analyst from a foreign bank operating here said the exchange market remained largely stable for a quite long time with the taka appreciating a little.

He, however, said the apparel exporters has no reason to be scared as the dollar weakened against almost all currencies, including those of Bangladesh's competitors in the sector.

Moreover, there is a sign of depreciating the taka against dollar in the coming months as the market would see rising demand for the greenback to settle the increased L/Cs opened last fiscal year.

According to latest figures from Bangladesh Bank, L/C opening increased by 45 percent to US$ 24.44 billion during the last fiscal year as compared to the previous fiscal year (2006-07).

"Exporters may be facing some pressure for a while but the market trends show it would turn to their favour in the coming months," said the market analyst, requesting anonymity.