Export stands out in turbulent year
Bangladesh's export sector showed its prowess in 2022 despite the devastating Russia-Ukraine war, unprecedented freight costs, energy crisis, record inflation and a risk of a recession that loomed throughout the outgoing year.
The sector was off to a good start in January as the coronavirus situation improved in much of the world and the momentum continued until August even after the war broke out in February and escalated fuel prices, energy shortages and power outages pushed up the cost of production at home.
Shipments, however, dipped in September and October before rebounding in November as international buyers began placing more orders.
All in all, the export sector was among a few bright spots for Bangladesh in a turbulent year.
Last year saw export earnings going past the $5-billion mark for the first time in the country's history in November, on the back of robust growth in apparel shipment.
In fact, the year saw a number of highs.
In January, overall merchandise export grew 41.13 per cent year-on-year to $4.85 billion. It skyrocketed to $4.908 billion in June, the previous highest before November raked in $5.09 billion.
The apparel shipment, which accounts for about 85 per cent of national export receipts, surged 42.5 per cent to $4.09 billion in the first month of the year. It sprinted to $5.09 billion in November.
The first shock after the war broke erupted came when European nations banned the use of Society for Worldwide Interbank Financial Telecommunications. Soon, Bangladesh started losing the opportunity to raise its market share in Russia.
The shipment to Russia only began recovering after local exporters started using alternative routes to ship goods to the country and receiving earnings in the Chinese currency instead of the US dollar.
The rise in freight costs by more than 500 per cent handed another blow to the export sector, while the record climb in the exchange rate amid the fast depletion of foreign currency reserves drove the price of the US dollar price to as high as Tk 110.
Exporters still complain that they are losing money and competitiveness in the global markets because of the lower exchange rate they receive while encashing export proceeds.
Record inflation in the European Union and the United States, which together account for more than 80 per cent of Bangladesh's export earnings, hit exporters hard since consumers tightened their purse strings as recession loomed.
Because of the fall in demand, many international retailers and brands sat on unsold inventories of clothing items.
The war and higher freight charges affected the cotton price, sending the cost of yarn in the local market higher. As the prices of cotton fell worldwide recently, yarn worth $3 billion has piled up with local textile factories.
Factory-level productivity fell owing to the recurrent power outages after the government in July moved to enforce load-shedding to protect the forex reserves since Bangladesh has had to import the fuels needed to generate electricity.
The pause to purchase liquefied natural gas from the global spot markets forced the government to shut many power plants temporarily, worsening the power supply situation.
Despite the gloomy global economy, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the platform for apparel exporters, announced in August its plan to raise apparel shipment to $100 billion by 2030.
In 2022, Bangladesh retained its position as the second-largest apparel exporter globally after China.
"The demand for locally made garment items is still very high despite higher inflation in Europe," said Senior Commerce Secretary Tapan Kanti Ghosh earlier.
Analysts attribute the stellar export performance to the US-China tariff war, competitive prices, and the recent improvements in workplace safety conditions.
This year, Bangladesh also cemented its position as a reliable supplier of apparel items as the country has been among a few nations that have kept its factories open since the coronavirus pandemic hit the world in March 2020.
"Bangladeshi exporters are resilient and they know how to survive in the stormy weather conditions," said Faruque Hassan, president of the BGMEA.
Throughout the crisis, local suppliers exported more to non-traditional markets such as India, China, Japan and Russia, along with traditional destinations, namely the EU, the US and Canada.
Bangladesh is also on its course to becoming a global manufacturing hub for value-added high-end garment items – a prospect that may go on to help the country boost export receipts.
"At the end of the current year, Bangladesh's share in the global apparel market will cross 7.5 per cent from the existing 6.4 per cent," Hassan said.
However, the shipment of some potential sectors, except leather and leather goods, could not meet expectations.
For instance, frozen foods, agricultural products, handicrafts, jute and jute goods, specialised textiles and carpets performed poorly because of the fall in demand in the global markets owing to the volatile global economy.
Md Abul Hossain, president of the Bangladesh Jute Mills Association, blamed the higher price of raw jute in the local market for the sector's failure to lift exports.
"Consumers are also not ready to pay more for jute goods because of the cost-of-living crisis. Consumers are looking for alternatives."
The shipment of goods is rebounding sharply, said Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry.
"International retailers and brands are cutting their reliance on China and moving to countries such as Bangladesh, Vietnam and Cambodia."
"Sales centring Christmas are showing better performance as consumers are going to celebrate the occasion in a major way for the first time in three years."
M A Razzaque, research director of the Policy Research Institute of Bangladesh, described 2022 as a mixed year for the export sector.
"Export grew in the first half before slowing down to some extent in the second half."
The exporters were supposed to benefit from the sharp depreciation of the local currency against the dollar. But they could not as banks fixed different exchange rates for the American greenback, said the economist.
"This has eaten up the benefits that the currency depreciation has brought."