Bangladesh apparel value addition remains shaky

Originally posted in Textile Today on 14 March 2022

Bangladesh’s readymade garment (RMG) value addition has been inconsistent in recent years. Apparel exporters have mainly attributed the COVID-19 pandemic-induced raw materials high prices and lack of long-term policy supports for this.

According to the Bangladesh Bank data, Bangladesh’s RMG items’ value addition was 59.13 percent in fiscal year (FY) 21, which was 56.49 percent in FY 20.

In FY20, Bangladesh apparel export earnings stood at $27.94 billion, while the country imported raw materials worth $12.26 billion. Thus, Bangladesh’s net apparel exports stood at $15.67 billion in FY20, displaying a 56.49 percent value addition.

During the first half (H1) of the current FY 2021-22, the value addition percentage further reduced to 55.80%, as net RMG exports stood at $11.10 billion against exports worth $19.90 billion and raw material imports worth $8.79 billion.

While the value addition remained almost stationary between 60% and 64% from FY 2012-13 to FY 2018-19, the data also showed. And in FY 19, the value addition remained lower than the pre-pandemic 64.32 percent, data showed.

The central bank considered the main head value of the components (raw cotton, synthetic/viscose fibre, synthetic/mixed yarn, cotton yarn, textile fabrics, and accessories for garments) instead of only raw materials – brought through back to back L/Cs, according to its latest quarterly report.

The RMG industry leaders said Bangladesh is mainly dependent on imported raw materials, such as cotton, petro-chemicals and chemicals, despite being the second-largest exporter of RMG.

The value addition of the knitwear sub-sector is higher than the woven segment, as the former sources 80 percent of its required raw materials from the local market, while woven is largely dependent on imported fabrics, they noted.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Vice President Md Shahidullah Azim said to media that the prices of raw materials have significantly gone up during the last two years – mainly because of the pandemic.

“Though we have been getting a huge volume of work orders, prices of finished products have not increased in line with the high prices of raw materials. The sky-rocketing raw material prices have eaten up our value addition.”