The garment sector in Bangladesh is likely to experience sluggish growth for next few years as there has been a fall in fresh investments in the sector, coupled with a dip in export orders since September.
There has been a decline in the flow of new investments in Bangladesh's garment sector owing to prolonged power and gas crisis and financial crisis in the United States and the Europe.
Compared to 176 applications received in 2010, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) this year received just 146 applications for setting up new garment factories in the country. In 2009, BGMEA received 184 applications.
There has also been a fall in the number of new membership applications approved by the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), which declined from 117 two years ago to 89 this year.
The decline in fresh investments is indicative of problems being faced by the garment industry, which contributes around 80 percent to the country's US$ 23 billion exports.
Meanwhile, import orders for new apparel machineries plummeted by around 25 percent during the initial four months of the current fiscal, which is reflective of the manufacturers apathy and their low risk taking capacity.
Letters of Credits (LCs) worth US$ 104.10 million were opened in July-October this year to facilitate importation of new apparel machinery, as against LCs worth US$ 137.92 million opened during the corresponding period last year.
These declining figures are not good signs and point towards a gloomy future ahead for Bangladeshi garment industry.
Further, a slump has been noticed in garment export orders since September this year owing to debt crisis in Europe, the key importer of Bangladeshi apparels, and the US economy marked by growth below expected levels.
The EU and the US jointly account for almost 90 percent of Bangladesh's total garment exports, with the EU importing six of 10 garments exported by the country each year.
The economic uncertainty in some of the key European economies has led several buyers to either cancel or postpone their orders. In some cases, they have requested deferred payment option.
In fact, retailers from several EU nations like Italy, Greece, Spain and Portugal, which have been badly hit by the debt crisis, have slashed hundreds of millions worth of orders despite busy Christmas season.
Fibre2fashion News Desk - India
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