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Costly accessories & declining profits worry RMG exporters

23
Sep '08
With increase in the international and domestic prices for accessories, profit margins of readymade garment (RMG) exporters of Bangladesh will continue to recede further.

The situation looks worse when seen from the perspective of garment manufacturers in the country who depend heavily on the global market for garment accessories.

In an exclusive interview with Fibre2fashion, Mr Safiullah Chowdhury, President of Bangladesh Corrugated Carton and Accessories Manufacturers' and Exporters Association (BCCAMEA) stated, “Presently, the international market is witnessing a rise of about 50 to 70 percent for products like sewing threads, back board, neck board and other plastic items like butterfly, color bone, color stay etc. Even the domestic market saw a price rise of 15-20 percent for raw material but since the end-users would not pay more for this increase in cost of accessories, manufacturers have to compromise on the profit margin by keeping the market price same as before.”

Mr Chowdhury further noted that increase in prices of accessories was largely due to hike in prices of petroleum products. As such, local companies are presently meeting 90-95 percent of the total domestic demand for accessories while the remaining is imported from abroad. Last year, BCCAMEA supplied garment accessories worth Tk7,500 crore to local manufacturers.

Bangladesh has mainly showed interest in producing basic garment items where the margins are nominal and the high cost of accesories is eating in to their meager profits.

Investments have been flowing in to meet the growing demand for accessories as the country has already turned into a global garment outsourcing hub. Left with no better alternatives, RMG manufacturers have taken to importing capital machinery, raw materials, dyes, chemicals and fabrics for producing goods for exports.

However, local exporters find it extremely difficult to compete with other RMG exporting nations equipped with their own raw material and capital machinery producing bases. In fiscal 2007-08, Bangladesh earned US $10.69 billion from RMG exports whereby expenditure on importing accessories, raw materials, capital machinery, dyes, chemicals, fabrics, yarn and cotton accounted for nearly a third of the export value.

Over four million bales of cotton worth $1 billion were imported from Uzbekistan last year while $145.8 million was spent on importing textile machinery in the last two and a half months alone.

Fibre2fashion News Desk - India


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