Knitwear manufacturers want longer payback period for incentive loans
The BKMEA president also demanded a maximum loan of $30 million from the Export Development Fund (EDF) for the knitwear factories
Mahmud Hossain Opu/Dhaka Tribune
Tribune Report
Publish : 09 Jan 2022, 08:35 PMUpdate : 09 Jan 2022, 08:35 PM
Knitwear manufacturers of the country have sought 42 months instead of the initially fixed 18-month payback period for the incentive loans disbursed to recover from the setbacks from Covid-19.
The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) sought the demand in a letter to the Bangladesh Bank recently.
The letter, signed by BKMEA President AKM Selim Osman to central bank Governor Fazle Kabir, said that the knitwear manufacturers were facing a crisis in shipping goods because of the pandemic.
The letter also said that the exporters are getting delayed payments from the international buyers.
“The factories started getting adequate procurement orders from the beginning of the 2021-22 fiscal year, but the entrepreneurs are facing serious problems in procuring cotton, yarn, cloth, chemicals and other raw materials for making garments,” the letter reads.
Osman also said in the letter that the cost of manufacturing garments has multiplied due to the global container crisis, skyrocketing freight fares, abnormal hikes in the price of yarn, and repeated hikes in the price of raw materials due to the power shortages in China, among other issues.
“In the first five months of FY22, knitwear exports have increased by 25.91%, but increased production costs have played a role in this growth,” he added.
The BKMEA president also wrote that the confidence and reliance of the foreign buyers have increased as the entrepreneurs of the apparel sector of the country continued to export garments at losses despite the crisis generated by the pandemic.
“The purchase orders have increased but due to the global vessel and container crisis, it has been tough to ship the export items on time,” he added.
He also said that some buyers are still cancelling or suspending export orders citing various problems and, in some cases, they are imposing various conditions including discounts.
Considering these above cases, the knitwear manufacturers are seeking more time to repay the loans from the stimulus packages.
The BKMEA president also demanded a maximum loan of $30 million from the Export Development Fund (EDF) for the knitwear factories.
He also claimed that they have to spend twice as much on raw materials and in many cases, even though goods are exported, there is a liquidity crisis as buyers do not pay on time.
However, the manufacturers of the apparel sector can borrow up to a maximum of $20 million from the EDF currently.
He also wanted time till December 31 this year to repay the loan from EDF to Bangladesh Bank.
He also urged the central bank to allow non-bonded garment factories to procure raw materials through back-to-back letters of credit and the credit limit set by banks should be extended by 75% as the prices of raw materials have increased abnormally in the domestic and international markets.
The letter said that the majority of local manufacturers ran their businesses incurring losses as international retailers and brands paid less and delayed payment during the peak periods of the pandemic.
Meanwhile, during the first wave of the Covid-19, the government announced an incentive fund for the export-oriented industries to pay their workers.
The manufacturers of more than 1,500 export-oriented apparel industries took the loan from that fund and paid four months wages to their workers.
The manufacturers urged the government for more time to pay back their loans and the government approved it after which, they started repaying those loans.
However, the leaders of BGMEA and BKMEA are again asking for more time to repay the stimulus loans.
Knitwear manufacturers want longer payback period for incentive loans
The BKMEA president also demanded a maximum loan of $30 million from the Export Development Fund (EDF) for the knitwear factories
Knitwear manufacturers of the country have sought 42 months instead of the initially fixed 18-month payback period for the incentive loans disbursed to recover from the setbacks from Covid-19.
The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) sought the demand in a letter to the Bangladesh Bank recently.
The letter, signed by BKMEA President AKM Selim Osman to central bank Governor Fazle Kabir, said that the knitwear manufacturers were facing a crisis in shipping goods because of the pandemic.
The letter also said that the exporters are getting delayed payments from the international buyers.
“The factories started getting adequate procurement orders from the beginning of the 2021-22 fiscal year, but the entrepreneurs are facing serious problems in procuring cotton, yarn, cloth, chemicals and other raw materials for making garments,” the letter reads.
Osman also said in the letter that the cost of manufacturing garments has multiplied due to the global container crisis, skyrocketing freight fares, abnormal hikes in the price of yarn, and repeated hikes in the price of raw materials due to the power shortages in China, among other issues.
“In the first five months of FY22, knitwear exports have increased by 25.91%, but increased production costs have played a role in this growth,” he added.
The BKMEA president also wrote that the confidence and reliance of the foreign buyers have increased as the entrepreneurs of the apparel sector of the country continued to export garments at losses despite the crisis generated by the pandemic.
“The purchase orders have increased but due to the global vessel and container crisis, it has been tough to ship the export items on time,” he added.
He also said that some buyers are still cancelling or suspending export orders citing various problems and, in some cases, they are imposing various conditions including discounts.
Considering these above cases, the knitwear manufacturers are seeking more time to repay the loans from the stimulus packages.
The BKMEA president also demanded a maximum loan of $30 million from the Export Development Fund (EDF) for the knitwear factories.
He also claimed that they have to spend twice as much on raw materials and in many cases, even though goods are exported, there is a liquidity crisis as buyers do not pay on time.
However, the manufacturers of the apparel sector can borrow up to a maximum of $20 million from the EDF currently.
He also wanted time till December 31 this year to repay the loan from EDF to Bangladesh Bank.
He also urged the central bank to allow non-bonded garment factories to procure raw materials through back-to-back letters of credit and the credit limit set by banks should be extended by 75% as the prices of raw materials have increased abnormally in the domestic and international markets.
The letter said that the majority of local manufacturers ran their businesses incurring losses as international retailers and brands paid less and delayed payment during the peak periods of the pandemic.
Meanwhile, during the first wave of the Covid-19, the government announced an incentive fund for the export-oriented industries to pay their workers.
The manufacturers of more than 1,500 export-oriented apparel industries took the loan from that fund and paid four months wages to their workers.
The manufacturers urged the government for more time to pay back their loans and the government approved it after which, they started repaying those loans.
However, the leaders of BGMEA and BKMEA are again asking for more time to repay the stimulus loans.