The prolonged Russia-Ukraine war, energy crisis and increasing inflation are likely to slow down Bangladesh’s present export momentum to Germany in the coming days, said German Ambassador to Bangladesh Achim Troster.
He was speaking as a guest of honour at the seminar titled “National Budget 2022- Implications on Trade & Commerce,” organized by Bangladesh–German Chamber of Commerce and Industry (BGCCI) in the Sheraton Hotel at Banani in the city on Wednesday.
The inflation rate in Germany has hit a 50-year high of 8%, according to new figures from the Federal Statistical Office. Prices of goods and services rose once again.
“High inflation and increasing energy prices will reduce the purchasing power of the German consumers, and thereby prompt them to spend less in buying consumer goods like readymade garments and leather,” Achim Troster said.
Amid the Russia-Ukraine war, Bangladesh’s export earnings in May 2022 hit a nine-month low to $3.83 billion, 1.64% lower than the target of $3.89 billion set by the government, according to the Export Promotion Bureau data.
Moreover, it doesn’t look like there will be a price drop anytime soon. The Deutsche Bundesbank (German Federal Bank) expects inflation to average out at 7.1% this year, a significant increase on its 3.6% prediction in December 2021.
Federal Agriculture Minister Cem Ozdemir said that he expects food prices to continue to rise, and is planning to reduce VAT on certain items to help the consumers.
The price hikes are hitting consumers hard across the country. According to a recent Insa survey, one in six people in Germany is currently regularly skipping meals, and a further 17% are considering doing the same if prices continue to rise.
The current price rises are being fuelled by a variety of factors, including uncertainty in the market following the Russian invasion of Ukraine, as well as the interrupted supply chains and delivery bottlenecks in the aftermath of the coronavirus pandemic, said German Foreign Minister Annalena Baerbock.
“Bilateral trade between Germany and Bangladesh amounts to over $7 billion, with Germany importing over $6 billion worth of products, mostly textile. It is Bangladesh's second-largest export market after the US. In 2020, Germany imported $6.53 billion and exported only $588 million worth of goods. With the forecasted continued growth and prosperity in Bangladesh, we very much hope that the imports from Germany to Bangladesh will significantly rise in the next few years,” said Achim Troster.
Readymade garment exports to Germany stood at $5.95 billion in FY21 against $6.97 billion from the US market. Germany is the largest trading partner of Bangladesh in Europe and the second-largest globally.
The German diplomat, however, said that Bangladeshi exporters should be worried about the new German Supply Chain Act, which will come into force on January 1, 2023, primarily focuses on human rights issues, but also takes the environmental standards into consideration.
On June 11 last year, the German parliament passed the Supply Chain Due Diligence Act (LkSG) – also known as the Supply Chain Act.
Bangladesh must ensure human rights, rule of law, sound labour and environmental standards, as well as good governance to enjoy trade privileges in the German market in the days to come, said Achim Troster.
By 2026, Bangladesh will be a middle-income country and is likely to experience several challenges including high tariffs in the EU markets.
Bangladeshi exporters may also get trade privileges including GSP+ up to 2029 in Germany, provided Bangladeshi exporters ensure human rights, rule of law, sound labour and environment standards and good governance.
Achim Troster said: “To expand German-Bangladesh bilateral trade in future, new export sectors need to be harnessed keeping in mind the environment and labour-friendly production."
“The new act on corporate due diligence in supply chains will mandate German companies from 2023 to ensure that there are no violations of human rights in their business operations and in the supply chain. Therefore, Bangladesh’s exporters, supplying to German companies, now have huge responsibilities to prepare themselves, especially in the light of the adoption of this supply chain law,” Troster also said.
“Bangladesh needs to respond proactively and demonstrate a compliant business landscape that respects human rights, as well as the environment.
"To meet increased energy demand without harming the environment and climate, Germany supports Bangladesh's efforts to achieve a maximum coverage through renewable energies, sharing the experience from our transition to renewable energies,“ the German envoy also said.
Shinepukur Ceramics CEO and BGCCI Director M Humayun Kabir delivered the keynote presentation on the national budget, passed in the Parliament on Thursday.
Ambassador of Bangladesh to Germany Md Mosharraf Hossain Bhuiyan, while speaking as the guest of honour, said that he proposed to the stakeholders of Germany and Bangladesh to set up an international standard training institute in Bangladesh to groom Bangladeshi nationals.
Bhuiyan, who is also a former chairman of the National Board of Revenue (NBR), said that properly trained and groomed Bangladeshis can meet a certain portion of labour requirements in the German market.
He, however, said that Bangladeshis must be skilled in German and German culture before sending them to Germany.
Germany’s skilled worker shortage has worsened in the aftermath of the coronavirus pandemic with significant consequences for the economy, according to a report in the Frankfurter Allgemeine Zeitung.
The report cites two studies by the state development bank KfW and the German Economic Institute (IW). According to the KfW’s latest Skilled Workers Barometer, the proportion of companies in Germany that see themselves slowed down by a lack of skilled workers on their payroll has doubled within a year.
With 44% of businesses now saying they feel held back by a lack of workers, the figure is twice as high as in 2021 and the largest proportion recorded for this time of year since the survey began in 2011. There are hundreds of thousands of vacancies with no suitable candidates.
The IW, together with the Competence Centre for Skilled Workers (Kofa), reported recently that in March 2022, there were a record 558.000 vacancies for which there were no suitably qualified unemployed people in Germany. The shortage is also affecting the entire labour market now, rather than specific sectors.
Germany has been in the midst of a “hybrid war” as Russia’s conflict in Ukraine exacerbates Europe’s energy crisis and putting in place contingency plans as its gas supplies — traditionally sourced from Russia via Nord Stream 1 — are cut off by Moscow.
Europe has slipped into a worsening energy crisis as natural gas, oil and fossil fuel imports — for which the bloc has historically heavily relied on Russia — have become a political pawn in the standoff between the European Union and Moscow.
Germany is particularly dependent on Russian gas supplies via its Nord Stream 1 pipeline, importing 59.2 billion cubic meters in 2021. It had planned to double those supplies with a second gas pipeline, Nord Stream 2. But Germany suspended those plans shortly before Russia invaded Ukraine on February 24, 2022.
Senior Vice-Presidents of BGCCI Taran Patwary, Md Muin Uddin Mazumder, Managing Director of Audi Bangladesh, Treasurer of BGCCI Saad Nusrat Khan and CEO of BGCCI Shahed Akhter also spoke on the occasion.
