The price cut of readymade garment products by global buyers and price hike of raw materials have hit the business of garment accessories hard.
According to Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA), prices of raw materials for garment accessories have increased by 15% to 20% while the selling price of finished products has declined by about 10%.
On the other hand, RMG-makers claimed that they have cut the prices of accessories as the global buyers have reduced prices of clothing products.
The accessories and packaging sector is considered a strong backward linkage industry for the country’s apparel industry – the lifeline of export earnings.
The sector saves foreign currency by providing accessories alongside helping meet the lead time.
“The garment accessories manufacturers are struggling to survive as the prices of finished goods continue to slide while the raw materials’ prices are soaring gradually,” Moazzem Hossain Moti, second vice-president of BGAPMEA, told the Dhaka Tribune.
“Given the current prices of raw materials, we cannot add value as Bangladesh is 100% dependent on import.”
The global buyers cut prices of clothing products, and so our buyers – local garment manufacturers – cut prices of garment accessories, added Moazzem, also managing director of Classic Carton Industries Limited.
“We are bearing the brunt of it and for survival we are waiting for the government attention with policy support including cash incentives and low-cost financing for compliance and remediation.”
As per the rough estimation of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), in January-July period, prices of apparel products have seen on an average 6% decline while their production cost increased by 17% to 18%.
“Vibrancy of garment accessories business depends on the business of garment industry. If the garment manufacturers get better price, they can offer the same for accessories,” BGMEA Vice-President Mahmud Hasan Khan Babu told the Dhaka Tribune.
Since the global retailers are cutting prices of apparel products, they balance the production cost by reducing prices of garment accessories, added Mahmud.
According to a study titled “Prices and Development in the Global Apparel Industry: Bangladesh in Comparative Perspective,” prices of men’s and boys’ cotton trousers exported to the US market declined by 40.89% in the past 14 years.
The study was conducted by Mark Anner, associate professor at the Penn State University, in 2015.
But Bangladesh has an opportunity to grow in the global markets as exporters of accessories products. The countries such as Myanmar and African countries can be the new destinations for Bangladesh.
In garbing the global market share in export of accessories products, the manufacturers need to ensure quality.
Talking to the present status of garment accessories industry, the sector people claimed that the increase in raw material prices added salt to the wound of manufacturers.
According to the BGAPMEA, it cost $625 to buy a ton of paper for making carton, which rose to $720, but the prices of per square metre carton came down to $0.70 from $0.75.
A dozen of nylon zipper was sold at $0.65, which came down to $0.60 at present.
“The price of a paper carton, which was 50 cents, has fallen by 5 cents. This is because of price fall of RMG finished products,” Classic Group Chairman Md Shahidullah Azim told the Dhaka Tribune.
Under the current status, the role of clothing sector trade body leader is most important. At any cost, they should take steps to stop price fall of clothing products, said Moazzem Hossain Moti.
They also have to think about how to reduce the production cost as well as keep prices of raw materials at a reasonable level, he added.
BGMEA and BKMEA leaders need to hold talks with the buyer representatives about the pricing in order to reach a win-win situation, according to the sector leaders.
The sluggish growth in RMG export and inflow of slower work order cast a shadow on the industry. As a result, the accessory makers are not getting enough work orders.
In the last fiscal year, Bangladesh’s export earnings from the apparel industry have seen only a 0.20% rise to $28.15 billion, which is the lowest on record in the last one and a half decades.
There are 1,600 members of BGAPMEA, but about 900 are in full-fledged business, while others are in trouble.
“Coming out of the crucial period, Bangladeshi manufacturers have to go for higher-end products to get better price and enhance productivity,” said ABM Mirza Azizul Islam, former adviser to a caretaker government.
On the other hand, the government should take steps in exploring new markets and diversify products, suggested the economist.
Since most manufacturer are considered small and medium entrepreneurs, the government should have special package for the sector.
Banks are unwilling to pay loans to the small industry people, but they need financial support.
In ensuring low-cost fund, the government should direct banks and financial institutes to provide them with funds, Mirza Azizul said.
In the last fiscal year, deemed export earnings of garment accessories and packaging stood at $6.7 billion, which was $6.12 billion in the fiscal year 2015-16.
Currently, there are 1,600 manufacturers in the country, which employ over 400,000 people. Local manufacturers can meet about 95% demands locally. Their products include labels, zippers, tags, tapes, threads, ribbons, buttons, rivets, laces, hooks, transfer films, paper, and ink.
RMG accessory products used to be exported as deemed items, but in recent years, several new global retailers have started sourcing accessory products directly from Bangladesh.
The destination countries include the Netherlands, South Africa, Pakistan, India, China, Ethiopia, Indonesia, Italy, Sri Lanka, Turkmenistan, Germany and Austria.
According to the association, some big buyers started contacting manufacturers to source accessories from neighbouring countries such as Myanmar, India and Vietnam – sources of their clothing products.