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Retail giants ask to cut price by 12pc
RMG exporters taste first bitter fallout from MFA phase-out
Jasim Uddin Khan
1/17/2005
Major international buyers have asked Bangladeshi garment exporters to reduce the prices of their products by an average 12 per cent to stay competitive in the world market in the aftermath of the Multi-Fibre Arrangement (MFA).
Bangladesh garment exporters have been asked by the retail giants like WalMart, GAP and JC Penney to match the price reductions by other competitors such as China and Pakistan, said sources at the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
The country's textile sector accounts for more than 75 per cent of Bangladesh's nearly US$7.0 billion annual export earnings. But it is now in the midst of a stiff competition in a quota-free regime following the expiry of the decades-old MFA on December 31, 2004.
"The traditional buyers want us to cut the garment prices citing availability of low cost products from china," BGMEA Senior Vice-President Alamgir Rahman told FE Sunday.
He said Bangladesh exporters will certainly reduce the prices of the garment products to match with the international levels. "The prices have already been lowered for some categories of textile products, and there will be further cut after analysing current international market situation," he said.
Rahman said as garment contracts are usually negotiated 3-4 months in advance, a more realistic appraisal of market behaviour will be known in another two weeks, when the first set of orders in the quota-free regime are finalised.
"Orders confirmed in September are now being executed. Fresh orders are expected to flow in next month when the international market situation will be clearer," Rahman added.
He said manufacturers will be forced to cut the prices by reducing profit margin and other expenditure.
Meanwhile, the local garment exporters are hoping for export surge in volume as several new buyers from the US and EU markets are starting to negotiate with the Bangladeshi manufacturers.
The exporters will be able to minimise the impact of the price reduction by raising the exports, said a commercial officer of country's leading garment exporter SQ Group.
Besides, there will be no more quota-related transaction costs and that is expected to partly offset the effect of export price cut, he said.
"Big buyers have already asked us to cut prices by an average 12 per cent. As the Chinese exporters operate on a narrow profit margin compared to most other major competitors, the pressure will be bigger on us." said Shakil Anwar, another exporter.
He, however, said it will be difficult for Bangladeshi exporters to get fresh orders without the reduction of the prices as the international buyers have now more options before them.
However, the One Stop Service Centre (OSSC) for garment sector opened Sunday at the Chittagong Port to the textile as a part of government's initiative to boost textile exports and cope the post MFA era.
Anwar said such service will help the garment exporters in the changing market situation. It can make the Bangladeshi products cost effective and more competitive in the world market.
The garment exporters urged the government to reduce banking service cost (5.0 to 6.0 per cent) which is much higher than other exporting nations.
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