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Falling prices pare down apparel profits

Refayet Ullah Mirdha
Garment exports rose to a record high in the immediate-past fiscal year, but the persistent low price offers from foreign buyers are paring down profits of local entrepreneurs because of global recession.
Shipments of knitted and woven items jumped 15.5 percent to hit a record $12.34 billion in the fiscal year to June 30, the Export Promotion Bureau said.
Manufacturers said the volume of export orders has marked a rise despite an 18-19 percent decline in apparel purchases globally.
Exporters are offered prices 10 percent lower than they were offered before the recession.
Garment owners say they now run their factories for the time being, especially during the financial downturn, just to maintain the contacts with buyers.
Besides the brunt of global crisis,
they bear a 20 percent higher cost of doing business. Erratic gas and power supply, high freight charges--local and international--yarn price hike, implementation of workers' minimum wages, higher cost of transportation and weak infrastructures have raised the cost of business.
Some apparel makers also blame the poor negotiation skills for lagging in realising a better price for their products from international buyers.
Ismail Hossain, managing director of Sharmin Group, said these buyers are now offering a price far below the minimum.
"The price declining trend started pinching severely since February, which reached its worst level in recent times,” Hossain pointed out.
Many manufacturers have already reduced the production capacity as they can hardly run their business with such a throwaway price.
When asked, AK Azad, managing director of Ha-Meem Group, said, "We
have no profit now, we are running our machinery for keeping business alive.”
"We are waiting for the next season when the price situation might improve a little on the recession recoverysigns, "he said.
Safina Rahman, director of Lakhsma Sweater Limited, has suggested the government come forward to give stimulus.
According to the latest data of the Export Promotion Bureau (EPB), the price index for manufacturing goods declined by 1.86 percent during July-June period of the immediate past 2008-09 fiscal year.
The data shows $5,918 billion exports of woven and $6,429 billion knitwear in last fiscal year.
Meanwhile, exports of Bangladesh made RMG items to the US market marked a 12 percent rise in the first three months of this year, according to the United States Trade Representatives.
reefat@thedailystar.net