Export sector in Bangladesh is vulnerable since exporters are exporting consumer goods at buyer’s dictation
With the involvement of export oriented readymade garment industry, a merchandiser is facilitating export valuing around $15 million in a year.
In the first decade of the current century, he started his career in the ready-made garment (RMG) sector.
He was astonished to see the price tag showing the retail price of a shirt which was higher compared to taka equivalent to the monthly salary of a worker of the industry.
But presently he is not astonished at the price tag since this is not an export price.
The price at which Bangladesh is exporting is not even fair since the price of such products sold in Dhaka is higher.
Does it mean exporters are exporting at under-invoicing?
Frequently such blame is thrown to exporters by different quarters.
These are comments by a merchandiser working in the RMG industry.
Despite non-availability of duty free access to the USA, Bangladesh’s RMG is in good strength in this market.
The age of this industry in Bangladesh is around 40 years but it is not yet well off stage to graduate to mid value product from low value/basic product, price of which is below the level of fair value.
The strength of this sector is still price, product is sold at buyer’s dictated prices.
It is the reality for countries graduating from LDC status through export-led growth models like East Asian emerging economies.
RMG is a manufacturing industry having direct backward linkage industries. It supports service sectors like banking and transportation which are, to a great extent, dependent on this sector.
It is reported that around 40 million people are directly employed in this sector.
It is said that around 80% of proceeds from RMG export is used to offload liability in foreign currency for imports and local procurements by LCs.
The rest is converted into taka for different payments including staff salary and utilities.
Entrepreneurs take risks in investment for profit motive.
So, investment and their excessive involvement in day to day activities deserve handsome profit.
The export price currently may fetch profit not more than desired level. What is earned does not directly go to the pockets of entrepreneurs since repayment of bank loans, in addition to tax payment, is settled out of profit.
As stated earlier around 80% of export proceeds are used for settlement of foreign currency liability at home and abroad.
A big chunk of the remainder is used by service providers: banks (bank charges, LC commission and so on), transport operators, shipping agents, etc.
The service providers are depending on the RMG sector but they are earning more than what this sector earns.
Export sector in Bangladesh is vulnerable since exporters are exporting consumer goods at buyer’s dictation.
Exporting goods at under value can only create huge employment without white collar jobs with standard benefits.
As such, the sector suffers inefficient management at mid levels which are the backbone of the industries.
All talk about the sector but educated people are not found working herein.
Financial sectors are lucrative for job seekers like MBAs due to high pay.
With regards to money, the financial industry including their regulator has power to create money by mouse click (out of thin air).
Banking industry to a great extent depends on the export sector including RMG industries from trade financing to non-funded facilities.
It is reported that employees of financial sectors enjoy low cost loans such as car loans, home loans, etc.
Same handsome facilities are available to other white color sectors also.
It is known that business loans and consumer/individual loans are not the same. Money dies in case of business loans but individual/employee loans by banks may not die even at their service-end.
Fractional reserve banking system allows banks to create money by accounting entries.
Such autonomous benefits are not available to the export sector since the export industry cannot create money out of thin air.
Whether low priced loans to employees fuel inflation or not is a question.
Policy support in the form of exchange rate benefit is needed to support the sector.Share this post: