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Quarterly Review on Readymade Garments (RMG)1:April-June FY'21Bangladesh BankResearch DepartmentExternal Economics Division1Comments on any aspects of the report are highly welcomed and can be sent to Shampa Chakraborty,Joint Director,Research Department,Samim Uddin, Deputy Director, Research Department and Md.Jahedul Islam, Assistant Director, Research Department E-mail: ,and jahedul.islam@bb.org.bd.1

Summary In April-June FY'21, total export earnings from Readymade Garments (RMG) stoodat USD 7968.81 million (Woven USD 3662.96 million and Knitwear USD 4305.85million) which was 0.33 percent higher than that of the previous quarter and 107.23percent higher than that of the corresponding quarter of last year respectively aidedby various continued policy initiatives by government and Bangladesh bank. Quarterly target of RMG export in April-June FY'21was USD 8834.37 million. Totalexport earnings from RMG was 9.80 percent lower than that of the quarterly target. In this quarter, RMG contributed 81.15 percent to total export earnings and 84.51percent to total manufacturing product exports. During April-June quarter of FY'21, the main destinations of Bangladesh’s RMGwere the USA, Germany, UK, Spain, France, Italy, Canada, Netherlands andBelgium. Total RMG export earnings from these countries stood at USD 5834.09million or 73.21 percent of the total RMG exports. The net export of RMG (as calculated by subtracting import value of RMG rawmaterials from RMG export value) was USD 4172.84 million in this quarter.2

Quarterly Review on Readymade Garments (RMG):April-June FY'21External sector’s stability mainly sustained by exports’ growth which largely depends onReadymade Garments (RMG) sector in Bangladesh. Despite continuous lockdown due toCOVID-19, the export earnings from RMG in Bangladesh were still in positive trend (0.33percent) in the April-June quarter of FY21. Notwithstanding, the yearly growth of RMGexport earnings (12.55 percent) exhibit a new hope in export industry in Bangladesh. Thisrecovery mainly aided by different continued prudential and proactive initiatives such asstimulus packages, Export Development Fund, low cost refinance schemes etc taken bygovernment and Bangladesh bank.The contribution of RMG to GDP stood at 8.86 percent in FY21. At the same time,Bangladesh's total export earnings from RMG stood at USD 31456.73 million which was12.55 percent higher than that of the previous fiscal year1 (Chart-1).The contributions of RMG and non-RMG products to total export earnings in FY21 wereshown in Chart-2.Chart-1:Trend & Growth of RMG %1510Growth FY185000FY17-10FY1610000FY15Amount (Million USD)350002500037.40%204000030000Chart-2: Product wise Export EarningsFY21WovenValue of Total ExportValue of RMG ExportGrowth of Total ExportGrowth of RMG ExportAgriculturalProducts2.65%Jute Goods2.64%Leather andLeatherProduct2.43%Frozen Food1.12%Source: Export Promotion Bureau (EPB)Source: Export Promotion Bureau (EPB)1Source :Export Promotion Bureau (EPB)3Knitwear43.76%

Quarterly Performance of RMG: April-June FY'21During the fourth quarter of FY21, total export earnings from RMG increased by 0.33percent compared to that of the previous quarter although this quarter was going through thehurdle of continuous lockdown started from April 2021. During April-June of FY21, totalexport earnings from RMG were 9.80 percent lower than the quarterly target. Product-wiseexport earnings showed that the contribution of woven garments and knitwear to total exportearnings stood at 37.30 percent and 43.85 percent respectively during the quarter underreport (Table-1). In this quarter, the contributions of non-RMG products to total exportsearnings were as follows: jute goods (1.88 percent), leather and leather products (2.62percent), agricultural products (2.87 percent) and other products (11.49 percent) (Chart 3).Chart-3: Product wise Export EarningsApr-Jun, 7%Jute Goods1.88%Leather and LeatherProduct2.62%Knitwear43.85%Source: Export Promotion Bureau (EPB)KnitwearExport earnings from knitwear stood at USD 4305.85 million during the fourth quarter ofFY'21, which were 4.31 percent higher than that of the previous quarter and 120.42 percenthigher than that of the same quarter of the preceding year. Moreover, knitwear export was1.40 percent lower than the export target for the quarter under report (Table-1). Quarterlyexport earnings from knitwear are shown in Chart-4.4

Woven GarmentsExport earnings from woven garments stood at USD 3662.96 million during the fourthquarter of FY'21, which were 3.97 percent lower than the previous quarter’s earnings butsignificantly higher (93.60 percent) than the earnings of the same quarter of the precedingyear. Moreover, woven garments export was 18.01 percent lower than the export target ofthat quarter (Table-1). Quarterly export earnings from woven garments are depicted in Chart4.Chart-4: Export Trend of Knitwear and Shaded area denotes the export earnings during Covid-19Table-1: Export of Readymade Garments(From FY'11 to Apr-Jun, FY'21)Woven ual1FY11FY12FY13FY14FY15FY 16FY17FY18FY'19Jul-Sep FY20Oct-Dec FY20Jan-Mar FY20Apr-Jun FY20FY'20Jul-Sep FY21Oct-Dec FY21Jan-Mar FY21Apr-Jun 62.514128.014305.8516960.03Source: Export Promotion Bureau, Bangladesh5(Million USD)Percentage Share in Total ExportTotalRMG(Woven Knitwear)WovenGarmentsKnitwearTotal7 (4 4727949.198126.387419.187942.367968.8131456.738 (4 2940.7244.7840.2541.7037.0135.9539.3037.3037.409 (6 2241.8038.7641.5641.3045.1043.5142.5443.8543.7610 (8 5282.5283.5481.8183.0082.1179.4681.8481.1581.16

Import of Raw Materials and Net ExportsChart 5: Net Export from RMG ExportDuring April-June of FY'21, the import value7500of raw materials (raw cotton, synthetic/viscose4500Apr-Jun FY21Jan-Mar FY21Jul-Sep FY21Oct-Dec FY21Apr-Jun FY20Jan-Mar FY20Jul-Sep FY20this sector stood at USD 4172.84 million,Oct-Dec FY20RMG sector. Therefore, the net export fromApr-Jun FY190Jan-Mar FY1947.63 percent of total export earnings fromOct-Dec FY191500Jul-Sep FY19stood at USD 3795.97 million, which wasApr-Jun FY183000Jan-Mar FY18textile fabrics and accessories for garments)MIllion USDfibre, synthetic/mixed yarn, cotton yarn, and6000which was 8.80 percent lower than that of theprevious quarter but 168.48 percent higher than that of the same quarter of the precedingyear. Import of raw materials and net export based on L/C statement (FEOD) from FY'18(January-March) to FY'21 (April-June) are shown in chart-5 and table 2.Table-2: Trends of net exports from RMG sector in context of raw materials import(Million USD)Fiscal YearRMGA/ ExportRaw Materials Import B/Net export in RMG3 1-212Jan-Mar FY188061.653172.354889.30Apr-Jun FY187780.323137.074643.25Jul-Sep 5852.56Jan-Mar FY198866.513088.165778.35Apr-Jun FY198181.852808.645373.21Jul-Sep FY208057.563349.174708.39Oct-Dec FY207966.463201.954764.51Jan-Mar FY208079.703427.934651.77Apr-Jun FY203845.472290.851554.62Jul-Sep FY218126.382845.835280.55Oct-Dec FY217419.182847.814571.37Jan-Mar FY217942.363366.554575.81Apr-Jun FY217968.813795.974172.84A/Export Promotion Bureau.B/Amount of L/C Settlement FEOD, Bangladesh Bank.Note: From July- September 2018, We have considered the main head value of the components (raw cotton,synthetic/viscose fibre, synthetic/mixed yarn, cotton yarn and textile fabrics and accessories for garments) instead ofonly back to back L/Cs Raw materials.Source: Own calculation of Research Department.Destination of RMGThe main destinations of Bangladesh’s RMG are the USA, Germany, UK, Spain, France,Italy, Canada, Netherlands and Belgium (Chart-6). During April-June of FY'21, total exportearnings from these countries stood at USD 6534.26 million; of which 89.28 percent or USD6

5834.09 million was earned from the RMG (woven 48.05 percent and knitwear 51.95percent) export (Table-3). During the quarter under report, RMG export earnings from thesenine countries increased by 4.19 percent as compared to that of the previous quarter and thiswas 91.43 percent higher than that of the corresponding quarter of the preceding fiscal year.Chart -6: Country wise Quarterly RMG BeljiumNetherlandsCanada*Shaded area denotes the export earnings during COVID-19Table-3: Country wise RMG Export in April-June, FY21(Million 138.28144.96Sub-Total6534.262803.543030.55Others 05.85Source: Export Promotion Bureau, BangladeshTotalRMGOtherExportsShare ofRMG in TotalExport (%)Others Sharein TotalExport (%)5 (3 4)6 (2-5)7 (5 2)8 (6 35.0318.85Recent Measures Taken by the Government, Bangladesh Bank and Other StakeholdersThe government has taken a number of measures to increase RMG production and boostedup RMG export. Following funds are important:Financial Stimulus Fund: A financial stimulus fund worth of BDT 50.00 billion wasformed from the budgetary allotment of the Government to combat the negative impact ofCovid-19 on exports for paying a maximum of three months' salaries and allowances to the7

workers-staffs of the export oriented industries. Entrepreneurs of such industries can takeloans from this fund through banks at two percent service charge. (BRPD Circular No 07,Date 02 April, 2020). Borrowers enjoyed additional 180 days as grace period for repaymentinstallment facility against loans from March 2021. After the end of grace period (applicabletill 30 September 2021), the remaining portion of loan must be paid with 18 EMI (BRPDCircular No 15, Date 24 Feb, 2021).Pre-shipment Credit: To continue the export activities of export oriented RMG industriesamid the Corona Virus pandemic, Bangladesh Bank has formed a refinance fund worth ofBDT 50.00 billion. RMG entrepreneurs can take loans from this fund through banks at 6percent rate of interest (BRPD Circular No 9, Date 13 April, 2020). Recently, for thebetterment of economic growth in export sector, BB reduced the interest rate on thisrefinance fund from 6 percent to 5 percent at receiver level and 3 percent to 2 percent port Development Fund (EDF): Loan limit facility from EDF has been enhanced fromthe existing limit of USD 25 million to USD 30 million against foreign currency financing ofinput procurement for member mills of BGMEA and BTMA until 30 June, 2021 (FECircular No. 05, Date 27 January, 2021). Moreover, the member mills of BKMEA canborrow a maximum limit of USD 20 million as single borrower (FE Circular No. 09, Date 25February, 2020). BB reduced the interest rate on EDF loans from 2.00 percent to 1.75percent per annum at borrower level until March 31, 2021. (FE Circular No-47, Date 28October, 2020).ConclusionTotal export earnings from RMG increased both in quarterly and yearly compared to that ofthe previous quarter and that of the previous year respectively, however it is still unevenbecause Bangladesh has already lost its position as the 2nd top RMG exporters in the worldto Vietnam. The production of synthetic fibers based products instead of cotton based,production of costly diversified products instead of basic and low price products, invitationthe foreign investors to invest in Bangladesh, fast broad-based economic recovery from theimpact of COVID-19 pandemic etc may help to regain its position for sustainable RMGexport growth in near-term.8

The contribution of RMG to GDP stood at 8.86 percent in FY21. At the same time, Bangladesh's total export earnings from RMG stood at USD 31456.73 million which was 12.55 percent higher than that of the previous fiscal year1 (Chart-1). The contributions of RMG and non-RMG products to total export earnings in FY21 were shown in Chart-2.