"Energy crisis forcing buyers to leave Bangladesh", 11 July 2024

Bangladesh has been failing to grab billions of US dollars in readymade garment orders since the last fiscal year due to the long-lasting gas supply shortage and electricity crisis.

In the last two years, most of the industries have not been getting enough gas supply with the required pressure and the situation worsened in May this year as the pressure in pipeline in many areas has gone down to almost zero.

Moreover, the country has been facing up to eight hours of daily load-shedding in many places, forcing the factories’ production capacity down.

Garment factory owners have claimed that their production capacity has gone down by up to 40 per cent. Factories are resorting to diesel-fired or LPG-based generators to fill the gap but this move is shooting up their production costs.

Due to the production drop, RMG exporters are...failing to manage workers' salaries and repay loan instalments on time. Many have already reduced business sizes while many are planning to do the same.

A Europe-based buying house’s country manager, seeking anonymity, told The Business Post, “We shifted work orders worth over $50 million to Sri Lanka and India in FY2023-24 as Bangladesh’s exporters have been failing to deliver goods on time.”

The energy crisis has had a significant negative impact on RMG and the country’s overall export growth...

RMG sector insiders say they do not see any hope in the coming days and have predicted that the country will fall into further financial headwinds and unemployment, at a time when the foreign exchange reserves are already in a worrying position and industries lost have more than 1,00,000 workers.

Bangladesh Knitwear Manufacturers and Exporters Association Executive President Mohammad Hatem said, “Due to the gas shortage, we are meeting our yarn demands through import.”...

Hatem said, “The data indicates that Bangladesh is losing foreign currency by importing yarn. On the other hand, we are losing orders. But if we import LNG, we can save more foreign currency and orders will increase as well.”...

According to the Rupantarita Prakritik Gas Company Limited (RPGCL), one of the two Floating Storage and Regasification Units (FSRU) of Summit LNG Terminal in Cox's Bazar’s Maheshkhali was extensively damaged when cyclone Remal hit the coast of Bangladesh in May...

In FY2022-23, Nipa Group exported over $110 million clothes. But in FY24, it has dropped down to below $90 million.

The company’s Managing Director Khosru Chowdhury told The Business Post, “I lost at least $30 million in business in the last fiscal year. Now I am planning to reduce my business.”

He explained, “Buyers are offering low prices due to the ongoing global economic crisis but our production costs have gone up due to the energy shortage, wages hike and inflation. All of which led us to fail to meet the shipment deadline.”

Many RMG makers have said that due to the gas and energy shortage, most of the factories failed to receive enough orders even though buyers were interested in placing them here.

In the last six months, Bangladesh has lost around $5-7 billion in RMG export orders only because of the ongoing energy crisis.

Sparrow Group Managing Director Shovon Islam said, “Most of the orders have gone to India, Sri Lanka and Vietnam...