July 20, 2020: Sourcing from Bangladesh began to recover last month following an influx of orders from the European Union and United States.
According to a survey by supply chain compliance solutions provider QIMA, inspection and audit demands for the country increased 49 percent year-on-year in June.
South Asia could also see more American business as almost 95 percent of US-based respondents of the survey said they had plans to change suppliers, with 30 percent opting for Bangladesh and India.
Meanwhile things are looking up for the apparel industry as sales of clothing and clothing accessory stores in the US have increased by 105.1 percent month-over-month in June, shows data of the National Retail Federation (NRF). But the Bangladeshi apparel industry insiders are not optimistic yet. “The US retail market is not coming back to normal; 105 percent growth is unusual as shops were closed for three months,” said Shafiul Islam Mohiuddin, former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and a lawmaker.
“We have to observe the situation, as Covid-19 is still out of control in their country, “added Mohiuddin, who is also an exporter to the US market. SM Khaled, managing director of Snowtex Outerwear Ltd – a leading jacket exporter to the US market – also echoed Mohiuddin’s view adding that thiswas not “real growth.”
PPE keeps apparel sector propped up
Throughout the first and especially the second quarter of 2020, personal protective equipment (PPE) production has helped mitigate some of the pandemic’s impact on the textile and apparel sector. By now, a number of countries, including China, Vietnam, Bangladesh, Cambodia and Myanmar, have repurposed a share of their apparel manufacturing capacities for PPE production, reports Just Style. Between January and May 2020, QIMA inspection volumes on PPE items increased 30-fold, with over 1.2 billion face masks inspected in the second quarter.
Entrepreneurs in Bangladesh said making PPE is a seasonal business, but it requires huge investments. Besides, design, development and obtaining the required certification for PPE is a lengthy process. That is why large-scale export of PPE gowns has not started in the country yet, although a lot of face masks are being exported. “Producing PPE is a new business for Bangladesh, but some of our entrepreneurs are already exporting,” said Shafiul Islam Mohiuddin. He said the government should monitor the quality of these products since they are for export to protect the “image of the country.”
Snowtex Managing Director Khaled said they have received orders for 2.6 million masks from French buyers, 2 million of which were shipped between May and June. The remaining amount will be shipped within the next few weeks, headded. “We also got orders to supply 1 lakh PPE gowns to the H&M Bangladesh office, which they will donate as part of their CSR activity. JICA has also asked us to supply 3,000 PPE gowns for its Bangladesh office,” he added. However, all these PPE gowns are intended just for the Bangladeshi market.
“Besides, buyers asking for millions of pieces of PPE gowns, which require FDA certification. We will consider that for future as now we are in the peakjacket production season,” Khaled added. He also said the Canadian ambassador to Bangladesh has shown interest in importing PPE gowns from Snowtex Outerwear.
Asif Ashraf, managing director of Urmi Group, saidthey have already exported about 1 million masks to France and some to the US. “PPE testing and certification process is costly, but hopefully we will get a certification from the FDA [Food and Drug Administration] soon,” he added. Asif said they are in talks with some US and EU buyers to supply masks and the company is also developing a PPE gown for the export market. ‘Absence of proper valuation discourages large companies to get listed with stock market’ Foreign investment institutions in their valuation statements mentioned that they found only seven to eight companies out of 321 listed with the stock exchanges suitable for long term investment.
There are many good companies in Bangladesh that are doing businesses with good reputation. However, these companies are not willing to get listed with the stock exchanges due to a lack of proper valuation. Speakers said this in a discussion programme styled “Capital Market and Covid-19: Charting Impact and Path to Recovery” the Chittagong Stock Exchange (CSE) on Saturday. Professor Shibli Rubayat Ul Islam, chairman of the Bangladesh Securities and Exchange Commission attended the discussion as the chief guest, while Asif Ibrahim, chairman of the CSE, presided over it.
Mamun Ur Rashid, managing director of the CSE, presented the keynote paper at the event. Nihad Kabir, president of Metropolitan Chamber of Commerce and Industry (MCCI) referred to a lack of proper valuation in pricing the shares in the stock market saying, “We observe that poor and loosing companies’ share prices increase gradually, but the share prices of good companies having strong fundamentals do not see such moves.” Foreign investment institutions in their valuation statements mentioned that they found only seven to eight companies out of 321 listed with our stock exchanges suitable for long term investment, she mentioned, adding, “This is a great shame for us.” We should work jointly for listing good companies into the stock market.
In this regard we can form a joint committee, she added. Azam J Chowdhury, president of Bangladesh Association of Publicly Listed Companies, and CSE Chairman Asif Ibrahim also endorsed this opinion. They said listing of good companies will boost investors’ confidence. Other speakers also stressed the need for necessary measures to make sure that companies with poor fundamentals cannot get listed with the stock market. They also said that the stock exchanges have to form new investment instruments like bond, derivatives, SME and green field companies immediately. Commenting on this issue, BSEC Chairman Shibli Rubayat Ul Islam said, “We are working to list good companies.
Walton is in the process to get listed and Robi also is in the pipeline. Stock market investors will be benefited once these companies get listed with the market.” “To ease the public issue process we are going to introduce an online platform for submitting documents,” he added. Some speakers at the seminar claimed that regulatory interference on stock exchange trading is very harmful for long-term investment. The BSEC needs to stop this practice, they added. Nihad Kabir said foreign investors have criticised the practice of regulatory interference. Selim R Hossain said controlling the index is not the job of the regulator. “Now the floor price mechanism is going on, which should be removed. Otherwise, institutional investors are not willing to invest in floor price,” added. The BSEC chairman, however, said the regulator has never intervened in share transactions. “We just monitor daily trading. Action is taken only when there are any irregularities.”
Liquidity crisis
Several speakers claimed that the stock market faces low transactions due to the liquidity crisis. They said mutual funds must be increased in the market. Now, mutual funds’ contribution is less than 1 percent of the market capital. It should be above 10 percent, said Md Abul Hossain, managing director of Investment Corporation of Bangladesh.
On the other hand, the CSE sought to turn on script knitting to enhance the institutional ability. Selim R Hossain said stocks need to run by institutional investors. But, in our country they are inactive in the market, he added. Nihad Kabir said, “Our stock market depends on retail and individual investors. But most of the country’s stock exchange depends on institutional investors.” In this regard, BSEC chairman Shibli Rubayat Ul Islam said 13 banks are ready to invest from the Bangladesh Bank stimulus package. Other banks also should come forward. “But there are some conditions on using a stimulus package. The BSEC has sought relaxation of the conditions.” He further said that they are considering turning on script knitting urgently.
Enhancement IT support
Stock exchanges were closed for more than two months due to the coronavirus outbreak. But in most countries of the world stock exchanges did not close during the pandemic period. Selim R Hossain said the stock market should not close in any situation, because it is very important for the country’s economy. Kazi Sanaul Haque, managing director of Dhaka Stock Exchange said, “We are working to upgrade our digital platform for share trading. Now we are working for opening beneficiary owners accounts through a digital platform.” The BSEC chairman said they are going to appoint a foreign firm to upgrade the digital platform.
Encouraging foreign investors
According to the CSE keynote paper, the stock market has $2.20 billion investment from foreign investors. The CSE managing director said, “We should encourage foreign investors to make more investment in the stock market.” The BSEC chairman endorsed this opinion. He, however, said the commission will allow foreign investment only for long term.
Source: Dhaka Tribune
