FROM THE ED­I­TOR-IN-CHIEF’s DESK…

Apparel Online - - Content -

I was sur­prised when a top ex­porter rang me up to un­der­stand pay­ment terms in Bangladesh… On deeper dis­cus­sion, he shared that buy­ers were be­com­ing very dif­fi­cult on pay­ment terms and even the big­gest of buy­ers did not want to work on LC at sight.

This is re­ally bad news, con­sid­er­ing that the in­dus­try is al­ready fac­ing a fund crunch and an av­er­age 8-10% of turnover value of an ex­porter is out­stand­ing, be­cause of var­i­ous rea­sons from de­lay in GST re­fund to non-pay­ment of RoSL… Not only this, there are many other liq­uid­ity is­sues that are forc­ing ex­porters to refuse or­ders on grounds of vi­a­bil­ity. I have heard the most un­likely of ex­porters ad­mit­ting to let­ting go of or­ders they would have in rou­tine picked up. No one can af­ford to pick up an or­der just for the sake of it and keep buy­ers happy.

The re­al­ity is that ex­porters across the board are find­ing it dif­fi­cult to keep their fac­to­ries run­ning, as fixed cost of labour, staff and in­fra­struc­ture is eat­ing into their fi­nan­cial stand­ing. The big­ger the fac­tory, the big­ger the cheque!

Now with buy­ers pre­fer­ring LC on DA terms of 30 days on­wards, the sit­u­a­tion has be­come very crit­i­cal. Many of my ex­porter friends share that in some cases buy­ers are ask­ing for as much as 120 days’ credit post re­ceiv­ing ship­ment and even then, reg­u­lar fol­low-up is re­quired to get the pay­ment.

And on top of that if the shipped pro­gramme doesn’t hit the right note with cus­tomers, small ex­cuses are cited as rea­sons for re­ject­ing or­ders, or ask­ing for huge dis­counts…

For a com­pany of size Rs. 100 crore, an ad­di­tional work­ing cap­i­tal of around Rs. 10 crore would be re­quired for a 2-month pe­riod, the time it would re­quire for pay­ment re­al­i­sa­tion. This is in ad­di­tion to the work­ing cap­i­tal re­quire­ment for 3 months (gar­ment­ing cy­cle from or­der to de­liv­ery). Con­sid­er­ing that the pre­vail­ing in­ter­est rate to­day is around 11%…, against this if we see the in­dus­try av­er­age profit mar­gins of 5%, how then is the in­dus­try go­ing to sur­vive the tougher lend­ing norms and tighter money sup­ply... Where is the in­cen­tive left to work?

Sadly, the Govern­ment is not in­ter­ven­ing in the mat­ter, so that such mal­prac­tices can be curbed… Many years ago, when the in­dus­try was fac­ing is­sues of fraud­u­lent buy­ers, the Govern­ment had ac­tively pro­moted the ECGC Lim­ited, as an in­sur­ance against such buy­ers, but the same is not pop­u­lar with the ex­ports.

What the in­dus­try needs is some reg­u­la­tions… The Bangladesh Govern­ment is known to take pro-ac­tive mea­sures to pro­tect ex­ports and en­sure that pay­ments are duly re­ceived.

In such tough times, when the ex­porter is sur­rounded by so many prob­lems, the Govern­ment has to be more pro-ac­tive… I just hope it hap­pens be­fore it is too late.

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