50 Star US Inc.
Unexpectedly, Bangladesh's garment sector has been experiencing a recent order issue. Many factories are frantically looking for orders from clients around the world. In addition, they are looking for subcontracts to continue. One of Bangladesh's denim producers closed their factory on July 6 and announced the closure on LinkedIn. This is quite concerning for both the nation's economy and industry.
What are the primary causes of the situation? Industry experts offered the following viewpoints:
Sales decline in the end market
America and Europe are our two key markets. European consumers are hesitant to purchase purely impulsive fashion items. For a number of reasons, Europeans may now be conserving more money. The COVID-19 epidemic, which has caused severe economic unrest and employment losses, is one of the primary causes. Many people have decreased their expenditures and raised their savings as a result.
Additionally, many people have been able to save more money because to government stimulus programs including direct payouts to citizens. People may have utilized these payments in some instances to pay down debt or increase their savings.
Global price rise
Around the world, people are experiencing extreme inflation and finding it difficult to purchase necessities. People are avoiding purchasing excess and pointless expensive clothing as a result. They are being forced to reuse the clothes repeatedly by these issues. According to the expert, the key causes of global inflation are fiat money, an expanding money supply, lax monetary regulation, and a dollar-based economy. External influences may also have an impact on European inflation. For instance, changes in the price of commodities globally, especially those for energy and food, may have an effect on inflation in Europe. Inflation dynamics can also be impacted by changes in trade practices, exchange rates, or global financial conditions.
Russia-Ukraine conflict
According to a report released in November 2022 by the OECD, the war in Ukraine caused a "massive and historic energy shock" to the markets. One of the key reasons why the global economy only grew by 3.1 percent in 2022 and the OECD predicted that it would only increase by 2.2 percent in 2023 was the "shock" of the conflict. The war between Russia and Ukraine has had a significant effect on the world's oil, food, and supply chains. According to Bloomberg, the LPP company with headquarters in Gdask has stopped all deliveries to Ukraine and closed all 139 of its stores there.
Unexpected visit by Joe Biden to Ukraine
The fashion sector in Europe is directly affected by Joe Biden's trips to Ukraine. the repercussions for Bangladesh's RMG business. In anticipation of the Russian response, many customers are holding onto PO. Following Bangladesh's decision to forbid Russian ships from stopping at Bangladeshi ports, the Russian foreign ministry has already summoned Kamrul Ahsan, the ambassador of Bangladesh to Moscow, according to Tuesday's report from the Russian news agency TASS. However, the main causes were extreme inflation, geopolitical unrest, and stock in the warehouses.
The RMG business in Bangladesh is impacted by a complex range of elements, both internal and external, despite the fact that the decisions made by world leaders and policymakers may have an effect on the global economy and trade. As a result, it is a certain that Joe Biden's trips to Ukraine would directly affect Bangladesh's RMG business.
Crisis in buyer funds
Grants, financial instruments (loans, guarantees, and equity), subsidies, trust fund awards, and procurements (public contracts) are a few examples of diverse sources of funding. The Financial Regulation establishes the guidelines for all forms of funding's implementation. The majority of purchasers open LCs using a 30/70 or 40/60 ratio deposit scheme, which means the buyer provides 30% of the funds and the bank advances 70% of the loan in exchange for an order. But because of the ongoing economic crisis, banks are no longer allowed to open LCs in this system.
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