Bangladesh will lose one of the most promising apparel export destinations if various Russian lenders are excluded from the SWIFT messaging system in response to the country’s military offensive in Ukraine, entrepreneurs warned.

Western nations announced on February 26 a harsh set of sanctions to punish Russia for its attack on Ukraine, including blocking some banks from the SWIFT international payments system.

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the global financial artery that allows the smooth and rapid transfer of money across borders.

If the ban becomes effective, local exporters will face difficulties in receiving payments from Russian importers.

Russia is a growing export destination for Bangladesh’s apparel items.

In the July-January period of the current fiscal year, the country sent garment items worth $415.47 million, registering a 36.47 per cent year-on-year growth, data from the Export Promotion Bureau (EPB) showed.

Bangladesh shipped apparel items worth $593.66 million to Russia in the last fiscal year – from July 1, 2020 to June 30, 2021 – comprising $373.25 million worth of knitwear items and $220.41 million worth of woven items.

But any sanction on Russian lenders on using the SWIFT messaging system could hit Bangladesh’s exports to the market.

Young4ever Textiles Ltd managing director Rajiv Chowdhury started exporting knitted hoody jackets to Russia recently as he sees the country as a promising foreign market. He has sent the first consignment to a Russian buyer based in Turkey.

He exported garment items worth $400,000 in two consignments and received $200,000 as the payment for the first consignment.

“I have been given assurance that my Russian buyer will make the payment from Turkey as it has an office in the country. So, this time I may not face any challenge in receiving the payment from my Russian buyer,” said Chowdhury.

But the entrepreneur plans not to ship any goods to Russia until and unless the uncertainty over the SWIFT is resolved as he may face difficulties in getting export proceeds.

“We have already directed our members to stop shipments of garment items to Russia as the war is going on there and for the potential ban on the SWIFT use,” said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“We are worried about the Russian and Ukrainian markets. Uncertainty has been created in the payment and shipment following the outbreak of the war.”

The BGMEA has instructed its members not to accept any new work orders from Russia to avoid any hassles in payments.

“Russian buyers should clear payments as soon as possible so that they do not fall into any uncertainty in the time of Covid-19,” Hassan said.

Bangladesh Knitwear Manufacturers and Exporters Association executive president Mohammad Hatem said they are worried about the payment problem due to the uncertainty over the use of SWIFT in Russia.

“We are not getting work orders from Russian buyers since the western nation agreed to ban some Russian banks from using the SWIFT system. It will create a major barrier for us in the Russian markets.”

The Russian market has been growing for Bangladesh since the fiscal year of 2009-2010 when the government started paying an additional four per cent cash incentive on the exports to new or emerging markets to offset the impacts of the global financial crisis of 2007-2008.

Before the incentive was introduced, the export of garment items to non-traditional markets was a few million dollars. It reached $5.08 billion in the last fiscal year.

Bangladesh considers all countries as non-traditional markets except the UK, those in the EU, Canada and the US.

Between July and January, export receipts from the non-traditional markets were $3.66 billion, an increase of 24.46 per cent year-on-year, according to the EPB.

Regarding the EU market, the largest export destination for Bangladesh, BGMEA’s Hassan says the European markets are not posing any challenge as the business is going on as usual until now.

More than $22 billion worth of garment items is shipped from Bangladesh to European countries, representing 64 per cent of the annual apparel export.