Bangladesh’s apparel industry, the $34 billion industry and the lifeline of the economy may suffer badly due to the outbreak of ongoing Coronavirus as the supply chain of raw materials for the sector might be disrupted if it prolongs and spread further.
Primarily some of the apparel makers have started to feel the pinch of virus outbreak as the suppliers of raw materials are facing problems in ensuring timely shipment as the government extended the New Year holiday.
On the other hand, the movement of business people between the two countries is going through restriction and the Bangladesh government has stooped on arrival visas for Chinese people.
Why China factors for the apparel sector
China is the number one trade partner of Bangladesh. As of last fiscal year, China-Bangladesh bilateral trade stood at $14.48 billion. China- Bangladesh bilateral trade is in favor of China as it has the largest share among the trade between the two countries. According to Bangladesh Bank data in the fiscal year 2018-19, Bangladesh imported goods worth $13.65 billion, while the country exported products of $831.2 million in the same period.
On top of that, over 50% of Bangladesh’s textile and textile-related goods including garment accessories are imported from China. In addition, about 40% of capital machinery and spare parts for the textile and garment industry come from the country.
Adverse impacts of coronavirus outbreak on Bangladesh textile and apparel industry
“In the bilateral trade, there is already a temporary impact as the communication between two countries is reduced, so the movement of goods,” A T M Azizul Akil, Senior Vice President of Bangladesh-China Chamber of Commerce and Industry (BCCI) told the Textile Today.
On top of that, the supply chain of industrial materials especially apparel, leather and other manufacturing sectors will see the gap as there are closures in stores and factories over the fear of virus spread, said Azizul.
“So far, I know some of the garment accessories and packaging makers are facing trouble in opening new Letter of Credit (LC’s) as the Chinese government has extended New Year vacation, while people are not allowed to move freely. Even some factories are closed over the virus issue,” Md Abdul Kader Khan, President of Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) told Textile Today.
Meanwhile, some of the shipment of raw materials is being delayed even being canceled as they importers need it immediately for meeting the buyers’ demands, said Kader.
“I was in the market today to buy some electrical items for our factory, each item I purchased with over prices,” said Kazi Al Mahedi, Managing Director, ZS Apparels Ltd.
“Our textile and apparel sector is highly dependent on China. It can be a disaster with a delay in shipment if the supply chain does not work properly. Already some factories are struggling to run properly,” he added.
According to Chinese media reports, more than a dozen Chinese provinces announced an extension of the current Lunar New Year holiday by more than a week as the nation attempts to halt the spread of the novel coronavirus that has killed hundreds of people and sickened thousands.
Ariful Islam, Senior Merchandiser of a Japanese buying house told Textile Today, “We will be badly affected due to the collapse of China. We import yarn, fabric and Accessories from China. The Chinese government now extended the holiday for another 10 days. Chances are less that within 10 days everything will be fine. Let say after 10 days they will resume their work. Then production will start but their banks, transportation, all logistic support cannot cover these 10 days gap. They will be under 20 days backlog.”
“So, all our garment delivery is under critical situation now. A big disaster is waiting for us. There is an EID holiday at the end of May. If customers do not extend the delivery date, then we must have to ship our goods by air which is very costly,” Ariful Islam further added.
“Globally the Coronavirus outbreak’s impact is on inventory shortfall both for raw materials and finished goods. India, Pakistan, Indonesia will enjoy momentum due to increased requests for raw materials back up. Bangladesh can gain from this situation if we act fast to back up alternative resources forecasting potential demand.”
“Our company has faced cancellation of an import order of five-ton raw materials from a Chinese supplier, which was expected to reach by next week,” seeking anonymity an official of a garment accessories manufacturer company told Textile Today.
On the other hand, the company also canceled its next trip to China over the fear of Coronavirus.
It also hit the sales of apparel goods, which like to cast a negative impact on the import of clothing goods from Bangladesh. Bangladesh’s apparel exports to China are about $800 million as of last fiscal year.
Talking on these issues, Centre for Policy Dialogue (CPD) Research Director Khondaker Golam Moazzem opined that the small business people, who import small amounts of goods and frequently travel to China will suffer more.
The business of every need likely to hit as the supply of goods may fall due to disruption in the supply chain, he added.
“We are heavily dependent on China for polyester yarn, viscose and mixed yarns. All my fabrics are getting stuck as the Chinese mills have extended their holiday by 7 to 10 days. So, there will be a production disaster as well,” said Shazia Shahid Ove, Senior Merchandiser, Target Australia Sourcing Limited.
Few hopes regarding positive impacts of Coronavirus outbreak
Some are thinking that there may be an opportunity for Bangladesh apparel makers if the situation worsens and the Coronavirus spreads further as it will discourage global buyers to find an alternative source for buying goods. Buyers may choose Bangladesh for sourcing goods due to its quality and reasonable prices.
“Sales of big retailers are falling because of the closedown of mainland China stores. Sales expected to drop and therefore sourcing of products may also decrease,” Bangladesh Garment Manufacturing and Exporters Association (BGMEA) President Rubana Huq told Textile Today.
On the other hand, some immediate orders from China office will be shifted and major contenders are Vietnam, Cambodia and maybe Bangladesh if our luck favors but this is temporary, said the business leader.
Commenting on the alternative sourcing of raw materials, Rubana said we can turn to our local fabric mill and also can shift to regional fabric mills as well.
“Globally the Coronavirus outbreak’s impact is on inventory shortfall both for raw materials and finished goods. India, Pakistan, Indonesia will enjoy momentum due to increased requests for raw materials back up. Bangladesh can gain from this situation if we act fast to back up alternative resources forecasting potential demand,” said Dolly Thay, Managing Director, Cloths “R” Us Ltd.
“Sweater category has a highest negative impact, which would be difficult to alternate,” Kyaw Sein Thay mentioned.
Meanwhile, business people also want government steps to keep import-export operational by taking protective and cautionary measures.
She also suggested alternative sourcing for goods, which Bangladesh needs to import on a regular basis to avert crisis or drop in the supply chain.
Anis Ansari, Sr. General Manager, Operations at Ha-Meem Group told, “A huge quantity of orders are being shifted to Bangladesh, Vietnam, Cambodia and Myanmar. Bangladesh has to set an immediate strategy to grab the diversified products order and sustain.”
“Local raw material sourcing will be increased; thus a positive vibe will be taken place to the industry. Few exhibitions may be shifted to Bangladesh; thus, the potential foreign visitors may be increased, which eventually may help to open future business opportunities,” he further added.
In December last year, the coronavirus outbroke in the central Chinese city, which is believed to have originated in the central city of Wuhan and is spreading across the country and in the other 10 countries. According to the South China Morning Post report, the death toll stood at 426, while 20,622 people infected.