Needless to say, how this COVID-19 became a game-changer in every aspect pushing for a new global order. In the first quarter of 2020, this pandemic led to a 3% drop in global trade values. Other forecasts from various agencies earmarked: trade volumes decreasing between 13% and 32% in 2020 (WTO, 2020), global growth falling to -3% (IMF, 2020) and different maritime seaborne scenarios ranging from a return to sector average (around 3% p.a.) after 2022 to growth rates falling by 17% by 2024.
The uncertain scenario:
Against the backdrop of a rising consumer base around the globe, supply chain disruption is the key one that fell victim to this pandemic. Because it is the one which spearheads the synergy between demand and supply keeping manufacturers and consumers go on and off-script on the stage.
Textile and apparel, being the lifeline of a global manufacturing base because of its vibrant linkage industries, is at stake as its lifecycle is short (as perishable products) and their commercialization is characterized by strong seasonal peaks.
In the wake of this pandemic, the textile and apparel sector is seeing an unprecedented pressure considering the uncertainties floated around. Countries that were in the lead roles for patronizing global supply chain, they became busy in building resilience given the emergency needs and approaches evolving.
Moreover, prospects appear questionable for low-cost sourcing countries those exports are highly singular meaning textile and garments marked the standalone role in generating revenues, concurrently faced with the challenge of limited financial means and less developed health systems and social safety nets to cope with the socio-economic effects of the pandemic.
Furthermore, lockdowns in their localities have thrown a spotlight on risks associated with high supply chain interconnectedness and challenges associated with global sourcing.
Seemingly, this has made an impact on trade logistics which orchestrate mechanisms that holds global value chains together. As per UNCTAD, export-oriented industries, particularly those that rely on Chinese inputs for production, were most exposed to initial supply chain disruption due to COVID-19.
Long term impact on Bangladesh RMG sector:
Given its non-essential nature, the textile and apparel sector faces significant risks. Indeed, in times of COVID-19, as consumers around the world remain in lockdown, they no longer need new products. This industry is characterized by a highly integrated global supply chain. And, this leads to a degree of disaster to a country like Bangladesh where around 85% of its exports include fashion goods.
As ADB revealed, the impact on Bangladesh’s RMG industry will not be limited to itself and might have grave repercussions on other industrial, consumer, and service sectors. The value addition in the RMG industry has increased gradually and stands at 63.2% as backward-linkage industries developed.
At an investment of $6 billion, large capital-intensive textile industry has been established for supplying yarn and fabric to the export-oriented RMG industry. Presently, there are 1,461 manufacturing units in the textile value chain, of which 425 are in yarn manufacturing, 796 in fabric production and 240 in dyeing-printing-finishing operations.
There are also a large number of accessories suppliers, mostly small and medium enterprises (SMEs), who are providing buttons, zippers, hangers, threads and other accessories.
From a logistics point of view, Bangladesh’s textile, apparel and garments industry is considered a time-sensitive industry. Irregularities in making goods reach a particular place at a specified location on time can lead to reduced (or no) profits for the textile owner.
Unfortunately, Bangladesh could not make an exception in this matter since European and American retailers, the two destination markets for this sector, are still canceling their orders. Adding woe to this situation, shippers are increasingly invoking ‘force majeure’ clauses within their contracts to halt their payments.
This evolution of the local epidemiologic situation in Bangladesh’s key sourcing countries has impacted workforce availability and production, as well as multimodal logistics underpinning global value chains.
One of the concerns blowing in this circumstance is that the manufacturing of textile and apparel goods could be shifted or relocated to other sourcing countries in the Asian regions that have similar competitive edge and are resuming activities faster or that are closer to retailers to diversify their supply chain risk.
Here we are seeing the reality; Vietnam made it to a faster resume of production and eventually attracted new buyers, leaving Bangladesh at the crossroad of COVID-19 sponsored economic damage.
Steps to recover:
Governments around the corners are implementing time-bound actions to ease the effect on their economies from measures put in place to limit the spread of the pandemic. Moreover, various assistance packages have been announced by IMF, the World Bank and others to support economies, including emerging market economies. Bangladesh is no exception.
To fight COVID-19’s unfolding fallouts, the government announced a stimulus package of Tk956 billion ($11.2 billion), or 3.3% of GDP to revive the economy, by strengthening the social safety net, export sectors, SMEs and other priority sectors. The package allocates Tk50 billion for RMG and other export-oriented industries which could only be used for paying salaries and allowances to workers and employees.
The size of the Export Development Fund has been increased from $3.5 billion to $5.0 billion which provides short-term facilities for importing raw materials for export-oriented industries. Out of this package, the central bank will institute a $600 million Pre-Shipment Credit Refinance Scheme for RMG and other export-oriented industries.
This highly welcomed package, though significant, will meet only a fraction of the massive requirements of the sector, which needs at least $470 million to pay wages every month. However, the country requires more support for the basic subsistence of the workers and to keep the industry alive.
Arguing that this is an unprecedented situation, experts argued that this situation may worsen before recovery begins. These stimulus packages cannot safeguard us for long since liquidity and cash flows are major problems in the clothing supply chain right now.
Yet, there is the prospect of even more severe disruption and millions of job losses, of factories, do not have the funds to survive until the end of the crisis. In this respect, some groups emerged to put this concern under the spotlight.
Sustainable Textile of Asian Region (STAR) Network, the body, which brings together representatives of the producing associations from Bangladesh, Cambodia, China, Myanmar, Pakistan and Vietnam, released a joint statement on the issue. It urged brands and retailers to consider the impact that their purchasing decisions during the coronavirus pandemic could have on workers and small businesses in the supply chain and, therefore, to honor their contracts with their suppliers.
Moreover, the Government must map out strategies to cope with the current crisis accelerating a transformation in consumption patterns, inducing structural changes to the industry supply chain.