Bangladesh, the second-largest apparel producer after China, is set to lose roughly US $ 6 billion in export revenue this financial year amid cancellations from some of the world’s largest brands and retailers. Garment exports accounted for US$ 34.12 billion or 84 percent of the country’s overall exports of US$ 40.53 billion, in the fiscal year ended June 30, 2019.
Mohammad Hatem, Vice President, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Managing Director of MB Knit Fashion Ltd recently shared his insights on the recent grim turn of global events due to the COVID-19 outbreak.
Textile Today: As garments and textile industry is the backbone of the country’s economy, in this extraordinary situation what measures should be taken by the associations like BKMEA, BGMEA and the government to protect the industry in the long run?
Mohammad Hatem: In this unprecedented global crisis scenario, ensuring the workers’ livelihood comes first along with it the apparel industry. To that holistically we need policy support the Bangladesh government, for example, Bangladesh Bank announced some policy to support the sector, which is welcoming.
However, this is not enough. The government should come up with more stimulus to save the country’s biggest export sector.
Textile Today: The World economy is shaking for Coronavirus COVID-19 pandemic, already more than $2 bn orders of Bangladesh RMG has been canceled. How much this Corona-impact will be longer, what do you think?
Mohammad Hatem: Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) members’ factories faced the order cancellations. BGMEA and BKMEA’s member factories have faced order cancellations of almost $6 billion. Only our member factories have lost almost $3 billion worth of orders due to the crisis.
But the package will be given as a loan with a payable interest service charge. As it is given as a loan so that we are worried about its effectivity in the RMG industry.
For the next summer season, most of the orders were canceled or put on hold, which made exporters worried about the future of their workers’ jobs as they could not run the factories unless there are enough work orders. Suspended orders will eventually get canceled. All these orders were placed for summer and it takes three months to get these delivered. If they are not taking supplies now, they will not take it when the summer is over.
There is no doubt that this blow will leave a lasting impact in Bangladesh textile and apparel industry. Keep that in mind that it will not be over in a couple of months. To overcome this crisis, as I said earlier, we need to overhaul our total outlook and future mindset to move forward.
Textile Today: How can we build a self-sufficient industry, if we consider this current experience?
Mohammad Hatem: Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and BKMEA, and stakeholders need to take a life lesson and should diversify the apparel products basket. Most importantly diversifying the export market to sustain the business.
The lesson we have learned amidst of COVID-19 outbreak that the majority of raw materials like fibers, machinery, accessories, etc. were imported from China which stopped due to the outbreak of the virus. So, in the future, we have to develop in this area so that we can source raw materials locally to gain self-sufficiency and overcome any future threats.
Textile Today: The way we got strong in knitting and denim sector backward linkage, how it can be done for other sectors?
Mohammad Hatem: Look the manmade fibers and woven fabric development need huge investment. And frankly speaking with a two-digit interest rate from banks and other obstacles in the business, RMG people cannot go for this investment.
We must ensure a non-stop supply of gas and electricity, hassle-free port services, improved roads, etc., declaring incentive packages for investors to ensure an investment-friendly atmosphere.
And to develop these areas backward linkage RMG entrepreneurs need to overcome all these obstacles. We need more policy support and foreign investments to develop these sectors.
Textile Today: How do you evaluate the government declared stimulus package of Tk5,000 crore?
Mohammad Hatem: First of all, I am expressing earnest appreciation for the Prime Minister’s announcement of Tk 5,000 crore stimulus package for export-oriented industries to mitigate the impact of coronavirus on the country’s economy. But the package will be given as a loan with a payable interest service charge. As it is given as a loan so that we are worried about its effectivity in the RMG industry.
Any percentage of interest or service charge is a gigantic burden for the factory owners. So, we urge the government to give the package without any interested string attached with long term payable capability. Only then it will be a milestone package for the apparel industry to bounce back stronger than before and remove the worries of the apparel manufacturers.
Textile Today: You said that ‘We need more policy support and foreign investments to develop RMG sector’. What type of policy support are you seeking, and how Bangladesh can attract more foreign investment?
Mohammad Hatem: To attract more robust foreign investments the government needs to relax the rules in economic zones to ensure investments from the foreigners. We must ensure a non-stop supply of gas and electricity, hassle-free port services, improved roads, etc., declaring incentive packages for investors to ensure an investment-friendly atmosphere. Otherwise, foreign investors will not feel motivated to come to Bangladesh and invest.