Bangladesh’s apparel industry, the lifeline of the economy with an 83% contribution to exports, has passed the unprecedented year 2020.
In its over 35 years of history, the apparel sector suffered the worst crisis in 2020 as the Covid-19 pandemic has cast a devastating impact on the sector sending export earnings significantly down.
The pandemic has left thousands of garment factory owners and workers in severe crisis as their livelihoods were abruptly taken from them.
Exports decline sharply
With the first case of Covid-19 infection in March, export earnings declined by 20.14% to $2.25 million in the month. The worst case of export earnings fall was recorded in April when it fell by 85.25% to $375 million against $2.54 billion in the same period of 2019.
Though the export earnings gradually improved it could not come out from the negative growth as of November.
According to Export Promotion Bureau (EPB) data, Bangladesh earned $24.81 billion, down by 17.64% during the January-November period of 2020, which was $30.13 billion in 2019.
Why exports dip
The sharp decline in export earnings was driven by the work order cancellation or held by the global buyers and slower demand in export destinations. They did it due to lockdown caused by the pandemic, which also forced to shut stores by some of the buyers.
As per the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data, about 1,150 apparel makers faced work order cancellation or help worth $3.18 billion.
Meanwhile, the work order shortage was caused by the slower demand in export destinations.
The obvious consequence of the resurgence of the virus is visible in global retail sales. Sales in Europe and the USA have dropped by 13% in October, which was already having a downtrend since March 2020, said the industry people.
Such a trend in retail is alarming for the industry, particularly bringing the worrying context of the global economy, trade, unemployment, and resulting impact on disposable income and spending, the solid recovery may still be far away, they added.
Order cancellation and slower demand lead to factory closure
The work orders cancellation by the apparel retailers and brands forced the factory owners to shut factories as they cannot bear the expenses of operations.
According to BGMEA, about 300 factories were shut during 2020. While another about 30 factories, which were the members of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) were shut for the same reasons.
“I had no option to shut the operation of my factory as the buyer canceled orders and held the payment. All the workers lost jobs,” seeking anonymity an RMG factory owner told Textile Today.
The year was a nightmare for me and my dream shattered due to the pandemic, he adds.
Workers lost livelihoods
As the factory owners failed to keep their factories afloat due to the Covid-19 impact, workers were the worst victim of the pandemic. This is because of a shortage of fewer work orders.
Meanwhile, according to a statement by the BGMEA President in November, about 70,000 workers of 160 factories lost jobs due to the COVID-19 pandemic. Meanwhile, in knitwear manufacturing, about 15,000 workers lost jobs.
However, the trade union leaders also claimed that the figure is much higher than that of the owners’ number.
“Due to ongoing coronavirus there are not enough work orders to run the factory, ” the factory owner told Halima when he fired her in October.”
Halima, who worked as an operator in an RMG factory located in Gazipur.
The sector employs over 4 million workers mostly women and they fell in vulnerability and bear the brunt of the coronavirus pandemic.
The year 2020 was very painful and devastating, who faced work order cancellation and the payment is yet to be realized.
Price cuts left exporters in trouble
While manufacturers are suffering to run factories with fewer work orders than capacity amid the Covid-19 pandemic, the buyers cut prices of clothing products. This was a big blow for the exporters.
According to BGMEA data, the prices of apparel goods exported from Bangladesh to the world declined by 2.1% during January-September of 2020 compared to the same period of last year.
In September alone, the prices of clothing goods fell by 5.23%. However, manufacturers are saying that buyers are offering 8% to 10% fewer prices compared to the pre-COVID level.
“Cutting prices by retailers is a common practice. But amid the pandemic, the brands and buyers went on further price cut,” seeking anonymity an exporter, who usually exports to US buyers told Textile Today.
I did not take the work orders of a dozen shirts at below $18 for cutting and making (CM) charge. But now I have to accept it at $16. This is a huge pressure for me to bear all the expenses, said the manufacturer, he added.
Delayed payment was a curse for exporters
According to data from suppliers, a total of 32 Bangladeshi apparel suppliers are owed about $20 million for goods already shipped to Debenhams. While discount on shipped or on progress goods was another woe for the suppliers.
Total dues for shipped goods to all buyers are about $100 million, the sector people claimed.
Though with the reopening of the economy buyers restored most of the orders but the discount demanded by the buyers and delayed the payment increased the sorrows of exporters.
Even, many exporters yet to realize the payment which left them in trouble to pay the workers’ wages and bank liabilities.
Stimulus package help to recover
However, the government’s immediate response to fight covid-19 pandemic fallout helped the apparel sector to lessen the impact and to turnaround.
We are grateful to our Prime Minister for promptly timely and wisely extending the stimulus package with all other policy supports,” said BGMEA president Rubana Huq.
Since the recovery from COVID-19 may take a longer time than expected, which may prolong till the middle of next year, the industry needs continuity of the supports received to stay afloat in the upcoming days along with additional supports to withstand any adverse impact, she added.
In March, the Bangladesh government announced a stimulus package of Tk5,000 as a loan at 2% for the country’s export-oriented industry to combat the covid-19 pandemic crisis.
The impact of the sluggish demand on export price is evident by NBR’s data. In November alone, our RMG price growth has seen a negative growth of 5.19%.
New investment was almost absent
According to the BGMEA and BKMEA, there are a good number of factories, who failed to complete the projects due to pandemic.
On the other hand, new investment in the sector was almost absent but some companies signed deals with Bangladesh Export Processing Zones and pledged to invest in 2021.
However, about 15 companies have become members of BKMEA mostly at the beginning of the year. After the outbreak of Covid-19 investors held investment plans and observed the situation.
Bangladesh entered the global protective clothing market
In the pandemic, the world moved to functional fashion and protective clothing, the most necessary item for the whole world. Bangladesh, the second-largest apparel contributor in the world which mostly makes Fast Fashion products, also has started to move to Functional Fashion drastically following the market demands.
According to BGMEA data, more than 33 companies who are making and preparing PPE for export, where the largest shipment was by the Beximco Group which exported 6.5 million medical gowns to US brand Hanes.
Since, Bangladesh is mostly dependent on a few items and basic goods, going on to protective clothing is helping to diversify goods.