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South Asian apparel exporters hope to recover by the end of this year

Apparel and textile exports from the South Asian nations are showing signs of gradual recovery from the impact of COVID-19 as the global retailers started taking shipments of goods on hold or canceled and lockdown eased.

After the outbreak of COVID-19 in March, the apparel and textile goods exports of south Asian nations including Bangladesh, India, Sri Lanka and Pakistan have witnessed a sharp decline in March and April.

South-Asian-apparel-exporters-recover-end-of-2020
Figure 1: The South Asian apparel exporting countries witnessing a recovering trend.

The sharp fall was driven by the order cancellation or hold by global supply retailers and brands due to the COVID-19 pandemic.

The pandemic has disrupted the global supply chain, as the lockdown was put in place to stop the spread of coronavirus and forced factory production, sales at stores shut, while people kept them captive in houses. As a result, the whole supply chain was disturbed and consumptions also fell across the globe.

However, in June exports earnings recovered from sharp fall but the negative growth trend continued. Exports performance of South Asian Countries Bangladesh, the second-largest exporter of apparel goods after China, saw a 20.14% decline to $2.25 billion in March, while 85.25% to $375 million in April, the highest fall in history.

However, in May the export earnings improved and stood at $1.23 billion with a 62% fall. Later, in June exports showed signs of recovery and posted a 6.63% negative growth to $2.24 billion.

Meanwhile, according to the Pakistan Bureau of Statistics (PBS) data, Pakistan’s textile and clothing exports declined by 64.5 percent in April to $403.834 million year-on-year. However, it recovered in May and earned $751.12 million to a 33.97% decline.

South-Asian-Country-wise-garment-export

But in the fiscal year 2019-20 ended in June, Pakistan’s textile and clothing exports posted a negative growth of over 6% to $12.526 billion.

On the other hand, Sri Lankan apparel exports also showed gradual recovery.

In March Sri Lanka earned $300 million down by 40.5%, compared to $504 million in the same period last year.

In April, the exports fell sharply by 82.40% to $60 million, while it recovered in May and earned $205 million with a 48.80% negative growth.

Reason behind the recovery

Though the downswing continued but in June exports bounced as the global retailers and brands have taken the shipment of canceled or hold work orders.

On the other hand, the retailers started to place work orders slowly as the lockdown eased and stores are opening gradually in the export destinations.

“Exports earnings increased in June as the global retailers and brands have taken delivery of goods that were on hold or canceled,” Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Senior Vice President Faisal Samad told Textile Today.

But the real picture of exports will be visible in the coming month as the present one is the performance of previous orders. It is yet too early to comment on the new orders, said Samad.

But we are hopeful about a turnaround at the end of the year as the stores are started to open, while the lockdown eased to some extent in many countries, said the business leader.

If the situation does not deepen further, the global economy will see a pause in the crisis and we may hope that the economic activities will start slowly, said Samad.

He also urged the retailers to come up with new orders.

On the other hand, manufacturers also opined that they are getting new work orders but are very slow compared to the previous year’s trend.

“With the reinstatement of cancel work orders, the manufacturers are getting a response from the global buyers. The impact of new orders will be seen in August-September earnings,” SM Khaled, Managing Director of Snowtex told Textile Today.

Right now, the sector is running with 70% to 80% capacity. If the situation improves, by the end of December, the sector will start to turn around, he added.

How to sustain the recovery?

The success of retaining recovery will depend on how the region will be able to rein the contamination of COVID and set the economic policy to combat the pandemic.

Bangladesh-garments-Steps-to-recover-COVID-19-IMPACT
Figure 2: Steps taken to ensure industry survival.

“Sustainability of the exports and economic recovery of the region will depend on how these countries will be able to control the spread of the virus as well as the formulation of international economic policy to come back,” said Zahid Hussain.

China, South Korea and Vietnam have a higher possibility to sustain the comeback as they have been able to address reasons, which caused the decline in exports, said Zahid.

In U.S. dollar terms, In June China’s exports also rose by 0.5% to $213.6 billion, strongly beating expectations and showing signs of recovery. On the other hand, imports rose by 2.7% year on year to $167.2 billion, bouncing from a 3.3-percent decline in May.

In the case of Bangladesh, India, and Pakistan, we are in the same boat in containing infection, where the health sector is vulnerable, said the economist.

All these depend on the management of health safety and stopping contaminations. But can we expect a change in corona management, he questioned.

Here, science and governance are separated in managing COVID, which needs to go together for the economic recovery, said Hussain.

Meanwhile, the exporters opined that the recovery will sustain if the government continues its policy supports and provides working capital to the sector.

“The present export trend is good but in retaining recovery and coming out from the negative growth, the sector needs working capital support as well as other policy support,” Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) First Vice President Mohammad Hatem told Textile Today.

On the other hand, the buyers have to take all goods kept on hold and place new work orders so that we can keep the factory operational, said the business leader.

Ho also sought 10% cash incentives for the next two years to combat the economic fallout of COVID-19 pandemic as the sector saw the hardest hit.

According to BGMEA and BKMEA data, the sector faced a work order cancellation of about $6 billion due to the pandemic.

Though the buyers have taken a larger portion of that orders but the manufacturers had to pay a discount, which left the factory in trouble due to financial losses.

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