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31 March, 2020 00:00 00 AM
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RMG sector fear for the worst due to coronavirus outbreak

The coronavirus outbreak could be viewed as a wake-up call for the Bangladesh RMG industry
Prof Sarwar Md Saifullah Khaled
RMG sector fear for the worst due to coronavirus outbreak

As its main sourcing destination, China, is the epicentre of the outbreak of coronavirus the supply chain of Bangladesh’s readymade garments (RMG) sector is taking a hit as there is no let up in the spread of the coronavirus around the globe. As manufacturers are hit with order cancellations, Bangladesh, the second-largest apparel producer in the world, is feeling the bites of the global coronaviurs pandemic. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said that “The buyers are inhumanly cancelling the work orders forcing millions of workers to be jobless”. It said adding that at least 1,089 factories employing 1.2 million workers received such notices as of March 22, 2020 evening. The western buyers and brands have either suspended or cancelled purchase orders worth more than USD 1.49 billion. Putting the factory owners and the workers in a dire situation, the orders placed for April 2020 were also being cancelled. As a result the sector is facing closure.  

 The buyers cited closure of their outlets because of the pandemic to cancel the orders. But they did not consider how the factory workers at the source will survive. BGMEA said calling on retailers to play their part in paying the workers’ wages. BGMEA officials met repeatedly with government ministers to discuss solutions to the problems in the sector.

 The RMG sector is responsible for nearly 82 per cent of the country’s total export earnings. BGMEA in a letter urged Germany’s Minister of Economic Cooperation and Development Gerd Mueller to immediately call on all German brands sourcing from Bangladesh not to cancel or hold any shipments. It wrote that “while the businessmen in Germany receive government support and address their losses, at our end we have an existential problem as we have to pay our workers”. When factories will fail to pay their workers the cancellations of orders may lead to serious social unrest in Bangladesh. BGMEA is certain that no German brands would like to see that happen on their account. It told that it would write similar letters to ministers in other countries also.

 Bangladesh is the second-largest global apparel manufacturer after China. It employs nearly 4 million workers, mostly women, across nearly 4,000 factories in the country. In the financial year 2018-2019 the garment sector earned for Bangladesh more than USD 34 billion in exports. Most of the garments went to Europe and the United States. After the new coronavirus outbreak forced many countries to put their cities under lockdown so the brands and retailers in Europe and the US have shut thousands of outlets. On March 1, 2020, the BGMEA leader said, prices of all garment accessories, including yarn and sewing threads, have already gone up by almost 50 percent.

 This is killing the Bangladesh garment sector. As most of the raw materials are imported from China, if regular shipments from China do not resume within the next two weeks, Bangladesh will not be able to procure any trim properly.

         The items whose supply chain got disrupted included yarn, sewing threads, paper, plastic items (buttons), and twill tape and even the dyeing cost was increasing unacceptably. In general, Bangladesh is possibly going to take a hit for three to four months.

The Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE) said that the coronavirus had already disrupted the business for garments suppliers in Bangladesh. For not only raw materials and other inputs, Bangladesh is still heavily dependent on China, in fact, more than 50 percent of Bangladesh’s textile and textile-related goods, including garment accessories, are imported from that country, but in addition, about 40 per cent of capital machinery and spare parts for the textile and garments industry comes also from China. The progress made by the country’s RMG sector in recent years, the lack of vertical integration – Bangladesh only carries out one part of the supply chain process – had remained a major source of vulnerability. It is Achilles’ heel for Bangladesh garment industry.

 The coronavirus outbreak could be viewed as a wake-up call for the Bangladesh RMG industry and also for the apparel industry globally. Such heavy dependence on China is unhealthy in many ways. Any disruption to the supply chain by an epidemic like the coronavirus can be devastating.

There is a real risk that some businesses may never recover from the shock. Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) expressed fear on February 15, 2020, as the sector was already running short of raw materials it may lose an estimated BDT 15.00 billion if the coronavirus outbreak in China lingered. It is a matter of fear that the supply of raw materials from China will remain suspended until March 2020 because of the outbreak. As we need raw materials worth USD 4 billion per year and 40 percent of that comes from China, this would create a serious crisis in the garments accessories and packaging sector in Bangladesh. To add fuel to the crisis Bangladesh of late itself is experiencing the death toll and infections of the virus.

 The writer is a retired Professor of Economics and Vice Principal at Cumilla Women’s Government College, Cumilla.

 

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Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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