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Thursday, 23 July 2020

Impact of COVID-19 on the Textile & Apparel Industry

Md. Nurun Nabi 
PhD fellow, Huazhong University of Science and Technology(HUST), Wuhan, China, and Assistant Professor, Bangladesh University of Textiles.

COVID 19 or Novel coronavirus was firstly traced in the human body on 31, December 2019 in Wuhan, Hubei, China. Now, this novel coronavirus spread all over the world. Almost 206 countries and regions were affected by this novel coronavirus. On behalf of the World Health Organization (WHO) Director-General, Dr Tedros Adhanom Ghebreyesus declared coronavirus disease (COVID-19) Pandemic on March 11. The number of affected countries and regions is increasing day by day. According to the World Health Organization, Institute of Epidemiology, Disease Control and Research dated 23 July 2020, Bangladesh has 216,110 confirmed infections and 2801 people have died from the coronavirus. Many people have recovered from this disease. The total healing number is 119,208.  

On 1 April 2020, the government cancelled all public programs marking Pahela Baishakh, the Bengali New Year, to avoid mass gatherings as part of its efforts to contain the spread of the novel coronavirus. However, Our governments are trying best and I would like to congratulate Our Honorable Prime Minister for her imperative and assertive decisions regarding control, supervision, and practical initiative. The government requested the people to stay at home and enjoy the programs online at the live telecast. 

The performance of the RMG sector is more critical for an economy like Bangladesh, since textile & apparel industry contributes 84% of the country’s export, employing close to 4.1 million people. As the textile is the backbone of our economy. While gauging the possible impact of the pandemic on the apparel sector, it is imperative to look into the demand side scenario by analyzing the European, US, and emerging markets for apparel export. The picture that is emerging is devastating. Social distancing measures are taken in countries currently most affected by COVID-19 are driving wholesale closure of thousands of garment factories with millions of workers being laid off without a social safety net. 

As the virus spreads within the garment-producing countries, more factories are almost closed down and some will be forced to close, putting potentially millions of more workers out of work. This leaves factories holding the goods, unable to sell them to the customer that ordered them, and in many cases unable to pay the wages of the workers who made them. For many of the 4.1 million workers in Bangladesh’s garment industry can be critical to survival. But more than a million have already been fired as global fashion companies have cancelled or suspended orders in Bangladesh due to the coronavirus crisis, according to a report of Penn State University’s Center for Global Workers’ Rights and the Worker Rights Consortium (WRC). The numbers only look set to rise and don't count workers in Cambodia, India, Myanmar, Vietnam, and other countries facing similar situations. There are fears that job losses could lead to hunger among the unemployed and their families. Most of the garments workers live below the poverty line. The minimum wage for Bangladeshi garment workers is about $96 a month, which activists say is below a living wage.

In these circumstances, it is also found that 98% of buyers many of the big global clients refused to contribute to the cost of partial wages for the employees. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said that more than one thousand  RMG  factories had received order cancellation or shipment delay notices from the buyers for export orders worth almost US$3 billion. It is affecting more than 1.44 million workers. Global buyers are not only cancelling and suspending orders but also, they are not taking ready goods. The current state makes us clear that the textile and RMG industry is vulnerable now. Fazlee Shamim Ehsan, Director of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said the prices of basic raw materials, including sewing thread and level yarns used in production, are high due to the virus outbreak. Considering the real scenario BGMEA President Rubana Huq said that everyone related to the RMG sector we have to be patient and not be afraid. Every manufacturer should contact their buyer and should try to convince them not to cancel their order fully and to take the ready goods through this employee can get their salaries.

According to the industry people, about 46 per cent of raw materials for the local RMG industry is sourced from China. Orders for nearly 650 million garments, worth a total of US$2.04 billion have been cancelled, impacting on 738 factories and about 1.42 million workers, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). This loss cannot be recovered soon or ever. The unemployment rate is increasing but we have a place for expectation. Our government is very imperative and assertive, as soon as the situation is deteriorating then comes a motivational as well as a blooming package for the textile firms and industries. On 25 March, Prime Minister Sheikh Hasina announced a stimulus package of Tk 5,000 crore taka for export-oriented industries to mitigate the impact of the coronavirus. Again not only for textile industries but also for small & medium business organizations. 

On April 5, New Incentive Package Was declared by the Honorable Prime Minister, Peoples Republic of Bangladesh, 72,750 thousand crore taka for the help of the industries and factories. This incentive package will help to revive and boost up our textile economy sector. The incentive packages include 1. Working Capital Financing (BDT 30,000 crore) Interest 9%; 4.5% will be subsidized, 2. CMSME Working Capital (BDT 20,000 crore) -Interest Rate: 9%; 5% will be subsidized 3. EDF Fund Expansion - Increase from USD3.5BN to USD5BN (New Addition 12750 crore); Rate: 2% rate. 4. Pre-shipment credit finance by BB - Rate: 7%; Amount: BDT 3000 crore. 5. Increase the Incentive Package to BDT 72,750 Crore from Existing BDT 5,000 crore. In these circumstances, different organizations like other government banks, financial and non-financial institutions, leasing companies should come up to help and alleviate these emergencies for saving the economy as well as the country.

The global impact of coronavirus is widespread and huge in the global textile market.  The global textile community forecasts that the textile growth will fall by 13% to 32% in 2O2O (WTO). The growth rate will fall gradually. The world trade organizations forecast becoming true day by day. The International Monetary Fund also assumes that the total global growth rate will be falling up to 3%  in 2020. The global supply chain network is getting poor and weak. The Transport connective is vulnerable almost stagnant. The textile market of the Bangladeshi garments industry largely depends on the European Union. The market share is almost 62% and other reaming the share contained by the USA and Canada like 21%. Our global market is shrinking and the supplier is not ready to receive the textile goods and services. The number of order cancellations is increasing day by day.

Top 20 Exporting Countries of fashion goods (share in global exports)
Source: MDS Transmodal, March 2020

Top 20 Exporting Countries of fashion goods (share in total country exports)
Source: MDS Transmodal, March 2020

From the figure, we can see that share in global trade and share in total exports are decreasing in this epidemic and global fashion houses are devasted. These circumstances threaten our industry and factory. The government and other concerning bodies of the world are getting more serious about these issues.

However, HSBC Bangladesh announced a set of measures to help it's textile and garments clients tide over the economic fall out from the coronavirus pandemic. The bank will provide special short- term loans of up to one year, with a principal moratorium for four months, which can be used to support payroll bills and utility payments. The bank will also allow three months' moratorium against the existing term loans enjoyed by businesses belonging to the textile and garments sector. The Bangladesh Bank has asked banks to extend similar support to businesses. Different Supporting body should come up to support and bloom up our textile and garments sector. By considering this situation, different international financial organizations like the World Bank and IMF, ADB and others should come and looks to support its people, businesses, and industries relieving from the pandemic. Now the different parties are raising voice to get encouragement packages again to support the industry. We hope to see the new sun of the day and start a new journey again with the suppliers and buyers. 

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