However, exports bounced back to grow in July and continued the trend steadily in the following two months, beating the targets but dipped again in October as export of woven items fell by 14.43 per cent while knitwear marked a decline of 2.19 per cent.
After the unprecedented export decline of 18.12 per cent in FY ’20 and a trail of declining growth in seven consecutive months, Bangladesh’s readymade garment industry had begun to show signs of revival lately; the performance of the sector edged to the positive territory in August and September amidst expectations of an increase in work orders as the Western world geared up to observe the festive season.
The sector slowly began to turn around when the factories started to reopen following an improvement in the pandemic situation in Europe. Bangladesh exported garments worth US $ 1.23 billion in May and US $ 2.24 billion in June cushioning the economic crisis and exports bounced back to grow in July and continued the trend steadily in the following two months, beating the targets.
But it seems it was not destined to last long as October exports dropped by 4.08 per cent year on year to a little over US $ 2.94 billion, missing the target by more than 6 per cent. According to the EPB data, shipment of readymade garments, which typically contributes more than 84 per cent to the national exports, recorded a negative growth of 7.78 per cent in October even as in the four-month period (July-Oct), exports declined 1.2 per cent to US $ 10.45 billion in FY ’21 from what was US $ 10.58 billion in the same period of FY ’20.
“The decline of exports in October is concerning, considering the fact that the industry has been battling hard against all odds and to great extent has been able to make a turnaround of sorts in the last few months when exports made a rebound after a prolonged depression owing to the pandemic. However, as I have explained earlier also, the increased volumes of exports in July and August has a lot to do with cancelled orders being reinstated and shipped along with regular orders. To add to which there have been orders for the holiday season (Christmas) which were also shipped simultaneously somewhere around August so that they can reach the export destinations on time and retailers are able to distribute it in their stores to hit the market by early November. All these added up to boost exports. So, a dip in exports in September/October was somewhat expected when compared with the surge of July/August,” said Md, Fazlul Hoque, MD of Plummy Fashions Limited speaking to Apparel Resources.
However, what concerns Fazlul is the second wave of the pandemic in the West with many countries either having implemented restrictions or planning to do so. “In case the resurgence of the Covid-19 pandemic is strong this winter, it is bound to hit the brands and retailers, which would have an adverse impact on the apparel exports,” expressed the MD of Plummy Fashions while adding if the resurgence is weak and restrictions limited, things might not turn that bad on the export front, otherwise it can hurt exports again, which would be upsetting.
“Volume-wise, the sector was on a recovery track in last 2/3 months but at a compromised price level. We have witnessed a sharp decline in prices,” said Dr. Rubana.Huq, the President of the apex garment makers’ body, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) while citing data collated by the National Board of Revenue, which underlined that prices of apparel items exported from Bangladesh dropped by 2.17 per cent year on year during the January-September period of 2020.
The decline in September alone was 5.23 per cent.
“Unfortunately, this is leaving the supplier side extremely vulnerable,” the BGMEA chief said, adding, “Now, due to the second wave of Covid-19 in the Western countries, the volume might drop as well. Buyers might hold back placing new orders. It means factories might end up with idle capacity, being already in a weakened financial position due to price hits they had already taken. This might prove extremely difficult for the industry to cope with.”
According to Vice-Chairman of the Newage Group of Industries, Asif Ibrahim, who spoke to the media, the second wave of the pandemic leading to shutdowns in Europe has initiated cancellations of export orders since the beginning of November, which he fears could impact export earnings.
Asif, however, underlined that Bangladesh has shown resiliency during the first wave and expressed hope that the industry could take lessons from that and carry on with business.
“Hopefully, we can take lessons from it and minimise the impacts through proper planning and Government stimulus packages,” said Asif.
It may be mentioned here that considering the fallouts of the pandemic, the Government came up with low interest loan, an initiative to support the factory owners for paying the workers their wages, which helped them survive and make a turnaround amid the pandemic. The Government gave Taka 75 billion to the owners in loans with only a 4 per cent interest rate enabling them to pay the workers’ wages. Later, it gave another Taka 30 billion as sought by the owners.
The factories drew almost half the offered funds to combat the economic crisis amid the pandemic. “That loan left a positive impact during the crisis. Now we need a wider review to see the real impact of it. An independent authority should do the evaluation, which will help the Government make decisions in distribution of such loans in future,” maintained Professor Selim Raihan, Executive Director of SANEM or South Asian Network on Economic Modeling.
However, as per Shams Mahmud of the DCCI, micro, small and medium enterprises have not received the support they required and were finding it difficult to stay afloat. “We are seeing the second wave hitting Western countries. Export markets may suffer because of that. The positive news is online sales are up. So, even if we see a decline in stores, the orders may not come to a standstill for Bangladeshi exporters.”
The impact of the second wave of the pandemic in West seemed to have surpassed the RMG sector now to impact Bangladesh leather industry as well. According to the President of the Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh, Md Saiful Islam, some countries in the European Union (the largest export destination for Bangladesh’s leather products and footwear), have already witnessed a second wave.
“This being the case, with varying extents, our sector is going to face the heat of the second wave, whether there is any second wave in Bangladesh or not,” said Md Saiful Islam while adding that the period from November to December was supposed to be a sales season in most of Bangladesh’s export markets.
“If the second wave hits hard the countries, stocks in the markets will pile up. This will result in the slowing down, postponement or even cancellation of export orders by foreign brands and buyers as seen at the height of the first wave,” Saiful added while lamenting that just as the industry had started to recover, the second wave seem to have started.
The second wave could further delay the recovery and will put some factories, particularly small and medium firms, in a struggle for survival, feared Saiful who further expressed fears that if countries such as China face any second wave, the supply chain and imports will face serious disruptions as well.
Now, if Bangladesh could come out of the export dip in October in the coming months or the second wave of the COVID-19 continues to batter the export-oriented apparel and leather sectors, as has been the case when the pandemic hit first, remains to be seen.