As we all know, the pandemic and the subsequent countrywide shutdown led to all economic activities, including production in factories, coming to a halt. And this came as a big blow to the garment manufacturers, who have been dealing with falling exports, rising overheads and faltering profit margins for quite some time now.
What followed next was nothing short of a disaster! There were large-scale order cancellations by global buyers (in April and May alone, brands and retailers have reportedly cancelled work orders worth US $ 3.18 billion, putting local suppliers in a tight spot), thousands of employees were terminated as factories they were working in either halted production or shuttered businesses altogether owing to the fallouts of the pandemic, and as expected, exports went for a toss.
Bangladesh witnessed a steep fall in exports in April after the country’s overall export earnings reached a record low of US $ 0.52 billion during the month, of which the apparel sector contributed US $ 0.37 billion.
The impact of the pandemic has been so severe for the industries that the Government had to roll out Taka 10,500 crore stimulus package for export-oriented sectors, particularly the apparel industry, so that they could pay their workers’ wages from April to July under the scheme, with only 2 per cent service charge.
Workers hitting the streets, processions organised and barricades being put on roads and highways – bringing back memories of the protests related to the issue of new minimum wage when the industry sort of came to grinding halt on account of workers’ agitation – became the order of the day throughout the months of April, May and first two weeks of June.
Even though the industry resumed operations soon after the shutdown was relaxed, it was on a limited scale. Besides, the complete breakdown of the supply chains and brands and retailers renegading from their promise only to cancel orders in mass scale and withholding due payments complicated things further. Such has been the menace of order cancellations and payment default that it forced the BGMEA to mull blacklisting Western fashion brands that ‘exploit’ garment makers in Bangladesh by failing to pay their bills on the pretext of the coronavirus crisis.
To start with, the BGMEA wrote to British billionaire Philip Day’s Edinburgh Woollen Mill (EWM) group asking it to pay for the clothes already shipped.
“BGMEA has taken the stand of blacklisting specific buyers and has begun with EWM,” said BGMEA President Rubana Huq, adding, “Severing business with them is not the ultimate means we should pursue. However, we will definitely take a position where we see buyers will fully attempt to exploit the suppliers.”
After a lot of discussion and deliberation, and mounting global pressure, international retailers started to gradually accept their cancelled work orders, while on the other hand, major retailers and brands of western markets also started to slowly reopen their outlets midway through June, which sort of rekindled the industry’s hopes again.
After a long, rollercoaster ride, exports also started recovering once again!
“Honestly speaking, nobody was prepared for the business impact on account of the pandemic, and as such, it was chaotic for both the buyers and suppliers. Everyone was frantically trying to save financial loss. Initially, it resulted in huge arguments/difference of opinions as most retailers asked for vast cancellations and held/pushed back the goods’ shipment. However, finally, after a series of discussions, they stepped forward and almost took all the goods without any cancellations which is a big help in business for us to sustain in a critical period like this,” said MA Jabbar, Managing Director, DBL Group, in an earlier interview with Apparel Resources.
Meanwhile, interacting with the media, former Vice President of the BGMEA and Managing Director of Rising Group, Mahmud Hasan Khan Babu underlined that gradual recovery was taking place in the garment sector since mid-June this year.
“For a full recovery, we will have to wait until January or February next year. Most buyers are reissuing cancelled work orders, which is good for the sector. It may even take one year to fulfil all the cancelled work orders, which is better than if they remained cancelled. We appreciate the buyers who are taking back their cancelled work orders,” said Mahmud Hasan Khan Babu, adding, “To sustain our recovery in garment exports, we will have to wait for Christmas sales in the western world and the US election in November.”
Second wave of the pandemic in Europe!
Now that Christmas is just round the corner, a new issue seemed to have cropped up for the manufacturers, especially in its export stronghold of European Union, where a walloping 64 per cent of the Bangladesh’s garment shipments head to. The virus seems to be making a comeback in many countries, such as Germany, Italy and Spain – all of which are the country’s major export destinations.
More than one million people have lost their lives from Coronavirus already and Europe, which was severely hit by the first wave, is seeing a reintroduction of strong measures in big cities like Paris, London and Madrid to contain the spread of the virus. Resurgence in COVID-19 cases has gripped countries across Europe, leaving politicians grappling with how to curb the spread of the virus.
Recently, Europe experienced a record high number of new Coronavirus cases reaching 71,365 on 21 September (according to the European Centre for Disease Prevention and Control).
“More than half of European countries have reported a greater than 10 per cent increase in the past two weeks,” stated Hans Kluge, the World Health Organisation’s Regional Director for Europe, at a briefing. Even countries that had largely avoided the first coronavirus wave – such as Czech Republic – are now seeing surges. Stricter regulations to try and curb the spread of the virus could remain in place for the entire winter. In the United Kingdom, for example, where case rates are doubling by the week, Prime Minister Boris Johnson announced new restrictions that could last six months.
Meanwhile, German Chancellor Angela Merkel also announced an array of new measures aimed at stopping a recent spike in novel Coronavirus. “We know that a more difficult time is coming, fall and winter,” German Chancellor Angela Merkel said as she justified the new restrictions being put in place while issuing a strong warning that if the current trajectory of rising infections continues unabated, Germany could see up to 19,200 new infections per day in the winter months. “This underscores the urgency to act,” Merkel added.
Meanwhile, Spain has also imposed partial lockdown in Madrid as it tries to control the most serious second wave of COVID-19 infections in Europe. As part of the restrictions, only a maximum of six people allowed to meet in any setting while people are allowed to travel outside their home districts only for essential journeys.
Many new restrictions, however, look different to those imposed at the beginning of the pandemic. Rather than implementing uniform, nationwide regulations, many countries are now opting for more localised approaches as countries are wary of nationwide lockdowns that would have crippling impacts on their economies.
“There has been a turnaround in exports lately, which was not expected by us even a few months back, which is definitely a very good sign for the industry. But going ahead, it would be difficult to say if there would be a significant turnaround in terms of exports or not considering there is a second wave of the pandemic in many parts of Europe. Also, in the other export stronghold, which is USA, many brands and retailers are struggling still. Besides, there is also the Presidential election, which is just round the corner. So, the next couple of months, it would be wise to just wait and watch,” maintained Fazlul Hoque, ex-President of BKMEA and MD of Plummy Fashions Limited, speaking to Apparel Resources.
One thing that Fazlul is sure there won’t be any sweeping restrictions or protracted lockdowns like before that could have a telling impact on the exports.
“Amid fears of a second wave, we prefer buyers with good track records and minimal possibility of our landing in fresh trouble due to COVID-19 uncertainty. But I hope there will not be a huge crisis if the second wave of coronavirus hits again as people have already adapted to the coronavirus emergency,” said Managing Director of Snowtex, SM Khaled, while interacting with the media.
What about USA?
Things are not much different in USA also with the country reporting increased numbers of new COVID-19 cases as health experts warn of a potential Coronavirus surge in the fall and winter.
The number of new coronavirus cases has increased by at least 10 per cent or more compared to the week before in 21 states, most of them in the West, according to a recent CNN analysis of data from Johns Hopkins University.
Cases are rising significantly in Alabama, Alaska, Colorado, Idaho, Maine, Michigan, Minnesota, Montana, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Oregon, South Carolina, South Dakota, Texas, Utah, Washington state, Wisconsin and Wyoming amidst rising fears that the US could also see an explosion of COVID-19 cases in the fall and winter as people exercise less caution and spend more time indoors, where there is a greater likelihood of transmission, underlined Dr. Chris Murray, Director of the University of Washington’s Institute for Health Metrics and Evaluation (IHME), who went on to add that a “huge surge” expected to take off in October “and accelerate in November and December.”
However, compared to Europe, restrictions have not been very severe in the USA.
Nevertheless, the US Presidential election for 2020 pitting President Donald Trump against former Vice President Joe Biden might change the equations in USA even if COVID-19 does not fear many, which again might have implications on exports as markets across the globe have reacted sharply to the US election results in the past as well.
Most national elections are not global events but the US Presidential election is an exception! The US accounts for more than half of the MSCI All Country World index, and the US dollar is involved in nine out of 10 currency transactions worldwide.
Things will also depend on how the US Presidential elections play out in November, Wasim Zakariah, Managing Director of Posh Garments, told Apparel Resources.
It may be mentioned here that President Donald Trump’s victory in 2016 triggered the so-called ‘Trump trade’ and policy uncertainty is always an unwelcome development for trade and commerce in such a scenario, and therefore, a close election contest would result in a higher degree of market volatility, felt many experts.
Bangladesh, too risk resurgence of COVID-19 in winter
There is also an apprehension that Bangladesh may witness the resurgence of COVID-19 in the coming winter, health experts underlined while advocating that the Government should prepare a roadmap and take effective preventive measures based on projection and experiences learned from the first wave so that it can act fast to control the possible winter wave and ensure proper healthcare services for the infected people.
“Coronavirus can remain alive for a long time in cold weather. So, the infection rate may show an uptrend at that time. We have alerted the Government about a winter wave of the virus and take proper steps to tackle it,” stated Dr. Abu Jamil Faisel, a member of the Public Health Expert Divisional Advisors’ Group.
Prime Minister Sheikh Hasina has also recently warned that the COVID-19 situation may deteriorate to some extent during the winter, and asked everyone to bolster preparations accordingly.
The experts also harped on educating people, encouraging them to follow health safety rules, ensuring adequate tests and strictly quarantining visitors from abroad as key to containing the pandemic while also advising the Government to resume daily briefing on the corona situation and provide proper messages from there to sensitise people to involve with the Government’s efforts to check the virus.
Going by the situation at hand, too many factors are at play already, and unfortunately all have the potential to impact exports adversely, which undoubtedly is a matter of concern for the industry going forward.