Bangladesh has started a new financial year (FY21) from 1 July, which at best can be termed as ‘plagued with uncertainties’. COVID-19 that has had a devastating impact across the globe has not spared Bangladesh either, especially its garment manufacturing and export sector, which is the lifeline of the country’s economy.
The first case of COVID-19 in Bangladesh was detected on 7 March. Since then, the pandemic has wreaked havoc in terms of lives lost and the overall economy of the country. Bangladesh exports, mainly dependent on readymade garments (92 per cent), suffered a big jolt in the wake of the epidemic. If the industry was forced to shut down operations for a substantial period on account of the countrywide shutdown, it was on a limited scale when it resumed operations, thanks to large-scale order cancellations (US $ 3.15 billion) by global buyers, especially those from the export strongholds of Europe and North America. Further worsening the situation has been buyers holding back payments, asking for discounts and demanding extended payment terms, which have the garment makers at their wits’ end, already struggling to run operations successfully.
If many had to bow out of the business, many of those who are still in are finding it difficult to keep afloat. The result – a sharp decline in exports and an increasing number of unemployed and unpaid garment workers!
Declining orders and exports
In the March-May period, work orders shrank by around 62 per cent. As per BGMEA, data compared to 454 orders received in the March-May period of last year, was a mere 172 this time around, in the corresponding period. The breakdown of the fresh work orders in this period shows that BGMEA member factories in March this year received 87 work orders as against that of 138 received in March last year, while in April this year, new orders were just 8 compared to 136 received in April last year. In the month of May, the BGMEA member units received just 77 work orders compared to 180 in May last year.
According to the Managing Director of Ananta Denim Technology Ltd., Sharif Zahir, new work orders from global buyers are not expected to improve much in the days to come, as most of the export destinations were still grappling with health issues following the outbreak of COVID-19 in those countries and showing little signs of stabilising anytime soon.
Such drastic fall in order volumes and the weakening demand of apparel items amongst the end consumers globally reflected on Bangladesh’s faltering apparel exports after the country missed export earnings target by 26 per cent in the July-May period and dropped 18.74 per cent year-on-year to US $ 25.7 billion.
The year-on-year drop was 20 per cent in March and 85 per cent in April.
“It doesn’t seem the crisis will be over soon. Analysts have forecast that apparel demand will drop up to 50 per cent due to the COVID-19 pandemic,” added BGMEA President Rubana Huq, while former BGMEA President Anwar-Ul-Alam Chowdhury on his part maintained, “The situation will worsen in June, July and in the next months.”
Rubana also underlined that the export sectors needed Government policy support to overcome the pandemic’s impact and sustain. “Until 27 June, the total RMG export reached US $ 27.50 billion, which was US $ 34.13 billion during the same period last year,” Rubana Huq maintained, adding, “By the end of June, the year-end export figure might reach US $ 27.60 to US $ 27.65 billion, which would indicate more than 19 per cent fall in RMG export.”
The RMG sector lost US $ 4.8 billion worth of export just in 3 months from April to June 2020, which shows the severity of COVID-19 on the industry.
Export debacle apart, coronavirus had a devastating impact on the livelihoods of garment workers.
As per latest available reports, around 21,331 workers, most of whom were employed in the readymade garment sector of the country, have reportedly lost their jobs since Eid. The report, which cited data collated by the country’s Industrial Police, underlined of the 21,331 workers who were employed with around 129 factories spread across six industrial zones that are under the jurisdiction of the Industrial Police, 19,409 were said to be employed with garment and textile units. Further, of these 19,409 workers, 2,298 are from 16 factories that are under the BKMEA, while 16,853 were reportedly employed with around 86 factories that are members of BGMEA. The remaining 258 retrenched workers were reportedly working in four mills that are under the Bangladesh Textile Mills Association (BTMA).
However, labour leaders have claimed that the total number of retrenched workers would be much higher as factories were allegedly sacking workers randomly without any notice.
Also, a large number of workers, who are still employed, had to deal with lack of timely disbursal of salaries. According to report of the country’s Industrial Police, workers of 1,004 industrial units, out of 7,602, in six areas under the jurisdiction across the country, were yet to be paid wages for May, as of 29 June. Out of 1,004 factories which did not pay wages of May, 436 are RMG and textile units, 10 are the factories under Bangladesh Export Processing Zone Authority (BEPZA) and 558 are the non-RMG units. Further, of the 436 RMG and textile units, 134 are the members of BGMEA, 266 units are listed with Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and 36 are the members of Bangladesh Textile Mills Association (BTMA).
The data collated by the Industrial Police further shows that a total of 655 factories, including 212 RMG and textile units, did not pay wages of April to their workers. “Some of the RMG units are yet to pay wages of April and May to their workers due to the lack of cash flow, as they have lost their business due to the coronavirus pandemic,” stated BKMEA Senior Vice President Mohammad Hatem, adding some of the subcontracting factories failed to pay their workers, as they had no work orders and did not get support from banks as they do not export directly.
Moreover, some of the factories paid wages of April with the loans from the Government-announced stimulus package, but failed in May as banks declined to disburse loans from the package citing various reasons, Mohammad Hatem added.
Meanwhile, the BGMEA in a statement claimed that 98 per cent of its active member factories paid wages of May to their workers. According to the wage payment status of BGMEA, a total of 1,926 factories of the trade body export directly and 1,886 of them paid wages of May to their workers as of 27 June.
Payment in 40 factories remained under process, the BGMEA said.
Although the members of the BGMEA are more than 4,000, the trade body only provided statistics of factories which export directly.
What the experts say
The rising poverty and unemployment, slowdown in production and consumption as well as risk to lives and livelihoods, experts and economists said, pose serious challenges to the country and its economy. Containing the coronavirus outbreak through prudent management in health system will be the prime challenge for the Government to ensure smooth recovery of the country’s economy devastated by the pandemic, they added.
Several studies conducted by local think tanks Centre for Policy Dialogue, South Asian Networks on Economic Modeling (SANEM) and the Citizen’s Platform for SDGs have already revealed that millions of non-poor people have become vulnerable to poverty, losing jobs and income while inequality in terms of income and consumption has increased significantly.
According to the studies, some 20.4 per cent or 3.60 crore non-poor people have become vulnerable to falling under the poverty line taking the country’s overall poverty rate to 40.9 per cent, higher than the poverty rate in 2005, due to the adverse impacts of coronavirus outbreak.
Now 3.40 crore or 20.5 per cent of the population are poor in Bangladesh, according to the Bangladesh Bureau of Statistics.
Containing coronavirus, providing livelihood support to poor and implementation of stimulus packages would be the major challenges for the Government, feels SANEM Executive Director Selim Raihan.
“Economic recovery will depend on how the Government can address the issues, mainly controlling the outbreak,” Selim said, adding the situation of poverty, unemployment and inequality will worsen if the Government cannot contain the outbreak, and it might even create social problems, including increase in crimes, violence and other social disorders.
So, the implementation of stimulus packages and other commitments to revive the economy and save life and livelihood should be the utmost priority, maintained Selim Raihan, who apprehended that private investment might remain stagnant due to the lack of finance from the banking sector which had been overburdened with implementation of the stimulus and possible Government borrowing.
Meanwhile, World Bank consultant Zahid Hussain said that the country entered the new fiscal year with huge uncertainties, adding, all the other issues, including economic recovery, would become secondary if the root cause of the uncertainties, coronavirus outbreak, could not be contained.
He also maintained that the economy may reach a level of rebound within 6 months if the Government can contain the outbreak, but added the actual recovery will depend on whether the Government takes all the necessary measures.
Meanwhile, the country’s Export Promotion Bureau has proposed to set the target for the country’s merchandising export at US $ 37.44 billion with 13.44 per cent year-on-year growth for financial year 2020-21.
The EPB recently sent the proposal to the Commerce Ministry and a technical committee of the ministry would be working on finalising the targets. Experts, however, said that a growth rate of above 13 per cent for the next fiscal year would be ambitious and the Commerce Ministry should be pragmatic in finalising the export target.
The Government set an export target for goods of US $ 45.5 billion for FY20 June 30. Against the target, the country’s export earnings in July-May of FY20 stood at US $ 30.96 billion with an 18 per cent negative growth.
The EPB reportedly set its proposed target at US $ 37.44 billion for FY21 based on the US $ 33 billion earnings reported in FY20.
“Considering the global situation, the 13 per cent growth target is ambitious as our export earnings even before COVID-19 were not in double digits,” said Centre for Policy Dialogue Research Director Khandaker Golam Moazzem, who further maintained that the ongoing negative trend would continue for up to the first half of the just started fiscal year, as normalcy would not return soon in the global market.
Now what would be the actual impact of COVID-19 on Bangladesh’s economy and the garment manufacturing sector and whether the industry would be able to recover soon from it to register export growth, are still open to conjectures.