“It would be a burden for the garment industry to pay the workers’ wages and bonuses together. Many countries in Europe and America were forced to impose fresh lockdown centring the second wave of the COVID-19 pandemic. Therefore, retail outlets were shut down further,” said the Vice-President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), MA Rahim Firoz.
Even as the inoculation drives in host of Bangladesh’s export destinations in the West, against COVID-19 have kickstarted, going by the available reports, things are far from being normal as yet, as far as export and order status are concerned.
In this situation, the upcoming festival of Eid-ul-Fitr could emerge as a major challenge for the garment makers as it would entail paying workers’ wages and bonus, say industry insiders, even as the entrepreneurs are apprehending to face some trouble over the same.
MA Rahim Firoz went on to add, “To handle the situation, foreign buyers have been compelled to reduce work orders; now, the rate of work order cancellation is about 20 per cent in the country that leads to uncertainty. Payment is not available after preparing and exporting of the products in time. Earlier, we would get export value with the exporting of goods. But now, the money is paid late and it takes two/three months’ additional time to get the payment. There is also no guarantee as to when the payment will come after production. So, the existing situation turns out to be more difficult to deal with… Eid bonus for workers is now a big challenge.”
It may be mentioned here that as per recent reports, dearth of work orders from global retailers and brands, especially to small and medium-sized garment factories, are reportedly turning so acute by the day that many entrepreneurs are now said to be looking for prospective buyers to sell their respective units and exit the business for good.
Owing to the pandemic last year, 300 SME units which are also members of the BGMEA had to shut down, reportedly said Rezwan Selim, a Director of the BGMEA, citing the trade body’s data.
Of those, nearly 20 factories have reopened and some are struggling to reopen as they did not receive work orders and were not able to manage funds, Selim explained speaking to the media, adding further that the flow of work orders was not good even for the big factories, and that a majority of the factories, particularly the SMEs, are running at 40 to 50 per cent capacity because of the lockdown in major export destinations due to the second wave of Coronavirus.
Since the inflow of orders in big units is slow, the SMEs are not getting the associated subcontracting orders, Selim added even as, according to reports, around 10 per cent of the factories said during the ongoing business slowdown, 50 per cent to 100 per cent of the work orders did not cover costs, yet those had to be accepted and they did so just to keep their business afloat.
This was as per a recent study of the Centre for Policy Dialogue (CPD).
Further, retailers and brands have so far, even if having reinstated 90 per cent of the cancelled and suspended orders worth US $ 3.18 billion, allegedly been delaying making payments, dealing a blow to the SME units.
Given the situation in hand, as explained by the apparel makers, one can very well imagine, what they are going through. And this is something, the garment makers are facing since the break out of the pandemic last year. Since March 2020, Coronavirus had started to impact the industry as garment manufacturing units were shut down for months due to lockdown imposed by the Government to prevent the spread of the virus. As a result, all kind of productions, exports and new work orders were stopped.
Consequently, many factory owners were forced to shut down their production units even as some had to retrench and lay off workers which forced many workers to come out in the streets to stage demonstration despite the pandemic. So, to address the situation, the Government announced assistance of Taka 7,500 crore with low interest to pay the workers’ wages.
After the initiative, the production started to increase gradually and going by what the garment makers have to say, the incentive announced by the Government at that time was very helpful in normalising the situation in the garment industry. But the new wave of COVID-19 in the West turned everything topsy turvy again even as work orders took a hit owing to the same.
So, with the holy festival of Eid-ul-Fitr coming up somewhere around April/May followed by the Eid-ul-Azha soon after, this situation is going to turn out to be even more difficult for the garment makers, industry insiders maintained.
Mohammad Hatem, Senior Vice-President of BKMEA said, “We have made some proposals to the Government to deal with the current situation. But the Government is yet to respond,” even as Touhidur Rahman, President of the Bangladesh Garment Industry Workers’ Federation on his part reportedly maintained, “I don’t believe that the RMG factories are losing work orders. After starting of vaccination, the workspace is going to be more extended.”
He went on to maintain that the lockdown was given in some European countries in the second phase and it was withdrawn again; while speaking to the media, Executive Director of PRI Ahsan H Mansur reportedly underlined that the apparel sector was in crisis due to the pandemic and that the second wave of COVID-19 in Europe and America had also hit business but at the same time he reportedly expressed optimism that paying Eid wages and bonuses by the factory owners was possible.
Meanwhile, in a positive development which is expected to give some respite to the garment makers of the country, they have been given six more months to begin servicing stimulus funds even as they were due to start paying the instalments on the easy loans amounting to Taka 10,500 crore they took, from this month
On the eve of Bangladesh embarking on a countrywide shutdown on 26 March 2020 to slow the spread of Coronavirus, the Government announced a Taka 5,000-crore special package to pay the wages and allowances of export-oriented industries’ workers for three months starting from April. However, as the fund was later found to be inadequate, the Government released another Taka 2,500 crore from the bailout package rolled out for the large industries affected by the pandemic. Then in July, the Government made available another Taka 3,000 crore to pay the wages and salaries for the month.
The apparel exporters were due to start paying the instalments on easy loans amounting to Taka 10,500 crore they took from this month even as BGMEA has been pushing for a deadline extension of two to five years, with a one-year grace period, for repaying the initial Taka 5,000 crore stimulus.
As per the letter sent by the Finance Ministry on 22 February to the Bangladesh Bank, the executioner of the Government’s relief packages, the repayment of loan instalments will now start from 1st September and the borrowers will have to repay in 18 instalments.
Thanks to this extension, the burden on the garment exporters is definitely going to lessen significantly. Nevertheless, if they would be able to pay the wages and bonus to the workers during the upcoming holy festival of Eid-ul-Fitr, is to be seen though.