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WEDNESDAY, AUGUST 17, 2022
How Covid weighed on apparel makers

RMG

Jasim Uddin , Ahsan Habib Tuhin & Faijullah Wasif
14 August, 2021, 12:00 pm
Last modified: 14 August, 2021, 01:21 pm

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How Covid weighed on apparel makers

For most, if not all, clothing manufacturers, the biggest challenge at present is survival – which makes some accept orders at rates below the production costs

Jasim Uddin , Ahsan Habib Tuhin & Faijullah Wasif
14 August, 2021, 12:00 pm
Last modified: 14 August, 2021, 01:21 pm
Many challenges are looming over the RMG sector of Bangladesh while we are striving through the COVID situation and its multiple waves for a prolonged period. Photo: TBS
Many challenges are looming over the RMG sector of Bangladesh while we are striving through the COVID situation and its multiple waves for a prolonged period. Photo: TBS

More than one year into the beginning of the Covid-19 outbreak, the apparel industry – the largest export earner for the country – is still reeling under the adverse impacts of the pandemic.

Most of the readymade garment (RMG) and textile factories are running at half their capacity, as the second wave of the pandemic in Europe and America in late 2020 disrupted their export destinations.

According to industry insiders, prices of basic raw materials – cotton and yarn – have gone up to almost double the pre-pandemic rates and, on top of this, buyers are offering lesser prices.

For most, if not all, of the apparel manufacturers, the biggest challenge at present is survival. This is why some of them are accepting orders at rates below the production cost to keep their factories operational.

Meanwhile, labour leaders claim a large number of apparel manufacturers have terminated thousands of workers even after getting loans under the government's coronavirus stimulus packages.

Commerce Minister Tipu Munshi informed parliament that at least 63 garment factories across the country were closed last year due to the pandemic, leaving 32,582 workers unemployed. However, a study by the Bangladesh Institute of Labour Studies (BILS) says the number of RMG workers who had lost their jobs during the previous peak of the ongoing pandemic stands at 3,24,684.

Joly Talukder, general secretary of the Garment Workers Trade Union Center of Bangladesh, said that about 80% of these terminated workers have got jobs in other factories, but the remaining 20% are still jobless or have migrated to other professions.

Highest stimulus in apparel sector

The apparel sector has received the highest amount of loan from the government stimulus packages.

Apparel industry owners got loans amounting to Tk10,500 crore to pay workers' wages and allowances, under the government-announced stimulus packages aimed at helping the affected industries stay afloat amid the pandemic.

Besides, the government has also allocated a Tk30,000 crore fund for providing working capital loans to large industries, including those in the RMG sector, with a one-year repayment period.

Order cancellation

According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the apparel industry has faced about $3.18 billion worth of order cancellations and withdrawals by international brands and buyers due to the global pandemic.

As a consequence of those cancellations, the country's garment exports fell by 85% in April 2020 compared to the same month a year earlier.

The sector also saw its export earnings drop by 62% and 7% in May and June last year, respectively, compared to the corresponding period of the previous year.

Apparel export is declining

During the first eight months (July-February) of the fiscal 2020-21, the RMG sector earned $21 billion, down by 3.73% from that of the same period of FY20.

In FY20, apparel exports declined by about $6 billion to around $27.95 billion when compared to $34.13 billion earned a year before.

Softex Sweater Industries Pvt Ltd, a Dhaka EPZ-based 18-year-old sweater exporter, has been doing business with some EU brands like Zara, GMS, Promod, Etam, and P&C for the last couple of years.

This factory's monthly export value was $1.2 million in the pre-Covid era, but now it has come down to half due to the increase in prices of raw materials, fall in product prices and additional costs to maintain health safety protocols during the pandemic.

As a result, the sweater exporter that had been witnessing sustainable growth has failed to confirm enough purchase orders and cornered the business.

"Now the factory has been facing monthly losses of about Tk2 crore to feed about 850 workers and run this unit. This hardship started in July last year," said the company's Managing Director Rezwan Selim.

While speaking about the situation, he said, "Our factory is now running at 46% of capacity. Every factory is running at below their breakeven cost and also below their production capacity.

"Industry people have a projection that the year 2021 also will go the same way as 2020. As a result, all entrepreneurs are facing a major challenge to manage bank financing."

Rezwan, who is also a director of the BGMEA, said, "This factory used to make sweaters based on contract production. Before the pandemic its monthly production was about 2 lakh pieces, which has come down to about 80,000 pieces now."

The same situation prevails at Fatullah Apparels Ltd, a Narayanganj-based knitwear exporter. Its monthly export value was $.60 million in the pre-pandemic period and last year it came down to $.48 million.

The company's Managing Director Fazlee Shamim Ehsan said the monthly exports of his factory currently stand at $.48 million, while the average monthly losses are about Tk45 lakh.

Echoing Rezwan Selim, Ehsan further stated that the product price fall and cotton price hike have added burdens on every apparel exporter.

"My company broke even in October last year. But in November it incurred a loss of Tk30 lakh and the amount of losses stood at Tk44 lakh and Tk61 lakh in December and January, respectively," said Ehsan, also a director of the International Apparel Federation (IFA) and a Director of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

Envoy Textile Mills Ltd, known as the world's first green textile producer, also has been facing a monthly loss of Tk2 crore to run the factory for the last two months, while its monthly operating cost is about Tk20 crore.

Like the Softex Sweater, Fatullah Apparels and Envoy Textile, almost every apparel exporter is faced with the same problem, and the problem is intensifying day by day.

Expressing concerns over the future of apparel exports in the wake of surging yarn prices for the last few months, Mohammad Hatem, managing director of MB Knit Fashion and the first vice-president of the BKMEA, said, "We recently exported a bulk amount of female knitwear items to an American buyer. Now we are unable to receive orders for another 5 lakh pieces as the yarn price hike has led to an additional cost of ¢20 for each piece of garment." 

Despite the increase in yarn prices, buyers are not interested in paying extra, he added.


Disclaimer: A collaboration between The Business Standard and Shojag Coalition

Economy / Top News

Covid -19 / Covid / Covid 19 / Apparel / Apparel Hub / Apparel industry / Apparel makers / RMG / RMG sector / RMG Sector of Bangladesh / Bangladesh RMG Sector / readymade garment

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