COVID 19 – Effect In Our RMG Industry

COVID 19 – Effect In Our RMG Industry

About The Author:

Akram Ahmad Numan

M.Com, FCMA (BD), ACS, CMA (Aus)

Director, Finance & Control

FCI (BD) Ltd.

Talisman Ltd.

The textile and clothing industries provide the single source of growth in Bangladesh’s rapidly developing economy. Exports of textiles and garments are the principal source of foreign exchange earnings. By 2002 exports of textiles, clothing, and ready-made garments (RMG) accounted for 77% of Bangladesh’s total merchandise exports.

In 1972, the World Bank approximated the gross domestic product (GDP) of Bangladesh at US$6.29 billion, and it grew to $173.82 billion by 2014, with $31.2 billion of that generated by exports, 82% of which was ready-made garments.

As of 2016, Bangladesh held the 2nd place in producing garments just after China. Bangladesh is the world’s second-largest apparel exporter of western fast fashion brands. Sixty percent of the export contracts of western brands are with European buyers and about forty percent with American buyers. Only 5% of textile factories are owned by foreign investors, with most of the production being controlled by local investors. In the financial year 2016-2017, the RMG industry generated US$28.14 billion, which was 80.7% of the total export earnings in exports and 12.36% of the GDP; the industry was also taking on green manufacturing practices.

The global apparel manufacturing industry was valued at $658 billion in 2018, growing at a rate of 4.6% over the past five years. Bangladesh holds a 6.4% share, second to China, which dominates with 36.4%. However, China’s share has been falling due to a shift in manufacturing to electronic goods and tariffs due to the recent US-China trade war. To capture this share, Bangladesh will have to compete with several other developing countries, such as Cambodia, Vietnam, and Myanmar, all of whom share the advantage of cheap labor. An essential step in beating these countries will be improving the ease of doing business in the country, where Bangladesh ranked 177th out of 190 countries. Bangladesh’s main export destinations are the EU, with whom Bangladesh has duty-free trade, and North America.

As the industry is export-oriented, COVID-19 Coronavirus is the greatest potential threat to Bangladesh’s RMG sector in the present day. Originating from the wet markets in the city of Wuhan; China, the Coronavirus continues to take the world by storm. Classified officially by the World Health Organization as a Pandemic. Most of the European countries and many cities in the US, UK, and Canada have undergone quarantine measures and restricted international flights while limiting local ones. Even though our world has been faced with several pandemics in the 21st century alone, including Severe Acute Respiratory Syndrome (SARS, 2002), Avian Influenza (Bird Flu, 2009), Middle East Respiratory Syndrome (MERS, 2012) and Ebola (2013- 2014), COVID-19 stands out from the rest due to its exponential growth and swift attacking power. Nearly every country is feeling the impact of COVID-19, with global economies being brought to a standstill. Bangladesh, of course, is no outlier to the virus’s effects.

Since Bangladesh is a developing country, the market economy of Bangladesh is rapidly developing; it is greatly influenced by supply and demand. Prior to this epidemic, Bangladesh averaged a GDP growth of around 6.5% per year and was forecasted to hit 8% in 2020. The country’s economy has been mostly driven by its export of RMGs, textiles, fish, seafood, jute, leather products, remittances, etc. The economy has really felt the effects of the virus, in particular, the 4500+ garments factories, whose main exports included mostly Europe, UK, US, and Canada, all of whom are in a lockdown state. Many buyers have canceled their orders with some of the garments industries across Bangladesh.

20 member companies of BGMEA have faced worth USD 17.02 million of order cancellation on Tuesday by 17th March. Also, worth USD 1.03 million work orders have been suspended. Some of the clothing retailers and brands have started delivering letters to the local manufacturers, asking them for cancellation and slashing of work orders as the clothing stores are shut down in Italy and Spain due to the Coronavirus. The buyers said until Monday, 23th March, they waited for the signals from their headquarters about the cancellation and slashing down of the work orders as many stores have been shut down in the US and Europe, especially in Italy and Spain.

The amount of cancellation and slashing of work orders depends on the severity of the spread of Coronavirus in the main European and US markets. If the situation prolongs, the amount of cancellation of work orders may be more, and if the situation improves, the amount soon will be meager. Other garments industries have completed making the product but were unable to ship it to the buyers due to the new restrictions. There are even some industries that had their goods and products to reach the buyer.

However, they were not able to settle all the payments in time due to the current adverse situation. During this time, it is difficult for the owners of the garments to run the factory, 264 RMG factories reported having already seen USD 607.9 million in orders canceled or postponed. The most considerable uncertainty lies amongst the worker’s job status, as if factories begin to halt or shut down, thousands will be left without a job, and there is a great potential of workers to riot.

Additionally, many Bangladeshi workers who worked in countries that are undergoing quarantine have lost their jobs and have returned back to Bangladesh, greatly reducing the chances of foreign remittance income. The unemployment rate will skyrocket, the International Share Market will be affected, and other countries whose economy is so strongly driven by export will face a similar situation.

What should do?

To recover from this crisis and rebuild Bangladesh’s economy, people should try to find and establish alternate sources of income as expert’s report it may take months to get the virus under control. Factories and industries should try and seek some sort of financial support from Banks and other financial institutions so that they can stay afloat or help out their workers during this time of unemployment. Rather than the cancellation of export orders, the companies should push to have them rescheduled instead, so when exporting is possible again, the garments factories can attempt to resume their business swiftly. 

We have taken some safety measures for our Workers and office staffs for COVID-19, which are as follows: 

# Providing hand sanitizing facility in front of the factory entry point for all workers & staffs

# Providing extra care with hand sanitizing materials in all toilets to ensure proper handwashing

# Provided proper hand wash training to all employees as per WHO guideline

# Provided awareness training to all employees about COVID 19 by the HR Dept.

# Provided awareness training to all employees about COVID 19 by our authorized doctors & nurse as per WHO guideline

# Providing awareness on COVID 19 through PA system regularly

# Increased additional two (2) nurses to check and monitor worker’s health-related issue regularly

# Fixed COVID 19 related awareness posters in different places of the factory

# Provided vitamin C tablets (continuous 7 days) to all employees

I encourage factory owners to boost the morale amongst their workers, having them train to become more skilled so that once our world can move past this virus, the Bangladesh garments factories will be able to produce high-quality products with increased efficiency quickly to meet the demands of the buyers.

About FCI (BD) Ltd.

FCI Clothing’s business was started in London in 1980, wherefrom a small factory, they produced the iconic Burberry trench and duffle coats. From then on, the business grew manufacturing for other brands such as Liz Claiborne, Jaques Vert, Windsmoor & Alexon. The expansion was then made offshore by setting up factories in Morocco in 1992 and then setting up in Bangladesh in 1997.

From inception, they have been producing high-quality garments, ranging from soft tailoring to structured formal outerwear for Global Brands. The business is known for the highest compliance standards, state of the art manufacturing facilities, and world-class technical know-how.

FCI has five (5) state of the art production units. Four (4) of which are woven sewing plants and one (1) is a sweater plant. The sweater plant is fully automated with Stoll Multi Gauge Knitting Machines. FCI’s current capacity can fulfill 27 million woven units per annum, along with 2.5m units of sweaters per annum. FCI has invested in the very latest technology in manufacturing to enable us to ensure consistent quality for our customers’ existing and new!

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