The ready-made garments sector has been called as one of the lifelines of Bangladesh’s economy, but how has this industry fared during the pandemic?
Factories lost new orders during February-March 2020, when lockdown measures were being taken by European countries, data collected through surveys revealed. Most RMG factories lost existing orders which were already in the pipeline when factories in Bangladesh reopened at the end of April 2020, after the countrywide lockdown.
Many factories did not receive any new orders. The brands and buyers are generally reluctant to take any responsibility for the additional costs the factories are having to bear in order to take preventive safety measures against COVID-19.
RMG factories are taking orders at cheaper rates as the orders from global buyers have scaled down. Factories that manufacture sweaters have been hit harder compared to factories for knitted and woven garments. This is due to order cancellations from the buyers during the peak time of the season, which happened to be during the global lockdown.
New orders from buyers were delayed, due to the looming second and third waves of COVID-19. Some factories are looking for new buyers to sell products from the batches of cancelled orders. Some are also considering selling products from the cancelled batches to domestic markets.
The stimulus package
The Bangladesh government has allocated a loan of BDT 10,500 crore (USD 1.2 billion) for the garments industry, in order to support the payment of salaries and allowances to workers.
One of the affected factories lost 50% of its turnover due to cancellations of orders, but it managed to pay the workers using the loan from the stimulus package. Following that, the factory has been gradually recovering.
Another factory had to shut down during the lockdown due to cancellation of orders. It failed to pay the wages of its staff after the lockdown was lifted, and did not receive any new orders. The factory authorities failed to receive a loan from the stimulus package because they could not submit the required documents. New loans were hard to come by from banks, so most workers remained unpaid. Due to the factory’s uncertain future, the workers are reluctant to return, and most have found employment elsewhere. With as low as 30 staff and 75 workers, the factory is trying to pursue subcontracting orders in order to survive.
Looking for other ways out
Generally, subcontracting ready-made garments factories are those which do not directly receive orders from global brands and buyers; rather, they receive orders from other factories where the actual orders have been placed. In recent times, the subcontractors are also struggling to survive as the parent factories are receiving next to no orders from the buyers.
Since the factories reopened in April 2020, some have not been able to get adequate workers, as many workers have not re-joined or returned from their villages after the lockdown was lifted. In addition, many workers switched jobs to different factories.
The factories mentioned were surveyed as part of a study, and have been sampled from the list of export-oriented ready-made garments factories of Centre for Entrepreneurship Developmet’s current project – Mapped in Bangladesh (MiB). Conducted by BRAC University’s Centre for Entrepreneurship Development and the Centre for Policy Dialogue, the study maps out how the sector is recovering and building resilience.
MiB has generated the list through a countrywide factory census, as the project aims to enable transparency in the sector by providing the industry stakeholders with authentic and updated factory data through an interactive digital map.
Fahim S Chowdhury is Senior Research Associate. Sadril Shajahan is Research Associate at Centre for Entrepreneurship Development (CED), BRAC University.