'The RMG sector, which accounts for approximately 80% of Bangladesh’s total exports, has suffered in various ways due to the pandemic'
More than 50% of Bangladeshi export-oriented readymade garment (RMG) manufacturers have had to take orders for products at much lower prices than before in case of emergency due to the ongoing Covid-19 pandemic, a study revealed recently.
The RMG sector, which accounts for approximately 80% of Bangladesh’s total exports, has suffered in various ways due to the pandemic, it also said.
The study, titled "Weakest Link in Global Supply Chain: How the Pandemic is Effecting Bangladesh Garment Workers", was conducted by the Institute for Human Rights and Business (IHRB) and the Subir and Malini Chowdhury Center for Bangladesh Studies at the University of California Berkeley, with the support of UNDP Bangladesh and the Government of Sweden.
In the study, it also said that buyers demanded price cuts on new orders that are bigger than the year-over-year reductions buyers usually ask for, according to several manufacturers.
Manufacturers reported that when the pandemic disruptions first hit earlier in March 2020, 77% had at least some of their orders canceled without payment from buyers.
Currently, only 27% of these same suppliers say that all or most of their orders have been paid in full.
Talking to Dhaka Tribune, Liaquat Ali, Chairman of Balaka Stitch Limited, said that they were taking orders at a price lower than their production cost as there was no other choice.
If they did not do so, they would have been forced to go under.
“As a result, at least we do not have to close our factories and leave the business. We are able to pay our workers and keep our business afloat," Liaquat also said.
“At least we survived due to the stimulus we received during the shutdown last year. The application has been made again this year, let us see what happens. But such incentives are not a permanent solution. That is why we are forced to export products at a discounted price, so that we can pay the workers and meet the utility costs of the factory. Almost the entire sector is suffering this way,” he added.
According to the survey, On, average, manufacturers surveyed will have to wait 77 days after they complete and ship customers’ new orders, to receive payment. Before the pandemic, the average was 43 days.
According to the survey, a majority of suppliers said they have less than half the order volume now relative to the same period last year, and 57% reported that, if current patterns continue, it is extremely likely or somewhat likely that they will be forced out of business.
Anwar-Ul-Alam Chowdhury Parvez, former president of BGMEA and President of the Bangladesh Chamber of Industries (BCI), said that the crisis in the RMG sector began since the increment of the salary for the second time. After the outbreak of COVID-19 pandemic, it has worsened.
“Now there is a situation that either you have to run the business at a loss or leave it altogether. A large number of owners have shipped their products at a discount. The manufacturers have no choice in these regards. Again, buyers were offering much lower prices,” he added.
He also said that the manufacturers are not in any position to talk about price until the situation returns to normal. If this situation continues, many factories will not be able to cope up with and they will be forced to leave the business, he also said.
“The sector is currently in a state of growth, but not profit - and this has been the case for the last two years. The government has to take some policies to overcome this. Existing loans have to be extended. For example, the term of the loan is 5 years, it should be extended to at least 14-15 years. Otherwise, the industry will be forced to close,” Anwar added.