COVID-19: An impending threat for Bangladesh RMG
Unpredictable outbreak of coronavirus disrupts the supply chain of raw materials of the clothing industry in Bangladesh. The country imports almost half of its textile and textile-related raw materials from China and so, if the crisis prolongs, it will bring an inevitable disaster in the entire supply chain management in Bangladesh.
According to BGMEA (Bangladesh Garment Manufacturers and Exporters Association) the country imported textiles and other raw materials from China worth $5.02 billion during fiscal year 2018-19. Moreover, about 40 per cent of the capital machinery and spare parts for the textile and garment industry comes from China.
Garment export contributed 84.21 per cent to Bangladesh's total exports income of $40.53 billion in the last fiscal. Export Promotion Bureau (EPB) data denotes that total garment exports amounted to $34.13 billion posting an 11.49 per cent growth during the period. But last fiscal year Bangladesh imports total raw materials and other from China is $13.65 billion.
RMG experts predict that if the coronavirus epidemic lasts long in China, Bangladesh's apparel production will definitely be affected as the US and the EU buyers are not travelling to Asian countries including Bangladesh. On the contrary, Bangladesh is also not visiting Hong Kong and China and so, business is almost going to be stagnant very soon if this crisis will be continuing.
According to the last fiscal year, China-Bangladesh joint trade stood at $14.48 billion. Bangladesh Bank data in the fiscal year 2018-19 shows that Bangladesh imported goods worth $13.65 billion while the country exported products of $831.2 million in the same period.
Literally, global buyers' demand for apparel goods are deteriorating and so, it will cast an ominous shadow on the export earnings which has already seen a 5.21 per cent drop in the first seven months of FY20. Although the manufacturers are incurring losses as they would have to pay workers' wages and utilities service charges, they will have to retain the buyers to avoid the shutdown of production.
Shipment of raw materials is being delayed. The inventory shortfall both for raw materials and finished goods influences our entire supply chain management. Due to the absolute dependency on China, factories are struggling to run properly and so, a big disaster is waiting for us as Eid holiday will begin at the end of May of this year.
Bangladesh's manufacturing sector, especially readymade garments, textile, plastic and leather industry will be the worst sufferers; economic threat will be deep-rooted and the harmony of supply chain of raw materials will entirely be collapsed. The manufacturers cannot start their production unless the deliveries of accessories and fabrics are confirmed. Buyers on the other hand do not cooperate if our deliveries are delayed. So, the impact of dark shadow is prominent.
At present, Bangladesh has 1,744 garment accessories and packaging manufacturing units which are producing 35 items and meeting 95 per cent demands of the $34 billion RMG sector. But the manufacturing raw materials are highly dependent on China as Bangladesh imports about 40 per cent-50 per cent raw materials from this country. If the impact of coronavirus extends for six months, the sector will count Tk. 1,500 crore losses because of production collapse.
Coronavirus panic has already been hurt the world's entire economic system including Bangladesh and so, our manufacturers are in unfathomable fear and dilemma whether China may revive completely or not within the shortest possible time. Delaying in the shipment process is tremendously affecting our manufacturing industries. As a result, textile and textile related materials prices are increasing by leaps and bounds.
In fact, small business enterprise will be the worst victim. Dependency on China for polyester yarn, viscose and mixed yarns influences our production cycle. Manufacturers and retailers' sales are deteriorating in one hand and a significant amount of orders is being shifted to Bangladesh, Vietnam, Cambodia and Myanmar on the other hand. Therefore, Bangladesh needs to be strategic to grab the diversified products order to sustain in the global market.
In these circumstances, the government of Bangladesh should be strategic in export-import policy by taking protective and cautionary measures. Alternative sourcing for textile and textile-related raw materials needs to continue on a regular basis to avert disruption or crisis in the supply chain. Otherwise, global economic depression caused by the coronavirus outbreak may affect the entire national economy of Bangladesh.
The writer is assistant deputy secretary, BKMEA