Untamed coronavirus pandemic threatens RMG industry
The endemic outbreak of corona virus disease formally known as COVID-19 across the globe can be termed as the worst outcome of globalization. The rapid spread of corona pandemic has disrupted the global economy and supply chains since countries are strictly maintaining border controls, massive city-wide lockdowns and quarantines in order to tame the virus. The COVID-19 pandemic tremendously aggravated global economic crisis and severely affected trade, economic activity and employment. The ILO in its report, March 25, 2020, provides that the crisis may result in a US$2 trillion deficit in global income, halve global growth from 2.9 per cent in 2019 to 1.5 per cent for 2020 and increase global unemployment by at least 25 million.
Therefore, the adverse outcome of coronavirus impacted on all sectors of Bangladesh economy that severely hampers financial transactions and the real economy, commerce and consumers at the levels of enterprises, entrepreneurs and workers. Since transportation has been stopped, the export outflows are interrupted and import inflows are facing delays. At the same time tourist arrivals are virtually non-existent as different hotels, including Five Star and Three Star, are closed for indefinite periods. Outmigration has been stopped, business contacts are disconnected and overall investment flows are facing serious uncertainties. This pathetic scenario has undoubtedly resulted from corona virus conundrum which deeply undermined the significance of globalization.
As a result, the number of losers in the global economic competition increased while winners are facing tremendous problems. What is deeply worrying is the fact that the RMG sector will be the worst victim of the coronavirus pandemic. The worldwide upcoming economic recession is going to severely impact on the Readymade Garments Industry (RMG) of Bangladesh aggravating the unemployment problems of the country. This study therefore attempts to reveal how Bangladesh attempts to contain the corona virus outbreak in order to save both workers and owners of garments industry.
It is laudable that government initiatives helped contain corona pandemic in Bangladesh through different ways. The government took preventing measures strengthening the lengthy quarantine arrangement that helped tame rapid outbreak of COVID-19, though the number of infected people increased tremendously in the USA, China and Italy that may have propensity to affect Bangladesh. The virus has already infected nearly 8 lakhs people and nearly 40 thousands people died throughout the world. The situation is worsening alarmingly. Since corona epidemic is global problem, the economic impact of this lethal virus on the RMG sector of Bangladesh is quite pathetic.
The wave of potential global economic recession owing to COVID-19 is going to tide the bank on Bangladesh economy seriously. The UN calculates the outbreak of this deadly virus could at least cost a trillion dollars and could slow down the global economy to under 2.0 per cent this year. The RMG sector is going to be the worst victim which is undoubtedly the biggest export-earning sector contributing over 84 per cent to the country's annual export. The epicenter of the virus is initially located in China followed by the USA and EU that are major trading partners of Bangladesh.
The European countries puts restrictions on cross border movement of people and thus closes down all non-essential sales of garment and other exports from Bangladesh. It is noteworthy that the US is the largest destination country for the country's exports while the EU alone accounts for 62 per cent of exports from Bangladesh.
As different estimates suggest that the COVID-19 has posed a serious threat to the economy of Bangladesh at a time when the growth of export earnings over the first eight months of FY 2020 has been negative 4.8 per cent growth over the corresponding period of FY 2019. The RMG sector provides negative growth over the first eight months of FY 2020, which stands at -5.5 per cent compared to the corresponding period of the previous 2019 year.The major trading partners of Western Europe and America are grinding to a halt because of the outbreak of deadly coronavirus.
For example, buyers from Europe and North America have either cancelled or postponed approximately 137.87 million dollars of readymade garment products from Bangladesh as many fashion brands have shut their stores in those countries due to the coronavirus outbreak. Another estimate suggests that more than $2.6 billion worth of orders in Bangladesh's garment sector has been canceled and new cancellations are coming up.
The deep concerning matter is that the canceled or delayed orders could lead to serious unemployment problemsin RMG sector of Bangladesh, as garment factories are likely to struggle to pay some 4.1 million workers in the sector, who already receive very low wages.
Therefore, the upcoming unemployment problems will aggravate the crisis more acutely that far exceeds ability of people to recover within short time.In order to prevent the upcoming crises, many governments adopted four main instruments for utilizing their unemployment protection schemes in order to ensure income security for workers and to protect their jobs, for example, "expansion of unemployment benefits; wage subsidies, expansion or introduction of partial unemployment benefits to compensate for crisis-induced reductions in working hours6; and employment services to complement income support to unemployed workers" (ILO report, March, 25, 2020). Therefore, it is high time to save the RMG sectors which teeters on the brink bankruptcy by containing COVID-19 before it breaks out as an epidemic.
The writer is an Assistant Professor of a Private University