Small and medium garment factories are yet to see the rebound in apparel shipments as they have not received as many export orders as the bigger units have, pointing to an uneven recovery in the sector.
After a drastic fall in business in April due to the ongoing coronavirus pandemic, the export of garment items started picking up from May as international retailers and brands reopened their stores in their home countries and returned with work orders.
Large units are the major beneficiaries of the uptick in the business compared to the small and medium factories because of the former’s strength.
“I used to run 100 per cent overtime in the pre-pandemic period. Now, it is 40 per cent as I am receiving a small number of orders,” said Ehterab Hossain, managing director of Base Fashions, which employs 1,000 workers.
In April, May and June, production at the factory was very low as orders dried up.
His factory is currently operating at 70 per cent capacity. The small and medium units mainly work for medium-level buyers, so their quantity is low, he added.
Hossain is not alone though as many other small and medium-sized factory owners are desperately looking for orders to resume full-fledged operation.
Ahmed F Rahman, managing director of Kappa Fashions, said the company is running at 80 per cent capacity.
“I hope I will be able to reach the pre-pandemic-level next January if the current flow of orders continues,” he said
Vidiya Amrit Khan, deputy managing director of Desh Garments, said she is running her factory at 70 per cent capacity as her US buyers are gradually coming back.
M Shahadat Hossain, chairman of the Bangladesh Terry Towel & Linen Manufacturers & Exporters Association, said his members are running their units at 70 per cent capacity now.
The Covid-19 fallout prompted a collapse in the shipment of apparel products, which contribute 84 per cent to national exports. The impact was so severe that overseas sales plummeted to $0.37 billion in April from an average monthly export of $3 billion.
This was a result of mass work order cancellations by retailers and brands. Many exporters faced abnormal deferred payment proposals from buyers, the return of goods from the ports of destinations, delays in shipment proposals and unusual shipment conditions.
The small and medium units were the worst affected due to weak financial condition.
About 300 small factories have remained shut mainly because of a lack of work orders, according to Md Rezwan Selim, a director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
“But they are not contacting the BGMEA to reopen their units,” he added.
More than 1,000 small and medium units are struggling to get work orders from international retailers and brands.
“Of the units, some laid off their workers,” Selim said. However, the situation of work orders is improving.
Along with large factories, the smaller ones have also been suffering from non-payment by buyers, and many of them could not avail funds from the government’s stimulus packages because of stringent terms although they are considered to be the backbone of the industrial sector.
“The government should come up with some policy supports like a tax waiver for the small and medium-sized units so that they can grow further,” said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
Many rising and smaller units cannot grow because of the tax burden, so the government should waive taxes, he said, adding that subcontracting firms are a major factor behind the creation of large entrepreneurs in the garment sector.
In most cases, the smaller units cannot compete with larger factories to land orders but these units are necessary, he said.
The garment exports rose to $1.23 billion in May and to $2.28 billion in June.
It was $3.24 billion in July, $2.47 billion in August and $2.41 billion in September, according to data from the Export Promotion Bureau.
Revival in export growth would largely depend on the continuation of the ‘new normal’, Shahadat Hossain said.
“If the second wave comes, export could be seriously affected.”
Online sale in the garment sector is booming, the BGMEA’s Selim said. “We have to adapt to the new trend in apparel marketing.”
