Bangladesh garment industry suffers from COVID-19 blow
June 23, 2020
As Bangladesh's garment factories gradually reopen, manufacturers are suffering from weak global demand amid the pandemic. Big fashion brands are still cancelling orders, adding to the plight of textile workers.
The president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has repeatedly warned of the dire consequences of those workers losing their already meager incomes as global fashion brands continue cancelling orders.
In response to the call, the European Union has organized emergency funding to help them, which Huq says was "much appreciated," but could go only so far in limiting the damage done to the country's textile industry.
According to BGMEA figures, orders worth $3.18 billion (€2.8 billion) have so far been cancelled since the beginning of the COVID-19 outbreak earlier this year.
"More than 50% of this $3.18 billion worth of order cancellations are from the European buyers," Huq told DW, adding this was "very unfortunate" given the long history of trade ties with the EU that have made the bloc Bangladesh's biggest apparel export market.
She acknowledges that European contractors are struggling, too, due to store closures caused by national lockdown measures, but says scrapping orders which causes financial losses for one party was "unjust."
German textile importers though, deny treating their Bangladeshi manufacturers unfairly.
German Fashion, an industry group representing this country's fashion labels, told DW in a statement its members didn't cancel orders "in big numbers," as they were striving to "maintain the close relations they’ve had with their producers for many years."
"We're currently holding several talks between manufacturers and buyers because we are convinced the problems can only be resolved by a willingness for compromise on both sides," a German Fashion spokeswoman said.
German textiles and fashion industry association, textil + mode, also said its member companies were aware of their "responsibility toward producer countries" and hadn't resorted to big-ticket cancelations in recent months. Firms were pursuing a policy of "partnership and mutual trust," a spokeswoman of the lobby group told DW.
German coffee chain Tchibo, which also offers low-budget clothing in its more than 1,000 stores across the country, said the blanket closure "virtually overnight" of all of them had "dealt a massive blow" to the retailer's business.
Tchibo spokesman Arndt Liedtke told DW, the company would aim though to "remain a fair and long-term partner despite the crisis."
"For us, it's been clear all along that we accept shipments in line with our contractual obligations agreed before," Liedtke says, noting that Tchibo has recently signed contracts for next year as it is essentially important for producers to have clarity about demand.
BGMEA official Rubana Huq is lauding Tchibo's approach, saying the company is not registered in a database run by the association and identifying companies found to violate contracts or cancel payments. Others, however, are less forthcoming, she adds.
Kik and C&A chastised
Germany's biggest low-price clothing retailer KiK, however, has been singled out by BGMEA as being currently one of the main offenders of contractual obligations.
Garnering annual revenues of about €2 billion, the budget retailer has cancelled goods worth $96,000 so far, with textile shipments to the tune of $9.26 million currently being "on hold," according to the BGMEA data provided by factories in Bangladesh.
KiK considers its cancellation quota of about 1% as "not too bad," claiming in a statement to DW it had made "hardly any cancellations" in the course of the COVID-19 pandemic.
Similarly, department store chain C&A, says accusations of the company resorting to massive order cancellations are "not correct."
"After the outbreak of the virus crisis, we urged our partners to immediately stop production as a precautionary emergency measure," a C&A spokesman told DW, adding there was no other alternative left after the company had been forced to shut all of its 2,000 outlets in Europe and couldn't sell off the goods delivered.
Textiles and clothing already produced were "of course accepted and paid for," C&A claimed, with orders having been "reactivated almost completely now."
"In total, we have resumed 97% of the goods shipments ordered prior to the crisis and are guaranteeing paying for them," the C&A spokesman said.
Cancelled orders are not the only problem facing Bangladesh's garment makers during the health crisis. More often than not, retailers in the west are demanding discounts on producer prices now, says Rubana Huq. "Along with downsizing the previously placed order, many of the buyers have been asking for discounts up to 20% to 50% as well."
German firms KiK and C&A are denying using coercion amid the pandemic, as Huq admits that pressure to lower prices was primarily coming from Anglo-Saxon retailers. "Some of the major companies that have exhibited unprofessional behavior are Dunne's store, Peacocks, ASDA, Arcadia, Sainsbury etc."
Recent talks with Peacocks owner Edinburgh Woolen Mill Group (EWM) have failed to produce any results, the BGMEA president said.
"We are trying hard to find a mutually agreeable solution [with EWM], but so far it seems [to be] a one-sided effort by us with almost no sign of workable cooperation from the other end."
EWM hasn't responded to a DW request for comment.
Textile wage hike
Solidarity vs. insolvency
At Euratex, the Brussels-based European Apparel and Textile Organization, the effects of the COVID-19 crisis are part of everyday discussions.
Euratex General Secretary Dirk Vantyghem knows the dire figures coming out of the industry by heart.
"The total turnover of the European textile and clothing industry has dropped by 50 to 60%, and in some sub-sectors even more. For the whole year 2020, we expect a drop of 30%. This is a drop of €50 billion and is unprecedented," he told DW.
Despite the massive blow, he considers the response of some companies to the crisis as "unacceptable" and urges them to display "solidarity across the entire value chain."
"We encourage the large retailers to honor the orders they have placed, because it should be in their own long-term interest. We should also consider the long-term stability of countries like Bangladesh," he says.
Bangladesh's textile industry representative Rubana Huq fully agrees with him, but fears larger and even darker clouds emerging on the horizon.
"Amid this unprecedented situation, buyers going bankrupt has emerged as another terror for our industry. When a buyer goes bankrupt, it instantly hits the outstanding payments to its suppliers," she says, raising the specter of insolvencies among big names such as Debenhams, La Halle or La Camaieu, which would massively worsen payment uncertainties, and threatening the survival of many in Bangladesh's garment industry.