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Without Government Aid, Bangladesh Garment Sector Could ‘Collapse’

Garment manufacturers in Bangladesh have demanded that the government extend the moratorium on the salary stimulus package by six months and delay repayment terms by a year, saying that the failure to do so would push the industry past the brink of destruction.

In an open letter published Thursday, Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the country’s largest trade group of factory owners, wrote that the central bank of Bangladesh has asked commercial banks to arrange repayments by the third week of January, despite the “deep plunge into uncertainty” triggered by the unabating Covid-19 crisis. Without the additional assistance or deferment of repayments, she said, “the industry will collapse.”

Overall exports for ready-made garments tumbled 9.6 percent in December, according to the Export Promotion Bureau of Bangladesh, contributing to what Huq described as an “unprecedented” decline of 16.9 percent for 2020. Woven garment exports slid 18 percent, resulting in the worst performing month since June. Only knitwear exports maintained a “relatively stable position” with -0.5 percent growth because of buoyed demand for home goods, she said. Shipments to the United States, the single largest export market for Bangladesh’s products, stumbled 12.6 percent year over year, trade data showed.

“So, given the effect of lockdowns in Europe and U.S.A. and their impact on retail and demand, the worst-ever Christmas sales the world has seen and, most of all, the effect of price decline (which is around 5 percent since September 2020), it was a dark year for the industry that we have seen,” Huq wrote. “As the uncertainties and stresses caused by the second wave still persists, coupled with the unavailability of [a] vaccine, and the impact on global economy it would leave, this downtrend in export will probably continue till April of this year.”

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With the jobs of Bangladesh’s 4.1 million garment workers on the line, the perception that the industry is on the mend and “getting all the favors from the government,” she added, must “kindly be reassessed.”

Factory owners borrowed 10,500 crore taka ($1.2 million) from the stimulus packages announced last March to pay workers’ wages for the months of April, May, June and July on the condition that they would repay the amount at 2 percent interest in 24 monthly installments beginning this month. In October, the BGMEA asked the finance ministry to draw out the repayment period to five years.

A survey published in December by Transparency International Bangladesh (TIB) contended, however, that 42 percent of the garment workforce, or 1.4 million workers, have not benefited from the stimulus payments despite the fact that the vast majority do not have savings. Factory owners employed some 84 percent of the incentives to address their own financial needs, TIB said. The report also claimed that 21,000 workers in 64 factories that accepted incentives did not receive their owed wages due to layoffs.

“The stimulus package was given from the public money, but the interests of the workers were not considered as a priority,” Iftekharuzzaman, executive director at TIB, said at a virtual press conference. Huq has refuted the report, citing the accuracy of TIB’s data.

Bangladesh was particularly hard hit at the outset of the pandemic. Amid the first wave of the coronavirus, Western brands and retailers canceled or suspended $3.1 billion in orders, roiling a country that counted on apparel for 84 percent of its overall exports. Besides the pared-back orders, factories have had to grapple with new post-coronavirus buyer behaviors, such as demands for steep discounts and extended payment terms that leave suppliers front-loading all of the costs of production.

In June, Huq estimated an “irrecoverable” loss of $5 billion due to the economic fallout.