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Closer Look: Asian Factories Struggle to Rebound Amid Crisis

Despite the escalating struggle with Covid-19 and huge losses due to cancellations of orders from global retailers and brands, factories in Asia, which continues to be the biggest sourcing hub for apparel across the world, are largely back to work.

On average, more than 80 percent of factories have been functioning in Bangladesh and India, and near 100 percent in Vietnam and Cambodia. Manufacturing is closed in Myanmar, which faces a stay-at-home order that started on Sept. 24 and has been extended through Oct. 21.

Capacity levels, however, are another matter, varying from 60 to 80 percent and often less, according to industry associations and analysts.

Smaller factories have suffered the greatest losses, having shut down temporarily, or even permanently, unable to sustain the losses from lost orders, as well as the effects of local lockdowns to prevent the spread of Covid-19.

Looking at the situation across Asia, Mustafizur Rahman, a fellow at the Centre for Policy Dialogue (CPD) in Dhaka observed: “Factories are continuing to open across most countries, despite the pandemic. Vietnam managed the Covid-19 situation very well, although they were heavily impacted by cancellations from the global markets. Bangladesh and India had to face a double whammy with the growth of Covid within the country, as well. But business is back.”

India

In India, which had apparel exports of $ 15.4 billion in the 2019-20 financial year (which ended in March), the numbers vary from state to state, with the knitwear hub of Tirupur in Southern India seeing more than 90 percent of factories back in operation. Tirupur accounts for almost a quarter of India’s apparel exports, according to analysts.

While factories in other areas, such as the New Delhi–Noida region are approximately 60 percent open, the overall export figures for India have been going up steadily month after month. For example, in July, garment exports were up by 32.3 percent over the previous month.

Yet, the total of India exports for the quarter from April to August are dismal, at negative 47.1 percent over the previous year for the same period. Industry analysts believe that the hard lockdown in India from March 24 to mid-June was a large part of the reason, and the huge numbers of migrant laborers returning to their villages amidst great hardship added to the woes.

Factories catering to the domestic market are even worse off, with approximately 40 percent open, as previous stocks still remain unsold and weak consumer demand has kept local retailers from buying.

As of Oct. 12, India had 7.1 million cases of Covid 19, with 109,000 deaths.

Bangladesh

Bangladesh has more than 95 percent of factories at work according to Bangladesh Garment Manufacturers and Exporters Association president Rubana Huq.

Bangladesh has been the second-largest garment manufacturer in the world in recent years, after China, employing more than 4 million workers.

Industry analysts estimate that the factories are running at an average of 80 percent capacity, as global retailers are still taking stock of their own troubled situations.

The July to September quarter, which is the first quarter of financial year 2020-2021 in Bangladesh, saw 1 percent growth over last year, with knitwear showing 7 percent growth and wovens at negative 5 percent. After the numerous cancellations, heavy discounts demanded by global retailers, and a countrywide lockdown in April, analysts noted that group revenue in June at $1.99 billion showed a decline of 8.6 percent over the same time period of the previous year.

In 2019-20, readymade garment exports of Bangladesh were down, falling 18.1 percent to $27.95 billion, a decline from $ 34.13 billion in 2018-19.

As of early this week, Bangladesh had 380,000 Covid-19 cases, with 5,555 deaths.

Vietnam

Although almost 100 percent of factories are up and running in Vietnam, most are operating at a much lower capacity as indicated by the export turnover of the textiles and apparel sector which was down 12.1 percent in the first seven months of the year over the comparative period of the previous year, at an estimated $16.18 billion, according to the Ministry of Industry and Trade of Vietnam.

Vietnam saw garment and textile export turnover of roughly $32.6 billion in 2019, up 6.9 percent from 2018, according to the statistics office. Recently, there has been talk of the U.S. imposing tariffs on imports from the country, adding to the uncertainty there.

As of Oct. 12, Vietnam had total of 1,135 Covid 19 cases with 36 deaths.

Cambodia

Approximately 100 percent of the factories are working Cambodia’s garment sector, as well.

That they are working at much closer to full capacity than many other countries and garment exports dropped by 5.4 percent to around $3.78 billion in the first half of this year from more than $4 billion in the same period in 2019, according to the ministry of labour and vocational training.

Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), said the general decline was because of the suspension of factories and fewer purchasing orders.

Cambodia has a total of 282 Covid-19 cases with no reported deaths.

Myanmar

Factories are closed in the country from Sept. 24 through Oct. 21, as the number of Covid-19 cases started rising and the government placed a stay-at-home order for Yangon and surrounding areas where the majority of factories are.

The garment sector has had a series of disruptions since February, not only because of canceled orders and the effects of the pandemic within the country, but also due to difficulty securing imports from China, from where 90 percent of the raw materials for the local garment industry are imported.

Garment exports were at $2.73 billion from October through May, in the fiscal year 2019-2020, according to data from the Ministry of Commerce, down from $4.6 billion in the 2018-2019 financial year.

As of October 12, Myanmar has 29,445 Covid-19 cases, with 664 deaths.

Weighing in on the the impact of the coronavirus pandemic as Asia continues to face a heavy toll with its high population, migrant labor issues and its dependency on a grim global retail situation, CPD’s Rahman noted:  “Asia is going to keep the lead in terms of sourcing. It is not very easy to replace such high volume of sourcing from one region.”

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