Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, tweeted: Brands have canceled or postponed orders one after another. We don’t know what to do tomorrow. We became partners last month. Brands have become strangers. She said orders from as many as 1,089 Bangladeshi garment factories have been canceled, severely hitting the economy. Huq said: “In emergencies, we can accept deferred payments.”
“As fashion brands refuse to pay US$16 billion in payments, workers in garment factories around the world are facing destruction.” Since the outbreak of the new coronavirus, Major European and American fashion brands have unilaterally canceled orders and refused to pay overseas suppliers.
Mostafiz Yudin is the founder of a clothing production and foreign trade company in Bangladesh. Most of his customers are European and American clothing brands. During the production process, Yudin suddenly received an email from a British customer. The email from Cardia stated that due to the impact of the epidemic, it would cancel all orders and no longer accept goods from the Yuding factory.
Yuding: The fact is that (the customer) only sent an email to the long-term partner, saying that the order was canceled and they did not want my goods. . (Although) I have bought the raw materials, they just don’t want them. How can (customers) do this.
In order to make Arcadia’s new clothing, Yudin spent more than 1 million US dollars purchasing raw materials, and the brand had a total of approximately 2.44 million US dollars worth of goods in his factory. Today, these goods, which were supposed to be sent to the UK, are filling Yudin’s warehouse.
Acadia is not the only brand that has canceled orders. Yuding said that 80% of the factory’s foreign trade orders have been cancelled, without any further explanation or compensation from customers.
Acadia Group stated that the COVID-19 epidemic is a “force majeure” and therefore the cancellation of the order is in line with the terms of the contract. They only accept goods that have left the port and are in transit, but they can only pay 30% off the price at a preferential price. All other orders, including garments that have been made but not yet shipped, will be cancelled. The reason is that after the season, customers will no longer buy spring clothing. Since stores are still closed, warehouses can no longer receive new inventory.
Yuding found it difficult to accept this explanation. He believes that when the two parties sign a contract, there is an unequal relationship: “The contract has 33 pages and 300 clauses. If I don’t sign, the brand owner will say, if you don’t sign, I will find another factory.”
Yuding believes that the normal operation of the factory depends on a system of debt and mutual trust. After receiving the order, he used the vouchers from the previous shipment to obtain a loan from the bank to pay for the new round of production costs, including raw materials, worker wages, production costs, transportation fees, etc., and would wait for the new batch of goods to be shipped. A production and trade cycle will not end until the buyer pays the new voucher in full. Now, because a large number of orders have been cancelled, banks are no longer willing to give him loans, and raw material suppliers are demanding payment. The previous production method is unsustainable, and it is difficult for him to accept orders from new buyers.
The owner of an Indian garment factory whose foreign trade orders were canceled once said in an interview with the media: “If our workers do not die from the new coronavirus, they will Died of hunger.”
2.26 million people have lost their jobs due to the epidemic in Bangladesh, and the poverty rate has increased by 9%.
According to a statement posted by DCCI on its website, Dhaka Chamber of Commerce and Industry (DCCI) Chairman Rizwan Rahman said in a webinar on Saturday During the keynote speech, he stated that due to the rapid spread of COVID-19 cases around the world, the entire economy has fallen into crisis, with the GDP reduced from the target of US$374 billion to US$364 billion. Poverty rates increased by 9.0% to 29.5% and 30% respectively. 2.26 million jobs have been lost.
In the era of globalization, many brands have moved their manufacturing processes to countries with low labor costs in order to expand profits. But when a crisis strikes, it is difficult to expect them to be able to weather the difficulties with businesses and workers in these countries. In this global epidemic that has lasted for nearly a year, the workers in developing countries at the bottom of the industrial chain are often the ones who really bear the brunt of the disaster.
The textile industry is a pillar industry of Bangladesh’s economic development
In 2020, the total population of Bangladesh reached 166 million, which is the highest population density. The highest and one of the poorest countries in the world. Bangladesh used to be the world’s second largest textile exporter, second only to China. In the past two years, it has been caught up by Vietnam. Its status as the world’s second largest textile exporter was replaced by Vietnam, and it moved to third place in 2020.
The textile and garment industry is a pillar industry in Bangladesh’s economic development, and garment exports account for more than 80% of Bangladesh’s total merchandise exports. Bangladesh has more than 2,000 textile factories and more than 6,000 garment processing factories. The textile industry employs more than 5 million people, about 80% of whom are women.
Terminal clothing Manufacturing is the main body of the industrial chain and a pillar industry of Bangladesh, accounting for 13% of the country’s GDP. The annual output of Bangladeshi denim clothing is about 200 million pieces, and its share of the European import market reaches 27%, surpassing China.
Bangladesh has abundant labor resources and low labor costs. The minimum wage is only about 416 yuan per month in RMB, which is less than half of the minimum wages in Vietnam and Cambodia. Its local low-cost raw materials and labor advantages have not only alleviated the pressure of rising domestic labor costs, but also quickly seized surrounding markets.
However, with the epidemic raging, these textile companies have suffered from “wave of order cancellations”, “order shortage”, etc., and bad news has been overwhelming, which has made these textile companies The textile and garment industry has encountered unprecedented severe challenges.
Mohammad Hatem, vice-president of Bangladesh Knitwear Manufacturers and Exporters Association, said: “We have to accept the new coronavirus as a part of life. If we don’t start work, there will be an economic crisis.”
Himself MB Knitting Company has reopened some of its factories to produce clothing for British Primark and several other retailers. Hatem added that the factory was under “pressure” from brand merchants to meet export deadlines.
The vice chairman is also worried that billions of orders may be transferred to countries such as Vietnam or China.
High production costs drag down apparel exports
After the recovery of exports during the period of COVID-19, due to Yarn prices and freight rates have increased, and garment exporters are feeling the pressure of unusually rising production costs. Entrepreneurs say that as Bangladesh relies entirely on imported goods to manufacture ready-made garments (RMG), the unit cost has surged 30% from a year ago.
Rising cotton prices have pushed up yarn prices in the local market. Garment exporters and textile traders are waging a silent war as yarn prices impact the profitability of the garment industry.
Fazlul Hoque, managing director of Narayanganj-based Pulumi Fashion Company, said that compared with last 8 Compared with last month, the unit production cost of his factory increased by nearly 30% in August this year. He also said that yarn prices and freight costs mainly affect the production costs of the garment industry.
Despite a 30% increase in production costs, the price per garment exported by Bangladesh has fallen by 3.7% in the past year due to lower demand in the COVID-19 era.
“However, unfortunately, international retailers and brands do not want to adjust to the additional production costs by increasing the price of clothing items. Therefore, we must continue to do so at lower prices with our buyers Business,” Hawke said, “is that most suppliers have been surviving by exporting higher volumes of goods, not by higher value.”</p
