Clean orders for apparel plunge 45pc
The inflow of new work orders to Bangladesh's garment sector from international retailers and brands for June is 45 per cent lower than that a year ago as demand is yet to get in the western markets as a result of the coronavirus pandemic.
"New orders happen to be being issued however they are at least 40 % to 45 % lower compared to previous year's," explained Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
So far, after strong negotiation with the buyers, some of the $3.15 billion worth work orders which were cancelled as a result of Covid-19 pandemic have already been reinstated.
"Finally, the neighborhood garment industry must face damages amounting to $5 billion," said Huq. "Consequently, we will continue to try and push the buyers for payments."
At the factory level, suppliers are receiving muted assurance from buyers on the payment despite the fact that vendors are reopening stores in the EU and the US, both biggest destinations for Bangladeshi garments.
Suppliers are actually facing two main challenges from the buyers on repayment: unusual deferred repayment and discount.
The clients are demanding even 180 to 220 days deferred payment although they mostly agreed to pay the amount of money within 90 days. Thus, the reinstatement of the payment of the rest of the work orders would be delayed.
"My buyers demanded 5 per cent to 10 % discount and a long-deferred repayment. I am hopeful that I can settle the repayment with my potential buyers," stated Vidiya Amrit Khan, deputy controlling director of Desh Garments.
An owner of a sizable garment factory on Ashulia was compelled to provide 15 % discount when his potential buyers threatened that they might take the goods following year if a big discount isn't given.
"Finally, I agreed. I could certainly not make any profit in this article," he said, trying to find anonymity.
Ismail Hossain, managing director of Sharmin Group, also settled for deferred repayment with his purchasers. "My buyers agreed to take back practically $16 million worth of clothing items. The repayment will be delayed."
However, the number of new do the job orders went down to nearly 50 % as a result of the coronavirus, he explained.
Khan argued that the neighborhood suppliers would default on their loans soon if buyers delay an excessive amount of in clearing the payments because manufacturers have to pay the fabric suppliers.
In garment business, manufacturers purchase fabric from millers with back-to-returning letters of credit and most of the payment to fabrics suppliers are created upon receiving the money from the international buyers.
This time around, the fabrics suppliers are also getting delayed payments.
Back-to-returning LCs are made of two distinct LoCs, one issued by the buyer's bank to the intermediary and the other by the intermediary's bank to the seller.
With the original LC from the buyer's bank in place, the broker would go to his own bank and includes a second LC issued, with owner as the beneficiary. The seller is therefore ensured of payment upon fulfilling the conditions of the contract.
Rubana saw continued slowdown in exports till the finish of 2020.
"The exports may plummet by 30 % to 40 per cent in the upcoming months because the retail market is but to rebound."
"The impact of the Covid-19 in consumers behaviour continues to be unknown and our factories remain struggling with cash flow and credits to produce a turnaround. We are still amid various uncertainties and changes to foresee near future trends."
Factories in Bangladesh have started reopening after Eid holidays with satisfactory occurrence of employees following proper guidelines to check the pass on of the coronavirus, the BGMEA said.
"The BGMEA board is encouraged to observe how factories will be adopting latest innovations at workplaces to better ensure the prevention of the spread of the virus," she said.
