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April 1, 2020

Bangladesh could see US$6bn hit from order losses

Bangladesh could stand to lose around US$6bn in export revenues as brands and retailers continue to cancel orders from the apparel sourcing major.

By Hannah Abdulla

Bangladesh could stand to lose around US$6bn in export revenues as brands and retailers continue to cancel orders from the apparel sourcing major.

Factories have been hit by cancelled orders or requests to delay payments by major brands as coronavirus has resulted in retail doors closing and government-implemented lockdowns across many nations in a bid to curb the spread of the virus

The BGMEA had voiced concerns that with cancelled orders and factory shutdowns, factory owners would be unable to pay workers, which could lead to social unrest across the country. 

Yesterday (31 March), Swedish fashion retailer Hennes & Mauritz (H&M) said it would pay and take delivery of goods already manufactured by its suppliers, as well as those in production. 

According to Mostafiz Uddin, managing director at Bangladesh denim products maker Denim Expert, a number of brands have followed suit including PVH, Target, Inditex, Marks & Spencer and French retail company Kiabi.

“These are huge and important steps, for many reasons. First and foremost, H&M, M&S, Inditex, PVH and Target are the major brands which source [the] largest quantity of apparel from Bangladesh. Knowing that they will accept and pay for the shipments of goods which have already been manufactured or which are already in production provides some relief to the manufacturers,” said Uddin.

The question is now, which other brands will follow, he said.

“At the time of writing, US$2.9bn worth of ready-made garment orders have been cancelled from Bangladesh. Almost half of these are in the process of being made or are complete. More cancellations will follow. Apparel factories of Bangladesh face lying idle through March and April. This will mean they are forced to lay off workers temporarily, or even close for good. Our industry is facing an existential crisis, of that there is no doubt.”

Mohammad Hatem, vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) told Reuters its members have lost more than US$3bn with all its orders until July cancelled or suspended. While the BGMEA said some 1,048 factories that were part of its organisation had reported orders for over 900m garments had been cancelled or held up. This could affect some 2m workers. The Bangladesh fiscal year runs from 1 July to 30 June.

According to the Reuters report, Primark and Gap are among brands that have cancelled orders. just-style approached the two for comment.

A Primark spokesperson said: “Every store in every country in which we operate is now closed. We are losing sales of GBP650m a month as a result. We have therefore been left with no option. We have large quantities of existing stock in our stores, our depots and in transit, that is paid for. If we had not taken this action, we would be taking delivery of stock that we simply could not sell. This has been unprecedented action for unprecedented and frankly unimaginable times.

“We at Primark have worked alongside so many of our suppliers for many years and value our relationships enormously. We recognise and are deeply saddened that this will clearly have an effect throughout our entire supply chain. We are in close and regular contact with our suppliers and very much hope that our normal trading relationships can resume as soon as possible. In the meantime, we are urging, in the strongest possible terms, governments in the countries from which we source our products, to take action in support of their local businesses and workers, in the same way that the UK and many European governments are doing.”

Gap could not be reached at time of press.

Last week, Prime Minister Sheikh Hasina announced a BDT50bn (US$590m) stimulus package to help export-oriented industries respond to the Covid-19 pandemic. The money will be used to pay worker wages. 

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