Coronavirus impact: Disruption in supply chain worries garment exporters

Bangladesh's clothing industry is likely to be seriously affected by the impact of coronavirus as the country imports almost half its raw materials requirement for the sector, exporters say.

They said the sector is facing uncertainties as the death toll from the novel virus exceeded 900 on Monday.

The country imported textiles and other raw materials from China worth $5.02 billion during fiscal year 2018-19, according to the lobby group Bangladesh Garment Manufacturers and Exporters Association, or BGMEA.

Besides, about 40 per cent of the capital machinery and spare parts for the textile and garment industry comes from China, whose Wuhan city was the epicenter for viral infection.

Garment export contributed 84.21 per cent to Bangladesh's total exports income of $40.53 billion in the last fiscal.

Total garment exports amounted to $34.13 billion posting an 11.49 per cent growth during the period, the state-run Export Promotion Bureau (EPB) data shows.

In contrast, Bangladesh's total raw materials and other imports from China totalled $13.65 billion last fiscal.

Former BGMEA president Siddiqur Rahman told the FE that exporters are worried about the garment shipments as China is the country's biggest raw material supplier.

"If the coronavirus epidemic lingers on in China, Bangladesh's apparel production will definitely be affected," he added.

The opening of letters of credit (L/Cs) for raw materials import from China has been affected, Mr Rahman said.

He said, "Buyers from the US and the EU are not travelling to Asian countries, including Bangladesh. We are also not visiting Hong Kong and China. So, the business is almost going to be stagnant."

BGMEA president Dr Rubana Huq told the FE that the coronavirus crisis has become a concern for the textile and RMG industry in Bangladesh since "we source a significant amount of our raw materials from China."

"While we are deeply sympathetic to the people of China…, it seems the deepening crisis and continued shutdown of facilities in China would have some disruption in our supply chain."

Dr Huq expressed the fear that the impact would be severe for sweater and woven sub-sectors.

"The Chinese holidays have been extended for seven days… if the crisis persists, it will lead us to an irrevocable disaster of the supply chain."

The waiting time of vessels berthing has come down to zero from 4-5 days during mid-January, she said, sensing a slowdown in imports has already started.

"If the crisis prolongs, the impact would be severe and perhaps unmanageable," the BGMEA chief said.

Former lead economist at the World Bank Dr Zahid Hussain said the impact on the Bangladesh's garment sector could become severe in case of a lingering coronavirus crisis.

He said the country's woven garment is the most vulnerable to the impact as China is the main raw material supplier.

"Bangladesh's apparel export is already in the negative trajectory. When we need to overcome the sluggish export trend, the Chinese impact is going to make us vulnerable," he added.

Local apparel manufacturers should look for alternative raw materials suppliers like India and Pakistan for offsetting the China effects, Dr Hussain argued.

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