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The Financial Express

Buyers bargain with garment makers, BGMEA with govt for Covid concession  

| Updated: January 18, 2021 19:27:01


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The apex body of the apparel makers has once again sought extension of repayment periods of loan packages in view of uncertainties caused by the 'second wave' of the pandemic.

Industry people have said garment buyers’ new approach to managing their supply chain amid the second wave of Covid-19 has put the local apparel exporters in an awkward situation, especially with their management capacity.

The buyers are now deferring order placements and divide them into smaller ones with shorter lead time, though cancellation of the order is not that rampant this time around, the exporters have pointed out.

Recent communication between the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Ministry of Finance does contain the worries that the buyers' approach has given rise to.

The level of impact of first and second waves on the local industry is different, the BGMEA said in the letter to finance minister on January 12.

The mild shock coming from the second wave is proving to be unbearable as the industry is ‘already enough injured’ after the first wave that was, according to the letter, more severe.

"With the detection of a new variant of the virus and that being more contagious than the first one, we are missing the biggest sales season this year, the Christmas," reads the letter signed by BGMEA President Rubana Huq.

Amidst a fresh surge of Covid-19 cases in Europe, the USA and Canada, different restrictions imposed on the movement of people and economic activities have started making an adverse impact on retail businesses in these countries.

"The second wave of Covid-19 has already started disrupting the retail market and global clothing trade including exports from Bangladesh," the letter adds.

Following the surge in new cases in major importing countries, the buyers are now deferring order placements and splitting those into batches on the shorter lead time, instead of cancelling orders, the BGMEA chief said in the letter.

"This has an adverse impact on our industry, since factories are not being able to make a forecast and plan their capacity," Ms Huq said.

More than 1,100 BGMEA member factories reportedly faced cancellation of work orders worth US$ 3.18 billion during last March-April due to the pandemic, according to the trade body.

Most of those were reinstated at heavily bargained prices, inclusive of deferred payment and discounts.

Against this backdrop of multipronged crisis, it was becoming increasingly difficult for the factories to stay on course without additional financial support by the government, she argued.

Since the factories were already struggling to meet regular expenses and cash flow with exports falling, prices dropped by 5.0 per cent in recent months.

The repayment of wage loan incentive, which was availed during April-July 2020, at equal instalments in 18 months would mean an estimated 20 per cent additional wage burden on the factories, the letter mentioned.

"This, in view of the current situation, is absolutely difficult," the BGMEA leader noted, reiterating her demand for extension of the repayment tenure.

The repayment of the loan was scheduled to start on January 17 (Sunday).

In the letter, the BGMEA president urged the finance minister to extend the repayment term of the wage assistance loan package to 36 months from the existing 24 months.

She also sought extension of the moratorium on the salary stimulus package by six more months.

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