Save small garment factories

In the post-Covid era, the country’s main ready-to-wear export sector apparently has mixed fortunes — a rebound on the one hand and a less visible decline on the other. The rebound is reflected in the substantial increase in exports (even beyond the pre-pandemic level), and the downside in the sluggishness of small and medium-sized factories due to a lack of export orders. That is to say, the jump in exports is attributable to the performance of large factories which would struggle to cope with huge export orders, while smaller ones are idle or at best trying to keep them busy with outsourcing for the big guys.

That being the case, this is clearly a picture of very uneven growth. Without a doubt, large factories deserve to be appreciated for their work, but the fact that the country’s RMG industry also includes thousands of small and medium-sized factories makes it essential to examine the reasons for their current state. .

The pandemic has caused extensive damage to the entire industry through canceled orders, depressed demand and low productivity due to lockdowns, restriction of movement and delayed clearance of raw materials against letters backed credit. Industry insiders feared the situation would persist and take a heavy toll on the sector of the economy that earns the most currency. The situation did not last long enough to cause an unmanageable dent in the industry as a whole, although small factories that relied heavily on outsourcing had to bear the brunt of it.

About a year and a half later, things have changed a lot to the delight of people in the industry. However, a close look at the state of the recovery indicates that it is overseas buyers and large garment units that are the winners. Bangladesh received $23.98 billion in ready-to-wear garments (RMG) exports, both knitted and woven, in the July-January period of FY 2021-22, registering growth 30.30% year-on-year, according to official data. December 2021 saw monthly exports of apparel products exceed $4.0 billion for the first time in the country’s RMG export history. An increase in demand in line with the gradual recovery from the fallout of the pandemic, the rehabilitation of the supply chain and, in fact, intelligent management of home production are mainly the reasons for the rebound—a well-deserved achievement of our manufacturers and exporters.

Now the obvious question, is it the efficiency and the damage control mechanism as well as the shock absorption capacity that allowed the big companies to immediately resume operations, which was not the case of relatively smaller units? Very probably.

According to reports, about a thousand medium and small factories have enlisted as members of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and nearly 1,500 non-member factories are not getting enough orders to survive. . These factories would also be exploited by the buyers because, whatever orders come to them, the price offered is too low. They still have no choice, they accept these orders – more to stay in business than to make a profit. Industry insiders have learned that as the severity of the pandemic began to lessen, large export orders were shifted to Bangladesh. These orders were originally destined for China, Vietnam, India and Pakistan — to name just a few of Bangladesh’s formidable garment export competitors. Naturally, this change was mainly due to the ability of factories to handle large orders while meeting the compliance needs of importing countries and buyers.

Observers are of the view that with the massive improvement of many garment factories over the years since the fires and factory collapses years ago, these factories stand out as sources favored by foreign buyers, including reputable global buyers who are willing. place not only bulk orders, but also high-end, value-added product orders. As a result, less well-equipped factories are unable to compete with them and the situation is likely to get even worse if the current situation continues.

The BGMEA and the government have an important role to play in upgrading the small units which, although able to manufacture and export, face many constraints—funding being the main constraint. Many of these units exported regularly in the pre-pandemic era, but are now too tightly held for any forward movement.

It is clear that if these small factories had been better equipped in terms of compliance, skilled workers and machines, the big factories would not have been overloaded with too much work as they are now (risking quality assurance), because a good part of the orders would have done it for the little ones. Also, they could invite additional work orders.

There is no doubt that the country’s RMG industry is the biggest beneficiary of government support — fiscal, financial or otherwise — but how far these incentives and incentives have gone to small units remains a question. It is high time that the government and industry associations, BGMEA and Bangladesh Textile Manufacturers and Exporters Association (BTMEA) sit down and try to find ways to make things better for small units of making.

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Michael O. Stutler