Home ›› 26 Feb 2023 ›› Front
His factories used to bustle with activities. Production was smooth, orders were abundant, and it did not take him long to earn a fortune. But now there is only eerie silence at the units like a graveyard as production has been shut.
BKM Mahfuzuz Zaman had been doing garment business since 1984. He set up the first factory in Dhaka in 2000 while the second one in Mymensingh’s Trishal started production in 2019.
“Nearly 1,000 workers used to work at the factories several months back, but those days are now gone,” Mahfuzuz, managing director of The Rose Garments Designer, told The Business Post.
Before shutting production at both factories in August last year, the 65-year-old businessman would annually export apparel goods worth nearly $13 million. An Indian buyer would usually place 90 per cent of the orders.
But due to the ongoing global economic crisis, the buyer failed to clear the letter of credit (LC) payments on time. That is why the bank barred Mahfuzuz from opening new LCs, which forced him to close the factories.
“I went to everyone for help but got nothing. Now I am a penniless businessman. I have nearly Tk 38 crore in liabilities but no assets, except for the factories. I do not know how I will clear the liabilities and lead the rest of my life,” he lamented.
Khandokar Iqbal Hossain set up Achieve Fashion, a woven-based readymade garment (RMG) factory, in 2016. The factory had a workforce of around 750 people, and they were all laid off on February 13 this year. The company would annually export nearly $8 million worth of clothes to the Western market.
“My Polish buyer started reducing work orders due to the Russia-Ukraine war. In the last couple of months, he could not place any orders at all. That is why I had to lay off my workers, and their outstanding wages will be paid on February 26,” Iqbal said.
As per the labour rules, if a factory fails to restart production within 45 days of laying off the workers, the latter can be dismissed.
Iqbal continued, “I am trying to receive a minimum amount of orders to restart production. But I do not know whether I will get that. I have bank liabilities, and my property is mortgaged.”
On January 11, Atikur Rahman, managing director of ZEX Fashion, said he was outside the country and his wife was in prison. “I borrowed from creditors to set up the factory but failed to repay. That is why they filed a case against me and my wife.”
Production at the factory is now closed, and his wife has been released. But she is now in hiding along with the couple’s seven-year-old son because the creditors are looking for them.
“I am worried because my wife and son are in danger. I do not know how I will repay the creditors. Until I repay, my family and I will not be able to move freely,” Atikur said.
Like Mahfuzuz, Iqbal, and Atikur, dozens of apparel factory owners found themselves in a tight spot during the last two years because the RMG industry had been hit hard by the ongoing global crisis created by the Covid-19 pandemic and the Russia-Ukraine war.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said at least 221 factory owners announced in the last two years that they had shut their businesses. Among the factories, 41 are in the Ashulia-Savar area, 54 in Dhaka Metropolitan, 78 in Gazipur, 34 in Narayanganj, and 14 in Chattogram. Moreover, dozens of subcontract factories were also closed due to work order shortages, which put them in a severe financial crisis.
Because of the closures, around 80,000 workers lost their jobs. Many of them joined other companies while some changed their professions, said industry insiders. Besides, many manufacturers have been forced to scale down operations amid financial difficulties. Some are struggling to survive, but they do not know how long they will be able to continue production because buyers are placing fewer orders.
BGMEA Vice-President Shahidullah Azim said, “We are facing the consequences of two massive consecutive crises – Covid-19 and the war. Due to their impacts, factories that were already in a vulnerable position could not survive.”
What created the crisis
After the 2013 Rana Plaza collapse, Bangladesh found itself in a very difficult situation as concerns were growing about workplace safety in the textile and RMG sectors. That is why the sector players invested a large amount of money to improve safety in the workplace.
Thanks to this, especially the green initiatives, Bangladesh managed to achieve a good reputation among global brands. This fuelled tremendous apparel export growth, which encouraged investors to put in money in the sector.
Amid this, the deadly Covid-19 hit countries across the world, forcing them to impose lockdowns. Bangladesh also announced shutdowns. At the time, brands postponed or cancelled orders worth around $3 billion.
According to the Export Promotion Bureau (EPB), the apparel sector’s earnings declined by 18.12 per cent to $27.94 billion in FY20 year-on-year. That is why many factories became vulnerable. Some were forced to stop production while the rest are struggling to survive.
When the pandemic began to subside, brands started placing lots of orders. The EPB data shows the country earned $42.61 billion in FY22 from apparel exports, posting a 35.47 per cent year-on-year growth. The outstanding export performance encouraged investors, and the BGMEA said the apparel sector saw nearly $1.5 billion of fresh investments in 2021 and 2022.
But amid this growth, Russia invaded Ukraine in February 2022, which resulted in global supply chain disruptions. This created an economic crisis around the world, especially in Bangladesh’s apparel export destinations, leading to record-high inflation. This then reduced consumers’ purchasing power, resulting in huge unsold stocks in brands’ warehouses.
Utilisation Declaration (UD) permissions, which indicate export order trends, have declined sharply for apparel exporters, which is evident by the fact that the first half of FY23 witnessed only a 2.5 per cent year-on-year growth. The rate was 7.27 per cent during the first six months of FY22 year-on-year.
Businesses said they enjoyed excellent export earnings in FY22 but that was not enough to make up for the FY20 losses. The war has made trade more difficult. As a result, those who were in a vulnerable situation and stayed afloat during the pandemic, especially the small players, could not survive.
Fatullah Apparels Chief Executive Officer Fazlee Shamim Ehsan told The Business Post brands’ sales had plummeted due to the consecutive global crises and that is why they are not placing enough orders.
They have also reduced prices, he said.
“Most of the factories that are still in operation can no longer afford to pay overtime. Many even cannot run eight-hour shifts due to the order crisis. Amid this, the government has increased the prices of all utilities, which has exacerbated the situation and put us in hot water.”
