Lockdown's triple trouble for RMG

The apparel industry is now bracing for a triple whammy - order losses, a burden of high airfreight costs and labour unrest following possible pay cuts - if factories are not opened by 1 August.

But even the reopening of factories before 5 August appears to be a pipe dream for them with no sign of immediate respite from the raging pandemic.  

Amid an alarming spike in infections and death toll crossing the 20 thousand mark, the government might further extend the ongoing factory closure, putting factory owners into, what they say, deeper trouble.

Industry insiders say buyers will cancel orders if they do not get deliveries on time. Besides, apparel exporters have to use air freight at high charges at half of the product prices. 

With factories sitting idle, owners will have to pay workers half of regular salaries as per law.

Moreover, garment workers have threatened to go for a movement if they do not get full payments on time.

Apparel leaders say only the reopening of factories can resolve all the impending challenges.

A group of apparel factory owners have urged the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) board to allow their factories to start operation arguing that most of them cannot afford to pay idle workers.

The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) leaders are also facing similar pressure as a number of factory owners have already informed their association that they would go with a "no work, no pay" policy.

Several manufacturers have already issued notices that the Eid vacation is only for seven days till July 26. After that, the remaining days until 5 August will be considered general holidays if the government in the meantime does not allow the reopening of factories.

In the case of reopening after 5 August, salary payments in the first seven working days of the month will then be processed in the second week of August. 

However, both associations said their members will comply with existing rules and regulations and they are in talks with the government to get any concession allowing them to reopen from 1 August.

Talking with The Business Standard BGMEA President Faruque Hassan said, "We have been requesting the government to allow reopening on 1 August. Otherwise, many factories may go for labour law provisions on payments and holidays."

He also added that if they are allowed to reopen on 1 August, the association would suggest to consider the last four-five days of July as additional vacations to the Eid holiday.

BKMEA Vice-President Fazlee Shamim Ehsan also echoed the same sentiments.

He said, "We are under pressure to ship goods on time and we might airfreight some goods. But factory closure stopped that too." 

The Chattogram Port Authority is also threatening to impose fines if they do not release goods from the port, he added.

Risk of workers unrest

The labour leaders say if the government does not allow factory reopening before the 14-day lockdown ends, salary cuts and delayed payments in the name of labour law would meet with strong protests.   

Nazma Akter, founder and executive director of labour organisation Awaj Foundation, said the workers were the worst victims of the 66-day general holiday last year.

"We request the government not to allow the factory owners to do the same again this time," she said.

She also mentioned that her organisation will send a letter on Thursday to ministries of labour and home informing of the upcoming unrest if workers are slapped with pay cuts.

Sirajul Islam Rony, president of Bangladesh National Garments Workers Employees League, said, "We will not accept pay cuts of workers through lay-offs. As the government keeps factories closed, it will have to take responsibility for paying workers if owners cannot."

The government should provide subsidies as it did in other cases, he added.

The BKMEA vice-president said, "We want to comply with the law. If any labour organisation demands are beyond the labour law, they should ask the government to entertain them."

Kalpona Akhter,  executive director of Bangladesh Centre for Workers Solidarity, said, "We will not allow paying 60% or 65% salaries like last year. Why would workers be the victims of this situation?"

 Bangladesh Apparel Exchange Founder and CEO Mostafiz Uddin said the government allowing factories to run will solve many issues like worker salaries, shifting of orders to other countries, airfreight costs, etc.

He also mentioned that the government has data on Covid-19 infections among workers, which might help it to consider the reopening of factories.

Orders situation

Sourcing Journal in a report says apparel buyers have started shifting from Bangladesh to other countries because of the ongoing closure of factories amid the strict lockdown.

"Some apparel brands and retailers have reached a tipping point to the volume they can source from Bangladesh," Saskia Hedrich, senior expert at McKinsey's apparel, fashion and luxury group, previously told Sourcing Journal.

"These are starting to diversify volume from Bangladesh to other countries to avoid over-dependency and manage supply-chain risks."

The garment supply chain just cannot get a break from Covid-19. If global shipping delays and inflationary pressures weren't bad enough, factory closures from coronavirus shutdowns in Bangladesh and Vietnam could derail more than one-quarter of US imports of clothing and footwear, a research analyst at S&P Global Market Intelligence's global trade data platform Panjiva said Friday.

High air freight cost 

Apparel exporters have to export goods by air because of shipment failure.

Narayanganj-based MB Knit Fashion Ltd on Monday had to ship a consignment of goods worth $72,000 through airfreight at a cost of $38,000, said its managing director Mohammad Hatem.

"We had to ship part of the order, otherwise, the full order could have been cancelled," he added.

Hatem, also BKMEA first vice-president, said airfreight shipment pressure will be higher after the reopening of factories.

Apparel leaders also mentioned that incoming orders have slowed down because of the current factory closure. On the other hand, orders of short lead-time almost vanished and those orders might move to other countries.

But the association has no data on the number of orders that have already been cancelled or moved to other countries.

Vaccination might be hampered

BGMEA President Faruque Hassan said if they can reopen the factories on 1 August, more workers would come under the vaccination coverage with the on-spot factory immunisation drives that began just before Eid. 

Around 29,000 workers were vaccinated in two days before Eid.

The BGMEA president further said the factories strictly maintain virus safety measures that make the production units safer than the village homes where workers are now enjoying the Eid vacation.

He noted that they are still trying to convince the authorities about the factory reopening on 1 August.

"We have already talked to a number of ministers and secretaries. We are very hopeful about positive feedback before 1 August," said the BGMEA president.

Sources said a group of apparel makers met with the BGMEA president on Wednesday and they put pressure on the organisation to allow them to open units. A number of apparel leaders have also scheduled a meeting with the cabinet secretary on Thursday.

Industry sources said they will argue their position in the meeting and request for permission to reopen, at least on a limited scale.

Seeking anonymity, a BGMEA vice-president said, "If the government allows those factories with shipment pressure, it will be a way of our survival."

However, some manufacturers apprehend that the government may extend the closure of factories because of the rising virus infections.