Does the resurgence of Covid in Europe spell disaster for the RMG sector?

Bangladeshi RMG workers lost around $502 million in wages during the March-May period of 2020 alone.

Europe has once again become the epicenter of the coronavirus pandemic, with many European Union (EU) nations recording the highest Covid cases in recent days.

Austria entered into its fourth national lockdown on Monday after tens of thousands of people, many of them far-right supporters, protested in Vienna against renewed curbs on movement, reports Reuters.

The Netherlands has also returned to a partial lockdown last week to curb the spread of Covid-19.

Meanwhile, Europe’s largest economy, Germany may also follow suit going into lockdown soon. German Health Minister Jens Spahn, on Friday, warned that vaccination alone will not cut the number of cases.

However, with coronavirus cases increasing again in Europe, it will have massive impacts on the Bangladeshi RMG sector, given that it is the largest destination for clothes manufactured in Bangladesh.

The Bangladeshi government on November 16 said that it will sit with stakeholders in the export sectors soon to review the market and possible impacts that are on its way.

In an earlier report published, sources at the Export Promotion Bureau (EPB) said that Bangladesh sends over 50% of its exportable goods to the EU markets.

BGMEA President Faruque Hassan also expressed his concern about the current spread of coronavirus in major EU markets.

He further said that the readymade garment sector has started getting orders and has been on the track after overcoming the pandemic last year.

According to another early report, Bangladeshi RMG workers lost around $502 million in wages during the March-May period of 2020 alone, mainly because there were not enough orders to keep the factories afloat.

A study titled “The Weakest Link in the Global Supply Chain: How the Pandemic is Affecting Bangladesh’s Garment Workers” revealed that 82% of interviewed workers’ income in April-May 2020 had declined from February 2020,

77% of the workers reported difficulty feeding all household members, while 69% were forced to eat less protein-intensive foods during the period.

By June 2020, export orders had fallen by 40-45% compared to 2019. Bangladesh lost $724 million in apparel exports to the United States until then.

Workers also faced critical challenges to their mental health and overall emotional wellbeing, being worried about both the pandemic and their financial futures — providing for their families, feeding them, and caring for their children.

The Bangladeshi RMG sector has been generating around 4.4 million jobs over the last four decades, and the entire workforce fell victim to Covid during the lockdown periods.

It was a sign of relief when the RMG industry started to pick up steam in September this year with the lives in European countries starting to fully come back to normal. The export earnings also started to reach new records in terms of year-on-year growth.

Bangladesh earned $15.74 billion from exports in the first four months of the current fiscal year (July-October), fetching a 22.62% year-on-year growth.

The month of October alone fetched 60.37% year-on-year growth. It also witnessed a historic growth in the apparel sector, as high as 53.28%, as exports reached $3.56 billion.

Meanwhile, experts, including the President of Bangladesh Garment Buying House Association Kazi Iftekquer Hossain told earlier that product diversification might reduce some of the shortcomings that the new surge of Covid in EU nations may bring.

He said that the textile sector of the country imports machinery worth $3 billion on an average in a year.

During the pandemic, the import bills of buying machines plummeted to nearly $750 million.

He further said that the textile and garment industries are highly labor-intensive and profit margin has been gradually decreasing over the years as production cost has risen.

Like Eid or Puja festivals, Kazi Iftekquer Hossain said the exporters and importers also see a substantial rise in RMG products during the Christmas festival.

However, the recent surge of Covid has all the possibilities to send all these recoveries on a downward trend again.

Till the filing of this report, there have been 205,954 fresh cases of Covid-19 detected worldwide, according to Worldometer data.

European country Netherlands is in the third position in terms of fresh Covid cases with 23,002 cases while Austria, Poland, and Germany are in the fourth, fifth, and sixth positions respectively with 13,806, 12,334, and 11,477 cases.