Amid pandemic, HK-based apparel maker trying to sell EPZ unit

With production suspended amid the fallouts of Covid-19, the management of Hong Kong-based woven garments maker Kwun Tong Apparels is trying to sell off the unit inside Adamjee Export Processing Zone.

"I am looking for potential investors who can buy my factory," Sanjeev Tikam Mahtani, chairman of Kwun's sister concern Must Garment Corporation, told The Daily Star on Wednesday. He has a second garment factory in Bangladesh.

"I have been doing business over the last 40 years in Bangladesh. I have never faced such a big crisis in my life that I faced last year," he said over a WhatsApp call from Hong Kong.

"I sold the goods on a big discount and faced a big quantity of work order cancellations from my long time business partners, retailers and brands," said an emotional Mahtani while recalling his many personal and business attachments with Bangladesh.

One of his US-based retailers cancelled work orders worth $20 million and another retailer had to be provided a discount of $25 million.

The accumulation of such losses become too much for him to bear.

Mahtani said he invested $50 million in the Kwun factory, which employed over 6,000 workers who were offered various facilities, such as mid-day meals, since its inception in 2006.

"I have never faced any labour unrest as I always stood beside my workers whenever they raised any demand," he said, adding that his annual exports were worth nearly $100 million.

"The buyers have demanded such long deferments in making payments that no one can survive as the banks will not spare the loan repayment. Nobody can survive as the retailers do not pay and the profit margin is so low," he said. 

"I have to send 20 containers of garment goods if I want to recoup the discount that I had to provide to one buyer during the pandemic time," Mahtani said.

When the pandemic surfaced, Mahtani had kept the Kwun factory shut for one month and faced a lot of losses ensuing from work order cancellations and discount demands.

Later on September 12, the factory management decided to go for lay-offs, paying Tk 13.60 crore to workers as compensation as per the rules of the Bangladesh Export Processing Zones Authority (Bepza), the regulatory body of export processing zones (EPZ).

Mahtani said by the time the government changed rules, making companies inside EPZs eligible for its stimulus package, it was too late for the Kwun factory.

The government offered export-oriented sectors Tk 10,500 crore through stimulus packages at only 2 per cent service charge, mainly aiming to ensure payment of workers' wages and allowances for four months.

Moreover, garment exporters situated inside EPZs are not eligible for incentives offered on export receipts to those outside, something the Kwun factory could have utilised to alleviate its financial crunch.

Meanwhile, banks have been sending him notices for loan repayments. Mahtani wrote about these issues in a letter sent to Bepza last week. The Daily Star obtained a digital copy of the letter.

Mahtani had written that he was unable to pay the compensation because the banks were not providing support amidst the ceasing of the unit's commercial production and business.

He had already paid out a handsome amount from funds he had in hand and the only option left for paying the rest of the compensation was selling off the factory.

Regarding his business in Bangladesh, Mahtani said he started off by opening a buying office and then moving on to establish factories.

"I have a lot of reputation in garment business in Bangladesh as I am one of the pioneering garment entrepreneurs in the country," he said.

Talking about the Kwun factory, Nazma Binte Alamgir, general manager (public relations) of Bepza, said her office had not yet received any formal letter or application from Mahtani or anybody of the Kwun proposing selling off the unit.

As per rules, Bepza's approval is needed to sell off any factory operating inside the EPZs, she said, adding that the Kwun would also need the nod if it wants to sell the unit to any investor.

She confirmed that the Kwun had been facing problems from buyers either demanding unusually long payment deferrals or cancellation of work orders because of the pandemic.

She said Bepza has been lobbying with the government to make factories inside the EPZs eligible for a cash incentives on export receipts.

Alamgir also pointed out that Kwun produced woven garment items, the demand for which had now waned because people were limiting movement outdoors due to the pandemic.

"So, the company was receiving fewer work orders for which it has to face such troubled times," she added.

Kutubuddin Ahmed, chairman of Envoy Group, another leading local garment group and former president of the Bangladesh Garment Manufacturers and Exporters Association, who is familiar with the incident, said the Kwun employs nearly 7,000 workers.

The workers need to be paid and if the factory gets sold, Mahtani will be able to pay the compensation, he said.   Ahmed, however, also said the interests of foreign direct investments should also be protected as these were from very important entrepreneurs creating jobs and turning the wheels of the economy through their businesses inside the country.