RMG orders slump | The Daily Star
12:00 AM, March 28, 2021 / LAST MODIFIED: 07:08 AM, March 28, 2021

RMG orders slump

Buyers go slow amid fresh fears and lockdowns

International buyers are following a 'go-slow' policy in placing orders with apparel suppliers in Bangladesh because of fresh lockdowns and stricter restrictions in key markets amid a rise in coronavirus infections and piling up of unsold goods amid depressed sales.

Local garment suppliers say there were receiving 20 per cent fewer work orders for the next season beginning from June.

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The fewer order placements are taking place mainly in small and medium enterprises as they have less production capacity and weak financial strength, and a few trade partners or buyers abroad.

Moreover, the demand for deferred payment is still as severe as it was in the initial months of Covid-19 in 2020. In a few cases, it has worsened as the situation in the Western market is dire, industry insiders say.

AK Azad, managing director of Ha-Meem Group, a top garment supplier, faces fewer orders and deferred payment.

"I know the lockdown will lengthen, and there is an uncertainty, and I am trying to improve the efficiency so that I can survive during Covid-19."

The third wave of infections is sweeping through Europe, which accounts for 60 per cent of garment exports from Bangladesh.

Countries such as Italy, Germany, France and UK are reinstating stricter lockdowns, and many other countries across the world are following the suit.

Previously, buyers used to give at sight, a form of payment due on demand. It requires the party receiving the good or service to pay a certain sum immediately upon being presented with the bill of exchange.

Buyers are now requesting a deferred payment for 180 days, sometimes even more. So, the situation has not improved in terms of payment deferment, suppliers said.

SMEs are the worst victims in such a situation. Besides, most of them are not getting sub-contracting orders as the bigger units do not have large volumes of export orders for themselves for the next seasons.

"The old inventory in the retail stores is one of the major reasons for the go-slow policy by the buyers," said Fazlul Hoque, managing director of Plummy Fashions Ltd, a Narayanganj-based knitwear factory.

"I have received 20 per cent fewer work orders from my buyers for the next seasons."

Hoque said the orders for some specific products were higher than the traditional goods.

For instance, all of a sudden, he received the orders for loungewear and night wears because of a higher demand for casual wear as people are staying most of the time at home because of Covid-19 and lockdowns.

Kutubuddin Ahmed, chairman of Envoy Group, one of the top fashion items exporters, said although the industry had been experiencing 20 per cent to 30 per cent fewer orders, it was recoverable because of the shifting of work orders from China.

"Buyers are following now a go-slow approach and placing orders in small slots instead of bulk amount. Since the Western market is under strict lockdown, their retail sales have plummeted. So, the request for payment deferment is always there," said Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

During the March-April period last year, the garments sector faced order cancellations and delays worth about $3.18 billion.

"We are negotiating with each of the buyers as best as we can. Some 90 per cent of the previous orders have been reinstated, and we are trying for the rest."

"However, it is complicated since a good number of the dues are caused by the bankrupt buyers, and we don't have any legal protection against such non-payment."

Not all the retailers and brands have cleared the entire arrears yet, she also said.

Whenever the BGMEA is reported about non-payment or other purchasing-related issues, the association immediately engages with the respective buyers to facilitate amicable resolution and expedite negotiation, Huq said.

"We have been contacting the buyers one by one on behalf of our suppliers. We have taken the help of our foreign missions, international media, and other social partners, including labour federations."   

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