Summary:

One of the largest centers of the world’s apparel industry, Bangladesh, is experiencing a backlog in orders due to recent political unrest, making it more difficult for garment manufacturers there to fulfill orders on time due to floods that interrupts their cotton supplies. 

Context:

Bangladesh exported $38.4 billion worth of apparel in 2023, making it the third-largest garment exporter in the world behind China and the European Union, according to the World Trade Organization. However, flooding is making it difficult for Bangladeshi garment factories to fulfill orders on schedule, which is causing a backlog brought on by recent political unrest. Because of the magnitude of its textile and apparel industry, Bangladesh is one of the world’s largest importers of cotton; yet, over the last few weeks, few trucks and trains have been able to deliver supplies to companies from Chittagong port due to the severe floods, according to industry officials and analysts. According to Mohammad Hatem, the president of the Bangladesh Knitwear Manufacturers and Exporters Association, the disruption has resulted in a 50% decrease in garment production, compounded by the turmoil and protests that led to factory closures earlier in the month of August. “The industry is now under immense pressure to meet deadlines, and without a swift resolution, the supply chain could deteriorate even further,” Hatem stated. Rubana Huq a former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), while calculating the cost of lost output at the garments factory she owns and operates in the capital city of Dhaka stated, “Even for a moderate-sized company like ours, which makes 50,000 shirts a day and if the price of one single shirt is $5, there was $250,000 of production loss.” While acknowledging that some clothing factories were reducing their rate of output, she cautioned that a full recovery “would be at least six months away” and that Bangladeshi manufacturers might lose 10% to 15% of their business to foreign competitors.  Shahidullah Azim, a director of the BGMEA industry association, stated that buyers are being cautious and would postpone placing new orders. “The longer this uncertainty persists, the more challenging it becomes for us to maintain the momentum we have built,” he stated to Reuters. Commodity analysts indicated that some cotton exports would be redirected to Vietnam, Pakistan, and India. “We are seeing and hearing about some cotton that Vietnam and Pakistan are requesting for quick delivery,” stated Louis Barbera, an analyst and partner at New Jersey-based VLM Commodities. According to Atul Ganatra, president of the Cotton Association of India, new orders that are transferred from Bangladesh may also be accommodated in southern India. According to Fazlee Shamim Ehsan, vice president of the nation’s knitwear producers and exporters association, power shortages plagued Bangladesh’s garment industry even prior to the country’s floods and political turmoil.  It is worth mentioning that over 80% of Bangladesh’s overall export revenue comes from the readymade clothing sector, which provides many of the most well-known fashion companies in the world. 

Picture and Article Sources: Reuters, The Business Standard