Bangladesh garment industry faces crisis amid political unrest, floods

Bangladesh's garment industry, a vital economic pillar, is facing a severe crisis due to a volatile mix of political unrest, including violent protests, and catastrophic flooding, threatening to unravel years of rapid growth and global prominence.

The textile and garment industry, which accounts for over 80 per cent of Bangladesh's total export earnings and contributes approximately 11 per cent to the nation's GDP, has been hit hard.

This industry contributes significantly to export earnings and employs millions.

Following the unprecedented anti-government protests, which reached a crescendo on August 5, Sheikh Hasina resigned as prime minister and fled the country. She landed in India on August 5 and is currently staying there.

 

The two-month-long anti-quota protests have led to widespread demonstrations, curfews, and violence. This unrest has not only disrupted factory operations but has also caused significant economic losses.

Factories were forced to close, and with the peak season for Christmas shipments and the booking of next season's orders upon us, the timing of the unrest has exacerbated the crisis.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) recently has reported substantial financial losses, estimating a shortfall of Tk 6,400 crore (approx Rs 4,500 crore) due to the shutdowns and communication breakdowns.

Khandoker Rafiqul Islam, the newly elected president of the BGMEA, mentioned that the goal of reaching nearly USD 45 billion in exports this year may not be achieved.

He attributed this to disruptions in both export activities and production.

I think this is a temporary crisis and we will tide over it. The exact magnitude of the losses will be known later, but yes, there has been an impact, he told PTI.

Echoing similar sentiments, former cabinet minister and president of BGMEA, Gholam Sarwar Milon, said the garment industry has been badly hit by both the political unrest and the floods, as both production and the supply chain of raw materials have been severely affected.

The crisis in the garment industry is unprecedented. Production is nearly 15-20 per cent less than the corresponding period last year. Several orders have dried up as investors and order suppliers are wary about investing. Several small factories have either closed down or are working on sub-contracts for big factories, he told PTI.

According to BGMEA sources, out of 3,000 major and small garment factories in Bangladesh, nearly 800-900 have closed since last year.

The big factories have survived, but the small and medium factories have borne the brunt. If the situation persists, it will worsen further, he said.

Milon suggested that the garment industry needs to diversify into making jute bags and other high-end clothing and also look for new markets.

The Bangladesh Textile Mills Association has projected losses of around USD 58 million. The impact on the industry is compounded by the recent flooding, which has further disrupted logistics and exacerbated the economic fallout.

Bangladesh's main port, Chattogram, through which more than 90 per cent of the country's international trade transits, has become a focal point of the chaos. The port's operations were paralysed during the political unrest, leading to significant delays in shipments.

Factories have struggled to maintain production schedules, and backlogs at ports and airports have stretched to a month in some cases.

To mitigate the damage, factories have turned to air freight and extended working hours, but these measures have not fully alleviated the delays.

The president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Mohammad Hatem, said orders are down by 15-20 per cent.

The industry has incurred huge losses in the last few months. In 2014, during political unrest, we suffered a similar situation. It then took us three years to return to the previous state. We hope to tide over the situation soon as Chief Advisor Muhammad Yunus is taking several steps to restore normalcy, he told PTI.

Hatem feels that if the situation is not overcome soon, there is a growing perception that foreign investors might look at new markets in other South Asian nations.

"However, other South Asian markets don't have the infrastructure like Bangladesh, which has such huge production capacity," he said.

The garment industry's workforce, which employs over 4 million people directly and nearly 15 million indirectly, with a significant proportion of women, faces mounting uncertainty.

The sector's remarkable growth over the past two decadesfrom USD 5 billion in exports in 2001 to nearly USD 40 billion in 2023now stands at risk.

The floods have compounded the challenges, causing damage to infrastructure and further complicating logistics.

Monsoon rainfall-triggered floods in deltaic Bangladesh and upstream Indian regions have killed several people and marooned or affected nearly 3 million others in Bangladesh, posing a huge administrative challenge to the newly installed interim government amid a political transition.

Due to the floods, the supply chain has been badly affected. We reached a high in 2023-24 where our garment exports touched around USD 46 billion. This time it is likely to be much less, said former army major and owner of a woollen garment factory, Mahfuzur Rehman.

The sector's growth from a small-scale operation in the early 1980s to becoming the world's second-largest apparel exporter, after China, underscores its strength.

In the financial year 2009, Bangladesh's apparel exports were valued at USD 12 billion. By the financial year 2023-24, this figure had surged to over USD 46 billion, reflecting the industry's capacity for recovery and growth even amid adversity.

In response to the crisis, the interim government, now led by Nobel Peace Prize-winning economist Muhammad Yunus, has prioritised restoring order and stability.

According to garment industry insiders, the path to recovery is fraught with challenges as the political instability has undermined investor confidence, and the recent flooding has further strained the already fragile infrastructure.

The sector's resilience will be tested as it attempts to regain its footing and restore its reputation as a reliable global supplier, a garment industry owner, who did not wish to be named, said.

He added that despite the current crisis, Bangladesh's textile and garment industry has shown great strength and the ability to recover in the past.