Fashion questions sourcing in Bangladesh and India after Covid-19

India has already become the fourth country in the world most affected by Covid-19, only behind the United States, Brazil and Russia. In Bangladesh, there are more than 90,600 people infected. With factories not running at full capacity, the international fashion industry is closely following the evolution of two of the largest supply hubs in the world.

The coronavirus crisis and, above all, the risk of a new outbreak, is causing companies to start looking for alternatives to Bangladesh and India. According to an executive of a fashion company, the the health crisis is also having an impact on the apparel factories. 

In May, both countries also suffered the impact of the cyclone Amphan, the most powerful storm that has been ever formed in the Bay of Bengal, according to the UN. The cyclone Amphan affected some 10 million people in Bangladesh, with at least 25 fatalities, while in India the number of deaths rose to 70 as of May 23. Half a million families lost their homes, according to the UN.

Cyclone Amphan joined the Covid-19 in May and affected Bangladesh and India

In India, Narendra Modi’s government decreed last March the world’s largest lockdown, affecting the 1.3 billion inhabitants of the country. In recent weeks, however, different restrictions have been eased and the return of migrant workers who had been trapped after the massive suspension of activities has been authorized.

On March 30,  the Bengali government decreed the suspension of non-essential industrial activity to contain the advance of the pandemic . Despite the closure, the Bengali administration allowed factories with ongoing orders to continue working until they were completed. The country ended the lockdown by the end of May, despite having surpassed China in number of cases and being among the 20 most affected countries in the world. 

As explained by different businessmen consulted by Mds, both in Bangladesh and India the textile industry is finding it difficult to maintain activity and employers are demanding public measures to keep up exports and regain employment.

Windy Group and Gokaldas have laid off 3,000 people and 1,300 people in Bangladesh and India

This week, for example, we have known the dismissal of 3,000 employees by Windy Group, a Bengali giant that has among its clients the largest fashion groups in Europe. In Gazipur, north of Dhaka, thousands of workers are awaiting the reopening of 52 textile factories, closed for more than two months due to the coronavirus crisis. Even global sourcing giants cut back in Bangladesh: Chinese group Li & Fung has laid off 100 employees as part of a global resizing plan.

In India, Gokaldas Exports, manufacturer for Gap, Zara, Adidas or Abercrombie, has closed one of its factories and dismissed nearly 1,300 employees for the cancellation or reduction of orders by large players. The company has twenty factories where it employs 25,000 workers. Another example of the cuts in India is Raymond, one of the largest manufacturers and distributors in the country, which has laid off 800 of its 7,000 employees.

Not only the lack of orders affects the sector, but also the labor force. Although the official speech notes that most workers have already returned home and are back at work, a report released this week by the Stranded Workers Action Network (Swan) notes that 67% of migrants in India are still trapped in the same place since the state of alarm was announced.

In Cambodia and Vietnam, textile production continues as usual

Which countries can capitalize on the doubts that are beginning to arise about India and Bangladesh? With the outbreak of the pandemic in China, European companies began to look to Turkey to save the closure of factories in the Asian country. The sector continues to focus on the Turkish market, currently to gain capacity to react to a frozen demand that could recover.

In Asia, Cambodia and Vietnam could also gain activity from India and Bangladesh . In both countries, according to industry sources, textile production remains “quite normal”, although some factories have stopped due to lack of orders when the big brands froze their production due to the closure of stores in Europe and the United States.

Bangladesh and Myanmar are currently among the cheapest textile supply hubs in the world, although the later does not have as much capacity as the first. Cambodia and Vietnam may come to match them in costs if they work with large volumes, but both countries have trade tariffs.

In early June, the National Assembly of Vietnam ratified the free trade agreement with the European Union, , although it has yet to be ratified by the Vietnamese National Assembly.

In the case of Cambodia, last February the European Union withdrew its tariff preferences to the country. Starting in mid-August, the country will have to pay tariffs on exports of certain types of clothing and footwear. Until now, Cambodia enjoyed zero tariffs under the Everything but Arms (EBA) program.