India Ratings and Research (Ind-Ra) in a report said the fall in consumer income and increase in household leverage will continue to have a negative sentiment through FY21. While India's dependency on imports is limited, it is dependent on exports and hence, the return of demand from the key markets including the US, the UK, the UAE and China is critical. The EBITDA (earnings before interest, taxes, depreciation and amortisation) will drop at least 15 per cent in FY21 across its textile portfolio, the report said. Further, it said the COVID-19 pandemic is likely to continue to impact the global textile production and supply chains and thereby textile product prices. The Indian textiles industry has taken a major hit because most of Indian yarn exports are to China, it added. The agency estimated that India's exports will be substantially hit till the first half of FY21, which had already reduced by more than 40 per cent till January 2020 due to the US-China trade war. Meanwhile, it revealed that cotton prices continued to soften in February 2020, due to lower export demand and squeezed domestic consumption. They fell to Rs 111 per kg in February 2020, compared to Rs 118 in the same month in 2019, on account of reduced offtake by mill owners, which are facing the heat of excess production and supply disruptions amid the spread of COVID-19. However, the Cotton Corporation of India continues to hold up the stock (40 per cent of total arrivals) and would maintain the current prices over the short term. While in the long term, a higher uncertainty regarding the duration of lockdown would be negative for the prices and pressure the liquidity of cotton spinners who are holding a cotton inventory of three to four months.
The cotton yarn industry continues to face a subdued export demand.
With the sudden lockdown of the global market and lack of incremental orders from China, yarn players have begun to face pressure on liquidity, despite the softening of cotton prices. This has led to an oversupply in the domestic market which has impacted yarn prices, while the demand is not likely to improve owing to the lockdown in India and other export destinations, the opening of factories in China could be a light in the dark for these players, it added. The majority of downstream players had to incur inventory losses due to the ongoing geo-political tensions in crude oil which led to the prices declining by more than 40 per cent month-in-month in March 2020. The losses are unlikely to be passed on till the short term. However, lower working capital requirements and reduced raw material costs could improve the margins of the man made fibre industry in the medium term. However, lower raw material availability (purified terephthalic acid) from China amid the COVID-19 led disruptions could lead to a steady increase in domestic prices. The fabric industry registered a marginal improvement in exports in 10 month of FY20, coupled with lower raw material costs and increased export demand from Bangladesh and other countries. However, Ind-Ra said, beginning February, the industry is facing a downfall with reduced domestic demand, leading to inventory piling up. The fabric industry is dominated by few players which have strong liquidity to manage the downside caused by COVID-19, while small and medium-size players would face the brunt of economic lockdown, it added.
Source: Economic Times
India''s textiles and apparel sector production is expected to decline by 10-12 per cent in the April-June quarter owing to the coronavirus pandemic, according to a study by KPMG in India. Demand shocks are expected to hurt India''s textile exports over the next few quarters, the study observed, assessing the current and potential impact of coronavirus on the sector. "With lockdown in China, price of man-made fibre imports is expected to rise significantly, resulting in higher price for some goods in the domestic market. If the current scenario persists over the next few months, the domestic retail market would also be impacted significantly," said the study. From a manufacturing perspective, employment would be impacted owing to limited demand in both domestic and international market, it revealed. Besides, assessing the coronavirus impact on the country''s micro, small and medium enterprises, the study noted that contractual, wage labour will get impacted more leading to layoffs, unrest, lowering of purchasing power. With Europe and the US being affected the most, there will be a huge impact on exports as global demand is expected to come down significantly, it said on outward shipments from MSMEs. A study by the All India Manufacturer''s Organisation (AIMO) estimates that about a quarter of over 75 million MSMEs in India will face closure if the lockdown due to COVID- 19 goes beyond four weeks and this figure is estimated to touch a whopping 43 per cent if the situation extends beyond eight weeks, said the KPMG report.
Source: Outlook India
As per a report in Economic Times, the government has convened a meeting of the empowered group on strategic issues related to the lockdown, to be chaired by the Home Secretary, Ajay Bhalla. The meeting will be attended by Amitabh Kant, Chief Executive Officer of the Niti Aayog along with secretaries from thirteen departments including economic affairs, health, department for promotion of industry and internal trade (DPIIT), pharmaceuticals, information and broadcasting, labour and employment, ministry of electronics and information technology (MeitY) and the Chairman of the Railway Board. Confederation of Indian Industry (CII) as well as Federation of Indian Chambers of Commerce and Industry (FICCI) would represent the industry sector. The meeting is conducted with the agenda to discuss an exit strategy after the lockdown and a calibrated way to open up the country.
Source: Economic Times
The Director General of Foreign Trade has also extended the validity of Handbook of Procedures 2015-20 till the end of March 2021. Considering the massive disruption of economic activities due to the spread of Covid-19, the commerce ministry has extended the life of the Foreign Trade Policy (FTP) 2015-20 till the end of the fiscal year 2020-21. The Director General of Foreign Trade (DGFT) has also extended the validity of Handbook of Procedures (HBP) 2015-20 till the end of March 2021. Many provisions relating to the export promotion schemes have been amended to extend the validity of the import authorisations, the export obligation periods and the last dates for making applications, submitting installation….
Source: Business Standard
As part of the package, finance minister Nirmala Sitharaman announced the transfer of Rs 500 a month to 20.4 crore women Jan Dhan account holders for three months. After announcing money transfer through Jan Dhan accounts of 20.4 crore poor women to blunt the Covid-19 impact, the government may impress upon state-run banks to help improve the cash flow of individuals, many of whom are yet not covered under any relief measure. One of the proposals being toyed with is to raise the overdraft facility automatically for customers with good credit history for a temporary period, should they wish to avail of it, a source told FE. “The proposal also includes raising the limit for Jan Dhan account holders (not just women) from the current Rs 10,000. A final decision will be taken soon,” he said. If approved, the move will benefit not just the poor (Jan Dhan account holders) but also the lower middle-class customers, who are bereft of the PDS facilities, among others. Currently, the Jan Dhan scheme has 38.3 crore beneficiaries who hold a total of Rs 1,18,434 crore in their accounts. Last week, the government pledged succour to the poor and the vulnerable – from BPL families, Jan Dhan account holders and construction workers to organised-sector employees – to cope with the lockdown, announcing a relief package of Rs 1.7 lakh crore. As part of the package, finance minister Nirmala Sitharaman announced the transfer of Rs 500 a month to 20.4 crore women Jan Dhan account holders for three months. This will cost the government Rs 30,600 crore. The transfer to only women account holders was aimed at helping the intended beneficiaries (poor families) with a minimum possible leakage. However, fears that the poor households where no woman has a Jan Dhan account will lose out on this benefit, have prompted the government to consider some relief to them, said a banking industry source. The government is also gearing up for the next round of economic measures that will likely focus on needs of specific sectors – including MSMEs, exports, tourism, civil aviation and animal husbandry – that have been battered by the Covid-19 outbreak.
Source: Financial Express
Even before the pandemic spread its tentacles in India, the country’s goods exports had contracted by 1.5% y-o-y up to February this fiscal to $293 billion. With vast swathes of key markets — the US and the EU — badly bruised by the Covid-19 outbreak and migrant workers back home following a nationwide lockdown, export hubs in India are pummelled by an unprecedented crisis. Exporters from hubs, including Tirupur, Chennai, Surat, Hyderabad, Pune and Kochi, that FE spoke to were bracing for harrowing times. About 25-30% of orders had been cancelled across various product categories. Overseas buyers are using the crisis to renegotiate contract terms and seek a cut in product prices. Domestic manufacturing units are shut and logistic chains in tatters, even though ports are somewhat functioning. Most of the top 25 destinations for engineering goods exports are facing a lockdown. These 25 markets together accounted for $53 billion exports in the April-February period, according to Ravi Sehgal, chairman of EEPC India. Exporters from Tirupur, the country’s larget garment hub that is expected to have shipped out aparrel worth Rs 26,000 crore in FY20, apprehend a 50-60% year-on-year slide in despatches in FY21. The cluster – with 1,000-odd units, mostly MSMEs – employs around 6,00,000 people. About a half of them are migrant labourers, who have gone back home with no certainty of a return anytime soon. The leather companies in Chennai say summer sales are gone and, given the crisis in the US and the EU, the outlook for winter orders remains uncertain. At the all-India level, orders worth about Rs 8,000 crore have either witnessed cancellation or a deferment of delivery, said exporters. Rafeeque Ahmed, chairman of major leather exporter Farida Group, said: “We anticipate that we will lose at least one quarter’s business. There is hardly any enquiry from the US and Europe.” Nearly 70% of the leather exporters are SMEs. Raja M Shanmugham, MD at Warshaw International and president of the Tirupur Exporters’ Association, said” “We have not even received our payments for exports in January and February, and much of the stocks despatched in March are stuck mid-way. I have no clue when the markets will revive and we will get our dues.” The already-dwindling farm exports are expected to plunge further in FY21. Even large companies are not unscathed. Having witnessed a dream run in the December quarter and in February (when its exports outstripped domestic sales), Bajaj Auto’s stellar show was jolted by the pandemic. Rakesh Sharma, ED at Bajaj Auto, projected an up to 20% y-o-y decline in exports in FY21 and maintained that the picture still remained hazy. While the auto maker hasn’t yet seen cancellation of orders, it fears its payment ability will be eroded if the situation worsens. Without enough labourers, employment-intensive sectors like garments, leather and even gems and jewellery are in for an extended period of uncertainties. Cash reserve is depleting fast and in the absence of adequate and smooth credit flow, and many units, especially small and mid-sized ones, are on the brink of collapse. The EU, the US and China alone account for 40% of India’s overall goods exports. Even before the pandemic spread its tentacles in India, the country’s goods exports had contracted by 1.5% y-o-y up to February this fiscal to $293 billion. In Surat, which houses some 20,000 diamond units, about 30-35% of export orders have been cancelled, according to Dinesh Navadia, chairman of the Gujarat chapter of the Gems and Jewellery Export Promotion Council. Production has come to a halt after the lockdown. Almost 80% of the gems and jewellery from India are exported to the US, Hong Kong and China, and nine out of every 10 rough diamonds in the world are being cut and polished in Surat. In the pharmaceutical sector, since Indian companies rely heavily on China for key raw materials, until the supply lines are restored fully there, domestic firms will get hit to that extent. Also, input prices have gone up due to limited supply, while the largest market, the US, is facing a recession. Nevertheless, large pharma companies are seen as weathering the crisis better than the rest. A spokesperson for Dr Reddy’s said, “The market demand continues to be good. However, our manufacturing facilities are operating at below-normal levels… and there are challenges related to the supply chain.” The Rs 12,000-crore carpet industry, with a significant presence in Uttar Pradesh, is apprehending a loss of about Rs 2,000-2,500 crore in FY21. Sidhnath Singh, chairman of the Carpet Export Promotion Council, said the order flow has already been hampered since January, with the crisis breaking out in China. However, it just exacerbated in March when the epicentre shifted to the US, which accounts for well over a half of our exports. Shaji Baby John, CMD at marine exporter Kings Infra Ventures, said: “Vietnam and China are still buying. But internal logistics is a serious problem.” A broad range of farm products, including rice, onion, grape, natural rubber, tea and cashew, will likely plummet in FY21. More than 4,500 natural rubber dealers and one lakh farmers in Kerala are staring at a dark future, as tyre companies have shut production. Dealers alone have incurred losses to the tune of Rs 400 crore in just the first week of lockdown. According to Jagannath Khapre, president of All India Grape Exporters Association, there is hardly any fresh order, and in many cases, payments for earlier supplies are stuck. Ajit Shah, president of the All India Onion Exporters Association, said exports in March were already down by 25% from the usual level to 75,000 tonne. Similarly, as Tea Board deputy chairman Arun Kumar Ray pointed out, tea output from the first flush in Darjeeling could crash by as much as 75%, as hardly any harvest took place. West Bengal’s rice exports have been dwindling over the years, and the pandemic has just worsened the situation. Pratap Nair of Vijayalaxmi Cashews, one of the largest cashew exporters, said: “If problems with movement of export cargo to ports in Andhra Pradesh, Tamil Nadu and Kerala not sorted out fast, many orders will have to be cancelled.”
Source: Financial Express
India and China are expected to discuss steps and explore measuresof boosting bilateral trade which has been significantly impacted by the coronavirus outbreak. China is a major market for Indian products including seafood, petrochemicals, gems and jewellery, but India’s export of these products to its neighbor has been impacted by the virus outbreak. According to Chinese official data, trade between the two countries in January and February of 2020 was down 12.4% year-on-year. This was also the time when the coronavirus epidemic in China was peaking. China's exports to India during this period stood at 67.1 billion yuan, down 12.6% y-o-y, while imports from India dropped 11.6% to 18 billion yuan. The slowdown in manufacturing activity in China, other Asian markets, Europe and the US due to the viral epidemic is hitting Indian exports. India exports 36% of its diamonds to China. The cancellation of four major trade events between February and April this year is likely to cause a loss of $1.05-1.3 million in business opportunities in the jewellery sector for the city of Jaipur alone, ET has learnt. The domestic fisheries sector is anticipated to incur a loss of more than $171,000 due to the fall in exports to China, according to some estimates. The knock-on effect of the pandemic is expected to disrupt trade in agricultural markets too across the Indo-Pacific region, including China. Global prices of goods like cotton will be affected in the second half of 2020 if virus continues to spread, according to experts. Some people familiar with India-China trade said that sectors including pharmaceuticals, healthcare and non-traditional securities are likely to emerge as the new sectors for trade between the two countries. According to official Indian data released in February, India’s trade with China decreased from $89.71 billion in 2017-18 to $87.07 billion in 2018-19. During this period, India’s imports from China declined to $70.32 billion in 2018-19 from $76.38 billion in 2017-18, and exports to the country grew to $16.75 billion in 2018-19 from $13.33 billion in 2017-18. As a result, India’s trade deficit with China reduced to $53.57 billion from $63.05 billion. Commerce and industry minister Piyush Goyal had said in Rajya Sabha in February that the government, in all its official engagements with the Chinese government, has been making efforts to achieve a more balanced trade with China, requesting them to lower trade barriers. “Various protocols have been signed to facilitate export of Indian rice, rapeseed meal, tobacco and fishmeal / fish oil, and chilli meal from India to China,” he said in a written reply to the Upper House.
Source: Economic Times
Apparel manufacturers and exporters in India feel that they should keep talking with buyers and vendors and find midway solutions during the ongoing Covid-19 pandemic. Few apparel exporters Fibre2Fashion spoke to said they will be working with the buyers to cover the losses due to cancellation of orders, non-placement of news orders, and other challenges. Currently, everything is on a standstill globally due to coronavirus. Since all stores are closed, retailers are unable to sell their merchandise. This leaves them with no alternative but to come back to the sourcing people to cancel the orders, feels HKL Magu, CEO of New Delhi-based Jyoti Apparels. Besides cancelling orders, some buyers have put their orders on hold, "which is a nice way of saying no," according to Magu. Even if the orders are not cancelled, the next quarter will be bad because "the customers will lose business which will affect our business. So, current financial year 2020-21 is going to be a bad year; there will be a contraction. Only way to survive is to keep our heads above water. Not only there will be orders cancelled, there will be serious payment issues and other challenges," Anil Buchasia, director of Kolkata-based Amrit Exports Pvt Ltd told Fibre2Fashion.There is no textbook solution for retailers and manufacturers for the current unprecedented situation, says V Elangovan, director of Tiruppur-based SNQS International. "Under the current scenario, there have been grim reactions from western retailers, because shops are closed in all the countries in which they operate. They all are sitting with a lot of stock in the warehouses with nothing to sell. They have their own difficulties and as suppliers we have our own difficulties. We have to pay salaries to the workers." However, KM Subramanian of KM Knitwear is optimistic that the retailers will place their orders back once the stores reopen. When asked about what buyers should do in the current situation, Buchasia said, "We are into workwear. We do business with the industry in the US and Europe, and the importers there. My suggestion for them will be – support the suppliers in this difficult time, keep giving them orders and not to stop them altogether. Of course, they can reduce orders gradually. They have to keep supporting the suppliers because this is a labour-intensive job, and if we don’t get orders, then the workers are going to suffer, we won’t be able to give salaries to them. This will lead to a huge socio-economic problem in countries like India and the developing countries." Elangovan suggested that there should be no naming and shaming of buyers. "We have to work along with the retailers, because tomorrow a vaccine may be announced, and the situation can turn around. As a buying agent, we have to build better bridges and not burn them. We have to keep talking to both the vendors as well as the buyers, put everybody at a comfort level. This is the most we can do now." "We are talking to the top management of our buyers' organisation, discussing better terms, taking out the stock. They say that instead of paying out in 30 days, they want better terms like paying in 100 days to 180 days. Of course, we need to help them at this stage. Some of our buyers are working with us for last 30 years, so we need to reciprocate them. My supplier base is also very cooperative. So, we are working out a solution," he added. In the same spirit, Subramanian said, "We will work mutually with the retailers and cover the losses." Ramu Raju, director of RR Sons Fashion Knits, Tiruppur, also feels that a mid-way should be found. "If buyers can defer the orders, instead of cancelling them, the new terms should be decided between the buyer and the seller." Explaining that the time ahead is not going to be easy, Magu said: "Now is the peak time of exports of RMG, but we are held up. It is not going to be before December that we reach the peak season once again, because the cycle is so big that even if we have everything in place and work very hard, the cycle of manufacturing and then booking the orders, then placing the orders and all that, at least we will be losing 8 months." According to him, it is now the opportune time for the government to come forward and help apparel exporters. "The Government of Bangladesh has given a Tk 5,000 crore package to the textile industry. In the UK, 80 per cent of the salary of the workers will be paid by the government. The Indian government has waived off ESIC/PF for companies having strength of less than 100. But even a small garment company doing an export of ₹5-10 crore will have a greater number of workers, making it inapplicable to the industry. Our government should reduce the GST by maybe 50 per cent. It can make reductions in the electricity bill, house tax etc." While the government has announced that the wages for the lockdown period are to be paid to the workers, it is not clear where the money will come from. "For our shipment which has gone out two months back and buyers have already received, now they have excused themselves regarding payments saying everything is closed. And if the buyers are not making payment and we have borrowed from the banks, all our limits will be exhausted. Not only worker’s salaries, we have to pay for the electricity bills, PF/ESIC, insurance etc. Hence, the government has to come forward with some stimulus package so that the industry also feels confident," Magu told Fibre2Fashion. Pointing out another problem, he said that around 70-80 per cent of Indian apparel industry consists of MSMEs, and many of them have invested their own money instead of borrowing from the bank. "How will banks give them money unless they have collaterals with them? So how are these MSMEs going to pay their workers when money is not coming from the buyers?"Buchasia is also of the opinion that the government should come out with some kind of package for the labour-intensive garment industry, which brings foreign exchange for the country. "In addition to deferment of interest, there should be a waiver of interest, waiver of statutory dues, which normally the government and the banks take from us. We are partners with the banks and government. Ultimately, they take 35 per cent of what we earn. So, in difficult times, they should support us." The government can help the industry by waving off PF to be paid by the employer. It can also give ESIC waiver and reduce the power tariffs for the next couple of months, according to Elangovan. "Already some states have announced reduction in power tariffs," he mentions. "If we pay 2-month salary to workers, our capital will get exhausted. So, we are waiting for the government to take some steps, including lowering of interest rates. The Bangladesh government has taken good steps in this direction. It is paying 3-month salary with only minimal deduction in some fees, which can be paid back in 2 years," adds Raju. Subramanian suggests that the textiles ministry should speak with the brands "to continue working with India and maintain trading relations".
The Coronavirus pandemic is having a strong impact on the global economy. Questions are rife about the possible economic and financial fallout of asking a third of the world's population to stay home and shutting down factories. Is a systemic financial crisis likely, maybe along the lines of the 2008 crisis 12 years ago? The World Bank's India Chief says the two crises cannot be compared. In an interview to Times Now, Junaid Kamal Ahmad talked about how the coronavirus impact is different from the financial meltdown of '08, saying, "what is really different is the financial shock was an attack on the demand side of the economy. Here it is a supply shock. It is a health shock." While in 2008, economies simply needed to be stimulated for demand to rise, and for the crisis to end, this time around it isn't as simple. Countries around the world now face a fine balancing act of slowing an economy down to deal with a health crisis, while not holding it too far back that a rebound would become difficult. "In order to address the health shock you actually have to hold back the economy. If you do not hold back the economy, you cannot practice social distancing," Ahmad said. It is this sequencing that is extremely important, and countries around the world are doing it differently, Ahmad said, giving the examples of US, Sweden and India. In the United States, the federal government has used a bottom-up approach, where different states are slowly being locked down separately. This then adds up to the whole country under some version of restricted movement. Sweden on the other hand, has asked citizens to actually honor the system themselves and observe social distancing and go into lockdown mode. India, by far, has taken the most drastic step, shutting 1.3 billion people in their homes which is "unprecedented, unheard of" according to Ahmad. Every country's main goal now is to flatten the curve in terms of health but the real challenge lies in getting the economy back on track as quickly as possible. To help with this, the World Bank approved a fast-track $1 billion India COVID-19 Emergency Response and Health Systems Preparedness Project to help India prevent, detect, and respond to the COVID-19 pandemic and strengthen its public health preparedness. "What we have done is followed India’s lead and put out a billion dollars into that health expenditure supporting the public health system to actually deal with this health crisis immediately so that the economy can come back as soon as possible," Ahmad said. This is the largest ever health sector support from the Bank to India. This new support will cover all states and Union Territories across India and address the needs of infected people, at-risk populations, medical and emergency personnel and service providers, medical and testing facilities, and national and animal health agencies.
Source: Economic Times
A discussion has started within a section of the government over multiple ways to resume economic activity, particularly in manufacturing, in a limited way after the lockdown ends to enable businesses to pay salaries and meet operating costs and to ensure the economy does not fold up and go into a deep freeze. While discussions are preliminary, and the outcome will depend on the coronavirus threat levels, there is loud thinking on allowing curtailed shifts with social distancing, allowing automated production like automobiles and putting in place a regimen of work passes and companies providing dedicated transport to their workers. In case of automated production lines, it might be easier to commence operations given there are fewer number of hands on the floor and it is easier to observe social distancing. At the same time, it is essential to devise ways to get textiles and some of the other large employment generating sectors running to reduce likely economic hardship. Measures are being considered even as thinking of the next economic package may await a fuller assessment of the domestic and international Covid-19 fallout. The immediate priority, of relief to the poor and tax compliance relief for individuals and businesses, has been addressed for now, it is felt. Officials suggested that such factories will have to ensure that workplaces are not crammed, as it cannot be business as usual till the pandemic is brought under control. But arrangements can be worked out in such a way that 30-40% of the workers are allowed so that at least a part of the production cycle can commence. This will help keep supply chains, crucially in common consumer goods, moving. This will also mean the movement of goods in some of the sectors although the demand for products such as automobiles may be limited. While there are suggestions that some of it can be stocked, for companies, carrying large inventories will impose additional financial burden. There is a proposal to allow exporters, who have already received orders, to complete production and dispatch them to ensure that they fulfil their contractual obligation and are not barred from future contracts. In fact, some businesses that have by and large agreed to pay salaries for March, will find it tough to keep meeting the wage cost going forward as their revenues have stopped. In fact, sectors such as tourism and hospitality are starting the month with zero business and sustaining operations without any sales is going to be tough. Even some of the largest companies in the consumer goods space are only running 15-20% of the production chain, which are part of the ‘essential goods’ set-up, industry sources said. Besides, disruption in the supply chain for even food processing and beverage companies is holding up operations. While big companies may be able to sustain their operations for a longer period, the smaller ones do not have deep pockets to sustain their operations without any revenue for long. The decision to bear the EPFO bill for those earning less than Rs 15,000 in units employing up to 100 workers is expected to cost Rs 20,000 crore annually, leaving the government with no headroom to bear the cost for the entire workforce.Apart from workers, banks and other lenders also need to be paid to ensure that there is no pile-up of bad debt that impacts the stability of the financial sector in the medium to short term.
Source: Times of India
At least 15 international apparel retailers and brands have so far assured Bangladesh's garment manufacturers that they will accept shipments of products that were previously ordered, in an effort to help the country's exporters deal with the coronavirus fallout. The retailers and brands are: H&M, Inditex, PVH, Target, Kiabi, M&S, C&A, Tom Taylor, KappAhl, Benetton, Decathelon, Primark, Puma, Tesco and Kontoor. They are currently finalising the terms and conditions of previously submitted work orders. However, the total size or value of their orders could not be ascertained. DBL Group, a leading garment exporter whose biggest buyers include H&M and Puma, has been assured by the two international retailers that they will not cancel work orders placed earlier, said DBL's Managing Director MA Jabbar. "I hope the rest of my buyers will contact me next week. We are positive that the buyers will stand by us in this critical time," Jabbar told The Daily Star over phone. Ever since the coronavirus outbreak began, many western apparel retailers—who had been sourcing products from Bangladesh for decades—sent letters to the local manufacturers, seeking cancellation of current and upcoming work orders. This is because, amid nationwide lockdowns to curb the spread of the deadly virus, their stores are closed and demand has collapsed. At the same time, many retailers and brands stood by garment manufacturers who have been adversely impacted by order cancellations and delayed shipments. "We welcome their decision to support us and hope that payment terms will remain unaffected in order to ensure liquidity flow for the factories," said Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), in a WhatsApp message last week. Huq issued the response after Swedish retail giant H&M last week assured apparel suppliers that it would accept orders which were already manufactured. "At least six of my long-term buyers contacted me to receive the orders," said Mahmud Hasan Khan Babu, managing director of Rising Group, a leading garment exporter. "I am trying to continue production in the factories, but the situation is not good. Moreover, most Western buyers have already shut down their stores," he said, adding that the buyers' response at this critical moment is definitely a positive sign. For instance, French buyer Kiabi told Rising Group during a video conference last week that it would take previously placed orders worth nearly $14 million. Rising Group has been supplying knitwear items like T-shirts to Kiabi for more than nine years. The French company purchases nearly $120 million worth of garment items from the Bangladeshi manufacturer every year. Kiabi has been annually sourcing various Bangladeshi garment items worth $700 million for the past 20 years, Babu said. As of yesterday, export orders amounting to $3.02 billion have been cancelled by international retailers, according to data compiled by the BGMEA. About 1,104 garment factories have reported a combined loss of 946.90 million units of work orders. This will affect 2.19 million workers in the country. Very few factories were in operation yesterday even in production dense areas like Ashulia, Savar, Gazipur, Chattogram, Tongi, Maona, Narayanganj and Narsingdi. Garment export fell by 26.70 per cent year-on-year to $1,972.24 million in March this year, according to BGMEA data. The countries worst hit by coronavirus, such as Italy, the UK, the US, France, Spain and Germany are prime destinations for Bangladeshi garment exports. The US alone is the single largest export destination for Bangladeshi garments, importing about $6 billion worth of apparel items each year. Germany is close behind with slightly less imports. Bangladesh exports nearly $3 billion worth of garment items to Italy and more than $2.5 billion to Spain and France each year and over $3 billion to the UK.
Source: The Daily Star
Indecision of factory owners and lack of coordination among the government agencies multiplied the sufferings of readymade garment workers, labour leaders and experts said on Sunday. They said that thousands of workers on Friday and Saturday were forced to return to their work locations in Dhaka and its adjacent areas amid the countrywide shutdown. Export-oriented garment factory owners were allowed by the government to reopen factories on April 5 while the number of novel virus infections and death was on the rise. Blaming indecision of RMG factory owners, trade union leaders demanded closure of all factories to protect workers from infections, besides demanding payment of wages and coronavirus protective equipment for the workers. Transparency International Bangladesh on Sunday in a statement also condemned the factory owners for exposing workers to health risks violating their health rights. TIB said that the insensitive act of factory owners which was detrimental to public interest had put tens of thousands of workers as well as people at large at higher risk of getting infected. TIB considered it a violation of safety and health rights of RMG workers who were under pressure from the factory owners to rush to their workplaces in extremely adverse conditions fearing loss of jobs as the country was still under lockdown. Thousands of garment workers used local transports, ferries and even walked to reach back to their places of employment in Dhaka, Gazipur and Narayanganj, among others, as their owners were set to resume production at factories from Sunday amid the nationwide shutdown announced to fight the spread of coronavirus. However, on Sunday morning most workers could not enter their factories as the authorities of a good number of factories chose not resume work without any prior notice after the BGMEA and the BKMEA urged their members at midnight to keep factories shut till April 11, labour leaders said. Due to the closure of factories, workers decided to go back to their village homes on Sunday on local transports and on foot. ‘There are two reasons behind the sufferings of the readymade garment sector workers. There is this lack of coordination among the ministries as government agencies failed to determine the health risk of the RMG workers and the delayed decision issued by the apparel trade bodies to keep their units closed,’ Centre for Policy Dialogue research director Khondoker Golam Moazzem told New Age on Sunday. He said that the government agencies were not giving the same priority in assessing the health risks involving the RMG workers. Moazzem also said that the leaders of the apparel trade bodies should have tried to keep their units shut through negotiation with brands and buyers amid the outbreak of the pandemic. He said factory owners should pay wages to the workers within a very short time as they had been made to rush to the city.‘We are not machines, we are human beings. We deserve dignity and respect and decent livelihood,’ Combined Garment Workers Federation president Nazma Akter said. Nazma urged the government, factory owners and buyers to pay workers and stop their sufferings in the apparel sector that engages over 40 lakh workers. About the payment of wages, BGMEA president Rubana Huq said they urged all of their members to clear wages for March as early as possible.‘A cell has been set up to assist BGMEA members in this regard,’ she added.According to the industrial police data, there were a total of 3,371 RMG and textile units under the jurisdiction of the agency across the country and of them 578 factories were open on Sunday.
Source: New Age Bangladesh
New Look says it is suspending payments to suppliers for existing stock "indefinitely", telling them in a letter that the stock can be collected by its owners. The retailer is also cancelling orders for its Spring and Summer clothing lines and won't pay costs towards them. New Look told the BBC it did not take the decision lightly. "This is a matter of survival," it told suppliers. One small firm said New Look’s behaviour was “totally out of order”.
The supplier, which provides clothing for several High Street chains and did not want its name published, told the BBC it was not currently owed money by New Look and had no outstanding orders with the retailer. However, it added that New Look’s approach would “devastate smaller companies down the supply chain at a time when they need help the most”. New Look’s instructions to suppliers came in the form of a letter, signed by chief executive Nigel Oddy and dated 2 April, which has been seen by the BBC. All New Look stores have been closed since 21 March. The firm said it was still trading online, but its distribution centre was full and it could receive no more goods. “We are acutely aware that our suppliers are facing their own challenges at this time, and that both their businesses and employees are being affected,” Mr Oddy wrote in his letter. “Government support schemes continue to be announced throughout the world, and we encourage you to pursue any options that are available to you.” The supplier who contacted the BBC said small firms could not afford to trade in those circumstances and accused New Look of “passing all the risk on to the supply chain”. The firm said it, and others like it, had its designs manufactured in China and could not afford to take on all the liability by itself. It added: “The new reality in China is that factories now insist on deposits for all orders placed on behalf of grocers and large retailers, as they cannot afford orders to be cancelled with no compensation to cover raw materials and production.” The firm called on those big retailers to “play their part in helping the whole supply chain by paying these deposits up front at the point of order”. “Since the middle of March, our revenue has collapsed from £160,000 per day to virtually nothing, as almost all of our retail customers in the UK have chosen or had to close for the foreseeable future,” the supplier said, adding that it had already furloughed 90% of its staff. New Look was already facing difficulties before the coronavirus pandemic struck. It closed dozens of stores in 2018 and 2019 because of “challenging” retail conditions on the High Street. A New Look spokesperson said: "Whilst our online sales channels remain open, albeit on a significantly reduced basis, we have regrettably had to inform suppliers that we cannot place new orders until further notice and will be temporarily postponing outstanding supplier payments until the situation improves." "We have not taken this decision lightly and have only done so out of absolute necessity, given the exceptional circumstances we are in. We greatly value our relationships with suppliers and are actively identifying opportunities where they can hold product for use for autumn-winter this year or spring-summer next year."
Source: BBC News
Coronavirus has wrecked global markets in a way comparable to the global financial crisis. Nations are unrolling emergency plans to save their economies.
The German government is providing €1 billion ($1.1 billion) in credit for businesses and companies of all sizes. The credit will be delivered through the state-owned KfW business development bank. Last week, Berlin said the KfW has around €500 billion to help support its economy. The government also announced a number of tax measures to ensure liquidity for companies. Late payment fines for loans may be waved for companies hit hard by the slowdown caused by the outbreak. Financial support will also be given to the Robert Koch Institute, the country's public health institute. Germany's Ministry for Education and Research is expected to receive €145 million for the development of a vaccine. The country has also set aside €50 million to repatriate German tourists stranded around the world. The southern state of Bavaria announced a fund worth up to €10 billion to help the region withstand the coronavirus. The fund allows the local government to buy stakes in faltering companies to prevent insolvencies. Companies with up to 250 employees can apply for loans between €5,000 and €30,000. The fund will also be used to guarantee 80% of loans taken by companies threatened by default. Bavaria is home to nine blue-chip DAX-30 companies including car manufacturer BMW, engineering giant Siemens and sports retailer Adidas. German Finance Minister Olaf Scholz told the newspaper Die Zeit that European countries must show "solidarity" with hard-hit countries like Italy. "A country like Italy must now spend billions to support its economy. This must not be allowed to fail due to a narrow interpretation of regulations."
Prime Minister Pedro Sanchez announced measures worth €200 billion ($219 billion) to help companies and protect workers and other vulnerable groups affected by the escalating coronavirus. The Spanish government plans to mobilize €117 billion for the package, with private companies providing the rest. Some €600 million will be pumped into basic social services. Half of the assistance measures, which are worth 20% of Spain's economic output, are state-backed credit guarantees for companies, and the rest includes loans and aid for vulnerable people.
Portugal, which declared a 15-day state of emergency starting on March 18, has unveiled a €9.2 billion ($10 billion) aid stimulus package, worth more than 4% of the country's GDP. The package includes state-backed credit worth €3 billion to help companies in sectors like tourism, hospitality, textiles, wood, micro and small enterprises. Some €5 billion of the fiscal stimulus is set aside to enable flexible tax and social security payment. Portugal's finance minister said that the country may implement a moratorium on loan repayment. Talks are currently underway with several banks.
France has pledged a €45 billion ($50 billion) aid package for small businesses in addition to tens of billions already promised for French workers forced to stop working because of shop and restaurant closures and strict new quarantine measures.
Newly appointed Chancellor of Exchequer, Rishi Sunak, announced a $14.5 billion emergency fiscal stimulus package to tackle the coronavirus pandemic. The stimulus will support the UK's National Health Service (NHS) and refund the cost of businesses for 2 weeks. The UK is also offering state-backed loans worth $400 billion (15% of the UK's GDP) for businesses in the retail and hospitality industries struggling in the sudden economic paralysis caused by mass self-quarantine.
The US Senate cleared a federal aid package worth $104 billion, which will give free coronavirus testing to people without health insurance, school meals for children, 10 days of sick leave and 12 weeks of paid family leave for certain workers. US President Donald Trump's administration is currently in talks with lawmakers about another stimulus package worth as much as 1 trillion dollars (€900 billion). The proposed package includes an immediate cash payment to lower-income Americans. The measures would include a tax cut for wage-earners, $50 billion for the airline industry and $250 billion for small businesses. Senator Mitt Romney also proposed $1,000 in payouts for ordinary US citizens. The enactment of the financial package must wait for Congress to agree on it. The US Federal Reserve announced three new finance mechanisms to combat economic damage. The first is to help households and businesses stay afloat and the second funds major financial institutions for up to 90 days. The new mechanism will allow companies including JP Morgan, Goldman Sachs, HSBC, Morgan Stanley, Deutsche Bank Securities, BNP Paribas Securities and Nomura Securities to use debt holdings as collateral for credit from the Federal Reserve. The program will be in place for at least six months. The third mechanism, the $10 billion Money Market Mutual Fund Liquidity Facility, will create an emergency lending facility for banks that purchase assets from mutual funds and other short-term credit sources. This measure is expected to keep credit flowing in the US economy.
Canada's Prime Minister, Justin Trudeau unveiled an aid stimulus package worth $82 billion Canadian (US $56.4 billion; €51.4 billion). The package will be used to support businesses and provide temporary tax relief. The package is worth 3% of Canada's GDP. The stimulus package will also support child benefit payments and provide emergency care to workers who don't have access to paid sick leave. Trudeau also announced that Canada would restrict all non-essential travel from the US. He assured that supply chains would not be affected by the move.
Australia has announced a fiscal stimulus package worth $11 billion to tackle the coronavirus pandemic. The package includes a one-off payment of AUD $750 ($451) for nearly 6.5 million lower-income Australians. In addition, the package will be used to save 120,000 apprentice jobs and support small and medium-sized firms. The fiscal stimulus package is nearly one % of Australia's GDP. Australia's central bank has slashed its interest rate to a record low of 0.25%, to boost fiscal stimulus in an embattled Australian economy. The Australian government also said that it would enable cheaper borrowing for businesses by intervening in the bond market.
Turkey said that it would roll out a stimulus package worth $15.4 billion to tackle the coronavirus pandemic. The 21-point package, known as the Economic Stability Shield, will support delay in loan and tax payments. The package will also increase pension pay, support businesses, reduce Value Added Tax (VAT) on domestic air travel and defer social security payments by 6 months for the retail, steel, automotive and hospitality industries, among others. Turkish President Recep Tayyip Erdogan also announced that Turkey is putting in place a "periodic program" to give healthcare at home for people above the age of 80 who live alone.
Adviser to Prime Minister for Commerce and Textile, Abdul Razak Dawood has said that the government had offered up to Rs100 billion packages to the industrial sector as a support following current challenging situation, created due to COVID- 19 pandemic. "We are continuously in contact with all major industrial sectors, including textiles and construction. With consultation of all stakeholders, the government would give incentive to the priority areas of industrial sector for revival in current critical situation," Razaq Dawood told APP here. The government wanted to resolve the liquidity issue of industrial sector, he said adding that Drawback of Local Taxes and Levies (DLTL) payments would be made, which were pending since 2009. The adviser said the government would pay Technology upgradation fund worth Rs 30 billion to the industrial sector to help it come out from the current challenge of COVID- 19 Coronavirus pandemic. He informed that total Rs 47 billion would be paid to the textiles sector in coming 100 days to support the major export sector of the country. Replying to a question, he said the government would pay all the refunds including in Rs 200 billion packages to compensate the industrial sector in coming Budget 2020-21. He said that this package would be paid at faster pace to the industries, adding that all the stakeholders were on board with the government to evolve joint strategy to resolve all the issues of industrial sector in current situation. He said that promoting industries and giving incentives to the business community was an important step to leading the country forward.The government would support the industrial sector and provide Incentives. The commerce ministry has also prepared a list of industries which could be reopened in the current situation, he said. The adviser said the refund of Rs100 billion for the business community is a part of that process and the government was committed to ensure timely refunds to the business community in this challenging situation. Razak Dawood said that his ministry was in constant contact with the business community to figure out how the challenge posed by the epidemic can be resolved in country's industrial sector. He hoped the government and business community including all industrial was one page, with joint plan of action with consensus of all stake holders "we would overcome on economic challenges after the COVID-19 pandemic Coronavirus. President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Mian Anjum Nisar while talking to APP hailed the Rs 100 billion package offered by the government. He said the government would take preventive measures and develop strategy to protect the pace of economic and trade progress and effects of world economic slowdown as apprehended by leading research organization after evolving the situation in COVID-19 pandemic. Mian Anjum Nisar while talking to APP said that the whole world including the potential market of Europe Union (EU) was effected by the coronavirus, which was the second biggest trade destination for Pakistan after the Generalized Schemes of Preferences (GSP-Plus) offered by EU in 2013. In this regard, the government must to go for conducting studies for mitigating the economic changes after Coronavirus. Renowned industrialist from Baluchistan, Ex-President FPCCI , Eng. Daroo Khan welcomed the package announced by the government and said that proper mechanism was required to disburse this package according the needs for different industries. He suggested that the government engage all stakeholders to resolve the current evolving challenge. On the occasion, President Islamabad Chamber of Commerce and Industries (ICCI) Muhammad Ahmed Waheed said that his chamber was fully engage in consultation with government in current challenging situation. Business community of the twin's city welcomed the Rs100 billion package offered by the government for industrial sector. President, Karachi Chamber of Commerce and Industries, Agha Shahab Ahmed Khan appreciated the government efforts for mitigating the current challenge. He said that his chamber and business community from all over the country was committed to support the government in current evolving situation. President, Peshawar Chamber of Commerce and Industry Engr. Maqsood Anwar Pervaiz said that business community of Khyber Puktunkwa (KPK in cooperation with government and stand with the government and lauded Rs 100 billion package announced by the government.
Source: Urdu Point
Garment factories will remain open from today (Sunday) only at Savar off the city despite the ongoing shutdown amid the coronavirus pandemic, sources said. Considering the overall situation, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Rubana Huq urged all members to keep their units shut until April 11. However, hundreds of garment workers are coming back to Dhaka from different parts of the country despite ban on public transport. Besides, factory owners in the Ashulia industrial belt at an emergency meeting held on Saturday decided that RMG units in Ashulia industrial zone will reopen from Sunday. Some 50 factory owners, headed by Abdus Salam Murshedy, managing director of Envoy Group, took the decision. When asked, MrMurshedy said some 50 factory owners from Ashuliazone sat on Saturday and decided that factories will remain open since Sunday. They took the decision in line with the instruction of Department of Inspection for Factories and Establishments (DIFE). DIFE on April 01 in a notice said the export-oriented factories which have work orders, are willing to run factories and engaged in manufacturing personal protective equipment, mask, hand wash/sanitizer and medicine to prevent coronavirus, can run their units provided they ensure adequate health safety of workers. The meeting also called on apparel makers to pay wages for the month of March to workers from April 12 to 15, MrMurshedy added. BGMEA president Dr Rubana Huq in an audio message said the factories having work orders and are engaged in manufacturing safety equipment can reopen in line with DIFE's instruction provided they can ensure sufficient health safety. She urged all members to pay March wages timely and not terminate any workers if any of them is absent. BKMEA on Thursday in a statement said it would not take any decision about factory closure from April 05 and its previous instruction regarding closure until April 04 would not be effective from Sunday. It asked its member factories to take their own decision at their own risk and responsibility regarding keeping their factory open. Mohammad Hatem, senior vice president of BKMEA, in a video message urged member units, if possible, to keep their respective factories closed until April 10. According to the Industrial Police (IP) data, there are 425 garment factories registered with BGMEA in Ashulia zone. And only 27 BGMEA member units remained shut while 422 remained open until Saturday. Only 12 out of 81 BKMEA member units, four out of 21 registered Bangladesh Textile Mills Association (BTMA) factories and 02 out of 98 factories under Bangladesh Export Processing Zones Authority remained closed until Saturday. And 32 out of 731 factories from other sectors were closed. The majority of the apparel manufacturing units in other industrial belts like Gazipur, Chattogram, Narayanganj, Mymensingh and Khulna, however, remained closed, according to IP sources. Some 7,602 factories including textile and clothing are under the jurisdiction of IP and 5,821 were closed while 1,781 were open. Meanwhile, close to a billion pieces of clothing items have been stockpiled or under production in factories as work orders cancellation continues in the aftermath of coronavirus, owners said. Until Saturday, over 1,100 factories reported that export orders for 946.90 million pieces of readymade garment items worth US$3.02 billion were cancelled or held up, affecting 2.19 million workers, according to the lobby group Bangladesh Garment Manufactures and Exporters Association, or BGMEA. Similarly, 281 member units of the Bangladesh Knitwear Manufacturers and Exporters Association, or BKMEA, reported that orders for more than $3.0 billion were cancelled or held or suspended until Friday. Citing primary data of the National Board of Revenue, the BGMEA said single month apparel exports in March 2020 dipped by 26.70 per cent to $1.97 billion versus $2.69 billion in March 2019. In contrast, dozens of global buyers have come forward to rescue the local textiles makers giving assurance of taking in the goods already produced even as the European Union, the US and Canada, the country's key export destinations, enforced lockdown to slow the spread of the deadly virus. Buyers such as H&M, PVH, Inditex, M&S, Kiabi, Target, Benetton, Decathlon, and KappAhl and PVH have assured local RMG makers of taking in their already-produced goods after the BGMEA urged the retailers not to cancel or hold up the existing orders. H&M, one of the country's largest global apparel buyers that sources apparels worth more than $3.0 billion a year from Bangladesh, in a statement last week, announced that it would get the delivery of the already produced garments and goods in production and pay for the orders. It, however, said it would not ask for any discounts and temporarily suspend placing new orders to its listed supplier factories in Bangladesh amid the coronavirus outbreak. Talking to the FE, Mahmud Hasan Khan, managing director of Rising Group, said factories have a good number of products either on stockpile or in the process of production due to the current cancellation or suspension. The owners, however, said only H&M and Inditex have committed to unchanged payment terms. Some of the buyers want to take 90 to 120 days to make the payment, they said, unsure about the delivery dates. A few apparel makers alleged that the conditions of Bestseller, C&A and Primark are not business-friendly. When asked, BGMEA president Dr Rubana Huq said some brands have come forward and informed the trade group of their decision to take the delivery of ready goods and the goods in production. She welcomed the decision to support the local suppliers and expressed the hope that the payment terms would remain unaffected, thereby ensuring liquidity flow to the factories.
Source: Financial Express